What is this article about? There are a range of ways the payments sector can innovate and change during the cost of living crisis to support the merchants that use their services.
Why is this important? The cost of living crisis impacts all companies and individuals. The payments sector can offer support during these troubling times.
What’s next? Legislation is likely to prevent retailers rejecting cash payments.
The payments industry is in a unique position to develop solutions that can help retailers and customers with the cost of living crisis.
In June 2022, PayPoint joined Pay.UK to help the government make cost-of-living support payments. By joining the Confirmation of Payee name-checking service, there is now a greater choice in payment methods so that people who most need financial support can receive payments through different platforms.
Helping the cost of living crisis comes in a variety of ways, from providing payment solutions with flexible terms to offering payment methods that reflect customer wishes for greater control, security, and flexibility.
Research by payments platform Paysafe shows that 44% of global consumers have changed their payment habits since the cost of living has risen. Payment solution providers and merchants need to meet these evolving needs.
Merchants must expand payment options
The cost of living crisis can give merchants the opportunity to reinvent their customers’ shopping experience.
Chirag Patel, CEO of Paysafe’s Digital Wallets division, says merchants “should focus on offering a range of payment methods that reflect consumers’ wishes for greater control and flexibility”.
However, cost is still an issue. Merchants pay around 2% to 8% of every sale to debit and credit card, e-wallet and buy now, pay later (BNPL) facilitators. During a cost of living crisis, much of this is often picked up by customers.
Through open banking, innovations from payment providers like Volume have started making the checkout process more seamless, enabling merchants to reduce associated fees and pass on savings. Volume’s website states that it believes accepting payments should eventually be free.
Super Payments offers free online payments to businesses forever and instant cashback for shoppers to reduce costs. It only makes money “if businesses increase sales and if shoppers save money” says the company’s CEO and Founder Samir Desai, who describes payment fees on digital purchases as a “tax on the internet”.
Every customer has their own reasons for choosing to pay the way they do, so offering alternative payment methods (APMs) from bank transfers to Apple Pay, Google Pay and PayPal, can help customers during the cost of living crisis.
However, adding APMs to the checkout experience can be a time-consuming process. That’s why a platform that incorporates multiple payment systems can be beneficial. Companies such as Pomelo Pay offer integration through their banking app.
However, the costs in providing APMs for some merchants, specifically small businesses, is a worry. The payments sector can help here by ensuring their payments solutions can work seamlessly with other finance management tools.
Peter Lord, co-founder and CEO of financial API provider Codat, explains that growth is no longer the top priority for many small businesses.
“While you might expect challenging conditions to lead to businesses unplugging their tech stack, our findings showed this was not the case,” explains Lord. “They were more likely to become more reliant on financial software and look for time savings and tools that integrate with one another, rather than removing software to save costs.”
“While fintech providers can’t do much to impact the rising costs themselves, they can play their part to help SMEs by building value-added features that give them better clarity around their financial position and remove the burden of time-consuming financial admin,” Lord adds.
Do not ignore cash payments
While bank cards and digital wallets are popular payment methods, cash is seeing a resurgence.
Some of the most vulnerable groups in society rely on cash payments but Paysafe findings show that 59% of respondents to its Lost in Transaction research think it is the most reliable form of payment, and 70% would be worried if they couldn’t access it anymore.
Ross Borkett, head of banking at The Post Office, says the ability to budget daily with cash is helping customers in these difficult times.
“Postmasters are already seeing cash withdrawals increase as consumers face the cost of living crisis, with some customers finding it easier to budget in cash, and we expect this trend to continue into the difficult winter period ahead,” says Borkett.
“Legislation to protect access to cash has been announced by the government and we’d encourage the banking industry to continue to support free access to cash for as long as it’s needed,” adds Borkett. This need for cash payments has to be acknowledged by merchants through the range of payment methods they make available to customers.
Through a range of payment methods and technology solutions, the payments sector can support merchants and customers during this cost of living crisis.