Cash is no longer king, thanks to the global coronavirus pandemic. Online payment apps and e-commerce are exploding in popularity, requiring small business owners to embrace different payment methods. That’s particularly true of businesses forced to shift from an in-person model to an online one during the pandemic. Small businesses that accept online payment apps have tended to fare better than those that don’t.

“Digital payments have become far more accepted,” David Axler, vice president of banking and tax at Wave, told business.com. “It’s become a part of our daily routine. Digital payments are making it easier for customers to pay now that there’s distance between small businesses and their customers.”

What are online payment apps?

Mobile and online payments are transactions facilitated through a mobile device or the internet. It removes the need to pay with cash or payment cards. Digital payments are also used to send money to friends and family through peer-to-peer payment apps.

Online payment apps are essentially digital wallets that securely store the user’s credit card or debit card information. The customer either uses the mobile app on their phone or selects that app option on the merchant’s website at checkout.

What are the pros and cons of payment apps?

Before you accept mobile payment or digital payment at your business, you need to consider the good and the bad. After all, these online payment apps are easy to use and convenient, but they aren’t void of risk. Here’s a look at the pros and cons of accepting online payment apps in transactions with your customers.

Pros of online payment apps

• They’re now a widely accepted payment method. Prior to the pandemic, consumers were wary of using an online app or mobile wallet for purchases. Sure, the likes of PayPal and Apple Pay have millions of customers, but digital payment apps hadn’t been adopted by the masses. Then the pandemic struck and everything changed. With people stuck at home, e-commerce and online payments exploded. Consumers who previously scoffed at online payment are now using it in droves. According to a recent report by Accenture, by 2023, digital payments will be responsible for close to 420 billion transactions valued at $7 trillion. By 2030, that will increase to $48 trillion.”It speaks to the comfort level of consumers in paying online,” Axler said. “It used to be not well understood, not routine.”

• You get paid right away. Unless you’re dealing in cash, you may have to wait a few days to get sales from credit and debit card transactions in your bank account. When you accept online payment apps, you get your money right away. You don’t have to wait for credit card sales to process or for a customer to respond to an invoice. Since cash flow is an important aspect of running a small business, the sooner you get money in your bank account, the better.

• They speed up checkout. With e-commerce heating up, merchants have to find various ways to close the sale. After all, shopping cart abandonment is a real problem for all types of online merchants. Accepting online payment apps streamlines the checkout process. The quicker and easier it is to purchase something, the less likely a customer is to abandon their online shopping cart. Also, the quicker the checkout, the higher the customer satisfaction rate.

Cons of digital payments

• There’s high potential for fraud. Online payment apps make it easier to purchase goods and services, but that convenience comes with risk. Scammers often target consumers and businesses using online payment apps. One way is through dummy apps that appear in the online app stores. If downloaded, these apps collect a lot of personal information about the user and use it to commit fraud. Encourage your customers to use well-known payment apps that are available straight from their legitimate vendors.

• They can get pricey to accept. Online payment apps are linked to a user’s credit card or debit card. When they use the app to pay you, you’ll be charged a transaction fee for credit card payments. The amount you pay depends on the credit card and type of transaction. Card-not-present payments, which is the category online payments fall under, typically cost more for the merchant. Basically, the riskier the payment, the higher rate you pay.”It tends to be the most expensive way to go,” said Andi Gray, president of Strategy Leaders. “Business owners really need to know what they need the payment app for.” If it’s to get paid faster or to lower your number of invoices, she said, you should consider an alternative. If you do accept online payments, she said to get the transaction fee below 3%.

• They’re harder to manage. Online payments might be more convenient for your customers, but they could be much less convenient on your end. Getting all the transactions from disparate payment apps into one accounting system can be cumbersome and time-consuming.”When you start to accept payments electronically, you don’t have them tied to a particular invoice or particular receipt,” Axler said. However, there is cloud-based accounting software that will automatically gather all your payments under one dashboard to give you a complete view of your sales.Impact of COVID-19 reinforces gender inequality – WorldBank
• Source: business.com