State of Payments 2021

With the current digital transformation and pressures of a pandemic, payments have changed from “how you get paid” to playing a critical role in your customer experience. And customers are increasingly demanding that businesses provide payment options that enhance their overall experience and allow them to continue the conversation beyond the point of sale.

Local businesses have never had to be more aware of preferences across the entire customer experience than now. But how have recent circumstances affected payments specifically? What are consumers looking for, and how can local businesses meet those expectations?

The question: what do customers want?

We surveyed 1,041 consumers across the United States and Australia to learn which payment methods local businesses need to utilize, and how, in order to compete in today’s marketplace. We learned which payment methods customers use, which ones they want and don’t want, and the consequences local businesses face if they don’t support their customers with frictionless payment options.

The findings? Customers want to choose how they pay.

According to our findings, payments are becoming an increasingly influential aspect of the customer journey.

1. A quarter of customers will abandon a transaction if their preferred payment methods aren’t offered.
2. 3 out of 4 consumers say the changes to their preferred payment methods due to COVID-19 are likely to stay.
3. Customers increasingly prefer digital payment options—including website payments, mobile wallets, direct pay platforms, and text links.

We’ve also found that when used correctly, the right payment methods can grow revenue, increase retention, and improve customer experience. And that local businesses are under-delivering in terms of consumer expectations.

Payment isn’t just a transaction. It’s an opportunity.

The truth is that most local businesses don’t give enough thought to payments—but they should. Payment isn’t just a monetary transaction. It’s a chance to connect, deliver ultimate convenience, and convert a customer for life. When you start thinking about your payment method as a multi-faceted exchange, you unlock valuable touchpoints that start and continue conversations and tap into an enormous competitive advantage.

We talk with local businesses all day, every day. So we know that many are missing out on revenue and optimization because they don’t know how to utilize their payments. We also know that local businesses have to adapt and rework the way they process payments if they wish to compete in a world of convenient alternatives. Read on to learn the methods that matter, what to offer, and how to use payments to transform the way you do business in 2021.

Why do your payment methods matter.

Many local business owners often think of payments as an isolated part of their processes. However, payments actually have the capacity to affect every aspect of your business. They represent an opportunity to continue a conversation, delight a customer, and win loyalty. The way you process payments might be the thing standing between you and raising your bottom line. As you’ll see from the data, if preferred payment methods aren’t offered, and offered conveniently, your customers will leave you for a competitor.

Consequently, your actual transaction process can’t just check the boxes. It needs to serve as an integral aspect of your brand. It should tell your customers that you want to connect with and delight them—as much as possible.

Your customers are different—and need different options.

Customer service is arguably the most critical factor in a local business’s success, but it’s not the only thing to consider. Surprisingly, consumers report that being offered convenient payment options is the next most important factor they consider when choosing a local business to purchase from—more than proximity to their home, discounts, coupons, or a personal relationship with the business.

The top two factors consumers take into consideration when making a purchase from a local business or service provider are Customer Service (60%) and Convenient Payment Options (41%). Only 14% of consumers chose loyalty programs as their top factor, and only 10% chose coupons or discounts.

Your payments impact your entire business.

It’s easy to assume that letting customers swipe credit cards or pay in cash will cover the bases. After all, they’ve been the de-facto options for decades. However, if those are the only two options you provide, you’re missing 31% of US consumers’ top choices.

Not offering your customers’ preferred payment methods can have serious repercussions on your local business. And offering the right payment methods can have an even greater impact on your bottom line.

Spotlight: How Adam’s Pest Control improved collection rates by adding a single payment method.

Driven by their commitment to being an environmentally- aware business, Adam’s Pest Control in Florida took another step toward becoming a 100% paperless company by shifting to accepting only credit cards. In order to make the shift as frictionless as possible, Operations Manager Tiffany Ghent needed a way to conduct transactions that sped up collections without interrupting customers’ busy schedules.

“We said ‘let’s stop calling them, let’s stop emailing them. Let’s just text them and say ‘We know you’re at work, we know you’re busy. When you get a chance, can you get back to us?’”

Banking on the early proof that their customers preferred text to communicate, Adam’s Pest Control utilized messaging to remind customers of outstanding balances and provide guidance on how to complete those transactions (online, over the phone, etc). They didn’t see payments as transactions—they saw them as opportunities to significantly shorten collection time, reduce operational costs, and even strengthen customer relationships through personal, friendly communication.

“I can’t tell you how many times customers respond saying ‘Thank you so much for the reminder! I’ll pay tomorrow’ or ‘Oh, my card was stolen, I’m so sorry! I’ll get this taken care of tomorrow’.”

“We were able to stop using our collection agency, which was significantly impacting us financially. We were able to lower our collection APR month over month, consistently, simply by following templated steps: sending friendly reminders gearing them toward payment in an easy way.”

What payment methods should you offer?

As you’ll see from the data, it’s no longer enough to offer only cash and card payments to your customers. Amazon and other ecommerce players have created a level of convenience that consumers have grown accustomed to. And they expect this convenience in all transactions—both on and offline.

Providing the right payment methods has become a crucial aspect to delighting and converting your customers. So, which options should you offer?

We offered old school methods – sending paper statements, stuffing envelopes, using stamps, waiting for a check to come back, or waiting for the customer to call you back. What we found was that as technology advances and people are used to making a one-click purchase through Amazon, we had to determine what the right payment options were for us. – Hillary Smedley, VP of Operations, Genesis Dental

Credit card remains king.

While payment methods continue to evolve, consumers still rank credit cards as their top choice. 33% of respondents listed swiping or inserting their credit cards as their preferred method of payment when engaging with local businesses. 14% chose contactless tap credit card payments.

With that said, research indicates that change is coming—and quickly. Digital options—including website payments, mobile wallets such as Apple Pay and Google Pay, direct pay platforms like Venmo or Paypal, and text links—were the top choice for 20% of consumers.

With the number of both smartphone users and merchants accepting mobile wallets increasing, the mobile wallet user base is growing faster than ever with a projected 1.3B users by 2023.

It’s important to keep in mind that the payment process includes more than just the transaction itself. 67% of consumers under 55 also want the option of digital receipts when engaging with local businesses. Having the right point-of-sale systems in place to meet these less obvious needs helps round out the optimal customer experience.

Beware of over-the-phone payments.

While customers prefer credit card payments, local businesses need to beware of how they process these payments. Only 3 in 10 US consumers feel comfortable paying a local business by reading their credit card number over the phone to a representative. Considering how common of a practice this payment type is, many local businesses are leaving massive amounts of revenue on the table.

I didn’t want to pay our shower glass contractors over the phone so I didn’t get around to going into the showroom to pay until 5 weeks after the service had been completed. I would have paid immediately if they had texted me.

Justin from Wow 1 Day Painting

Local businesses should also be wary of taking payments over the phone for a number of security and legal reasons. There are serious ramifications for businesses that don’t adhere to the security measures put in place by the Payment Card Industry (PCI), including disabling fines and risk of increased transaction fees from your bank.

Not only are customers apprehensive about giving a credit card number over the phone – as they should be– but as the business, I don’t want to take it over the phone. That places a liability on us that I don’t want. Somebody’s writing it down, and the procedure should be to shred it. But invariably, it’s scary to think that something like that could end up in the trash can and then somebody could get it. – Joel Masters, Owner, Portland Window Coverings

Not to mention, local businesses that collect payments by phone spend a considerable amount of time doing so. By exploring newer processes for contactless payments, you can save both legal headaches and time.

A payment preference breakdown.

According to our research, payment preferences for local businesses differ across key demographics. Following is an in-depth breakdown of these preferences.

01. Gen X, Millennial, and Gen Z consumers

Consumers under the age of 55:

• Have a stronger preference for digital receipts.
• Consumers under age 55 have an 89% higher affinity for digital receipts than consumers age 55 and above.
• Are more likely to abandon a transaction if their preferred payment method is not offered.
• Consumers under age 55 are 3x more likely than consumers age 55 and above to have abandoned a transaction with a local business because their preferred payment method was not offered.
• Rank “convenient payment methods” as a larger factor when considering a local business.
• Consumers under age 55 listed “convenient payment methods” as a key factor in determining whether to purchase from a local business 55% more often than consumers age 55 and above.
• Are more likely to try new forms of payment, such as paying through a secure text link.
• Consumers under age 55 reported being likely or somewhat likely to try paying via a secure text link at a 38% higher frequency than consumers age 55 and above.

02. High-frequency shoppers

Consumers who made 20+ purchases from local businesses in the last year:

• Report higher levels of loyalty to local businesses.
• High-frequency shoppers are 8% more likely to purchase from a brand they have an affinity for than low-frequency shoppers.
• Have a stronger preference for credit card payments.
• 60% of high-frequency consumers chose credit card payment options as their top choice, compared to 47% of low-frequency consumers.
• Report less impact on their local business purchasing behavior due to COVID-19.
• Only 25% of high-frequency consumers reported a decrease in amount of purchases from local businesses due to COVID, compared to 38% of low-frequency shoppers.

03. High-income consumers

Consumers with a household income greater than $100,000 per year:

• Report higher levels of loyalty to local businesses.
• High-income consumers are 13% more likely to purchase from businesses they have an affinity for or relationship with.
• Make more frequent purchases from local businesses.
• They’re 2.1x as likely to have made more than 20 purchases from local businesses in the last year.
• Show decreased tolerance for businesses not offering their preferred payment methods.
• 38% of high-income consumers have delayed payment or abandoned a transaction because their preferred payment method was not offered. This is 74% higher than the typical consumer.
• Demonstrate higher willingness to try new payment methods, such as paying through a secure text link.
• 2 out of 3 high-income consumers that have tried text payments either liked or strongly liked it.

According to this data, higher-income consumers are more loyal, buy more often, and want their preferred payment methods more than other consumers when engaging with local businesses.

COVID-19 has accelerated demand for low- touch payments.

When evaluating payment methods, local businesses also need to understand how COVID-19 has affected consumer preferences. From reducing touching of the same surfaces to pay-in-advance fulfillment, customers and businesses have been acclimating to the “new normal” of contactless payments for a while. And many consumers want these payment offerings to stay—and expand.

Approximately 50% of consumers reported that they were more likely to purchase from a local business that offered contactless payment methods during the COVID-19 pandemic. This number rose in key demographics such as high-income consumers.

These changes appear to have some stickiness.

Consumers’ top consideration when making a purchase from a local business as a result of the COVID-19 pandemic is the ability to distance from others.

Going forward, only 27% of consumers expect their payment method behaviors to return to what they were pre-pandemic.

The takeaway? Innovation doesn’t stop.

It’s clear that new payment methods are here, and customers are experimenting with them. Local businesses have to adapt quickly to their customers’ ever-changing preferences and anticipate their expectations. If they don’t, they run the risk of becoming irrelevant. In the case of payment methods, this includes losing revenue.

So, what’s next?

The next revolution in payments.

Consumers expect a seamless, secure, and convenient payment experience that meets them where they are. With 81% of US adults using smartphones – a percentage 2.3x larger than in 2011 – this means going mobile with the most innovative, convenient technology available. That’s where Podium comes in.

Podium Payments is a multi-functional payment platform that allows you to meet every customer payment preference, off or on-site, and tap into the opportunities present in every transaction.

Use text-to-pay anytime, anywhere.

Local businesses have found text-to-pay extremely valuable in giving customers a convenient and immediate way to pay. With Podium text-to-pay, you can:

• Bring your accounts receivable down. With text-to-pay, you can significantly decrease your accounts receivable by sending payment requests via SMS. No more waiting for customers to come in or call to pay.
• Give your customers the option they want. Through text, you enable customers to pay immediately via SMS. You can send a hassle-free payment request any time after a sale to get immediate payment.
• Continue the conversation beyond checkout. By conducting transactions through the same inbox used to communicate with customers, you can stay top-of-mind and increase your customer’s lifetime value.

Card readers built for local business.

Payments become opportunities when they create a textable contact with every swipe, dip, or tap. As customer preferences vary, the ultimate payment experience gives customers all the options. Now, you can cater to every customer preference with Podium card readers.

With both on-the-go field and wireless in-store readers, local businesses are finding that Podium hardware helps them provide the frictionless checkout experience modern customers want. With Podium card readers, you can:

• Go contactless—or not. Consumers want to pay the way they prefer. Podium Payments with card readers-helps that happen with a swipe, tap, insert, or text.
• Make reporting easy. With the addition of Podium card readers, you can capture all of the payments you collect, remotely or in-person, in one place. Podium Payments with card readers allows you to securely track all of your transactions digitally and understand your customers’ habits and buying cycles.
• Use hardware that keeps the conversation going. With the addition of card readers, you can continue the conversation whether the payment is made remotely or in person. Podium card readers blur the line between in-person and digital transactions, making for a seamless, modern customer experience.

“Podium really helps us look better than we are. As good as we try to be, we’re still a small business. I don’t have the financial backing of a big corporation to put together these awesome ways to pay right in an app or something like that. So it opens that door for people to process payments and interact with me financially in a way that is not only comfortable, but feels very professional.” – Joel Masters, Owner, Portland Window Coverings

Connecting your payments to the rest of your customer journey.

The power of the comprehensive Podium Payments platform lies in the fact that the conversation doesn’t stop once the payment is made—no matter how it’s made. Podium Payments integrates with and elevates your entire customer journey. You can collect feedback, gather reviews, and continue the conversation even after you collect a payment. Better yet, once customers receive their automatic receipt, you can ask them to opt into exclusive promotions. And you can utilize purchase history to ensure that each promotion is exactly what each customer wants to hear.

The results speak for themselves.

“Thanks to Podium Payments, our average time to payment this month is just 24 minutes!”

Many local businesses struggle with the age-old issue of collecting payments from customers in a timely manner. Outstanding balances, collections, and down payments often cause headaches and slowdowns, which have a significant effect on business efficiency and performance. But Podium Payments is changing the game.

The team at Wow 1 Day Painting in Detroit, Michigan, was struggling to receive payments for their services and had a sizable sum of unreceived payments in their Accounts Receivable column month after month. These unpaid accounts took valuable time from the team’s packed schedules to track down. But once they started using Podium’s payments solution, everything changed.

“The data that has really blown my mind is the time to payment. Just two months after my team at Wow 1 Day Painting began using Podium Payments, our Accounts Receivable were reduced to zero! It has also saved us a lot of time, eliminating the need for a weekly collections report. Thanks to Podium Payments, our average time to payment this month is just 24 minutes! More importantly, it has helped the payment experience feel safe and effortless for our customers.” —Justin Miller, Wow 1 Day Painting

Since we found out about Podium Payments, we have fallen in love with it. We no longer use any paper statements and have put our entire revenue management team on Podium. In the last 12 months, we’ve generated $130,000 dollars in revenue through the tool. It’s super convenient for our patients, which we love, but also for our team members. It’s taking a fourth of the time to send and collect payments.—Hillary Smedley, VP of Operations, Genesis Dental

We’re in the business of modernizing local payments.

The results are in. When you delight customers, you get your money faster. Your payments are not just transactions—they’re opportunities to transform the way you do business, beat out your competitors, and convert customers for life.