What are Digital Payments, their Methods, and their Benefits for Small Businesses?
Fuelled by mobile devices, smart technologies, and 24/7 internet connectivity, the way consumers shop and pay have changed. In response to these evolving consumer preferences, the market itself is undergoing a profound transformation, with both online and brick-and-mortar businesses looking more at digital solutions to improve sales, acquire new customers, and reduce costs. This presents opportunities for SMEs to enable the use of digital payment methods, create a journey of digital consumer discovery and marketing to capture the interest of their audience.
Digital payments can positively impact SME’s given consumers’ preference for digital channels, it’s not surprising to see that consumers are more inclined to make a payment through digital channels rather than the traditional payment methods. Further, there may be expense and revenue benefits to accepting digital payments:
What Are The Top Digital Payment Methods That SMEs Can Integrate?
Paperless or, Cashless is one of the professed payment methods of Digital India. Here are the digital payment methods that one can incorporate in their business:
Banking cards are more secure, convenient, and have more personal control than any other payment method. They enable users to purchase items in stores, on the Internet, through mail-order catalogues, or over the telephone. Known to save both customers and merchants’ time and money banking cards enable ease of transaction.
Unstructured Supplementary Service Data (USSD) channel an innovative payment service that works on dialing *99# on any mobile device. This service is available for all mobile devices including basic feature mobile phones and does not require an internet data facility.
Aadhar Enabled Payment System aka AEPS uses AADHAAR authentication at PoS or Micro ATM through the Business Correspondent to conduct basic online financial transactions.
Unified Payments Interface is a technology that collects payment requests, which can be scheduled and paid as per the requirement and convenience of the user. This digital payment interface enables multiple bank transactions & merchant payments into one hood through a single mobile application.
Make your next digital payment by linking your credit card or debit card information to your mobile wallet. This seamless mobile wallet application allows the transfer of money online to a mobile wallet,
Point of Sale:
A point of sale (PoS) is the place where sales are made. On a micro-level, retailers consider a PoS to be the area where a customer completes a transaction, such as a checkout counter.
Internet banking is an electronic payment system, which caters to the bank or other financial institution users to conduct varied financial transactions through their website.
Similar to internet banking, mobile banking also allows users to make various financial transactions using the mobile application of the bank or the financial institution.
Micro ATM is a device used by Business Correspondents to conduct instant transactions. These micro ATMs allow only basic banking services.
How Do Digital Payments Benefit Small Businesses:
Digital payments are 7x faster than non-digital payments. When SMEs employ these digital payment methods, they incur fewer business expenses, experience significant time saving, and enjoy the following advantages like:
- The better customer experience (e.g., accepting payments from any location via mobile phone)
- Cost reduction (e.g., reduced people cost versus paper-based transactions)
- Record retention (e.g., cloud-hosted transaction data)
- Deliver competitive advantage (e.g., ability to access overseas markets)
A survey conducted on digital payments illustrates the benefits realized by businesses further along their digitization journey in making and receiving payments via card, GPay, PayTM, and other e-payment channels. The report reveals:
SMEs using digital payments enjoyed a wide range of benefits from those using more manual traditional payment processes. Some of the benefits are:
Many SMEs after integrating digital payments noticed a reduced time to process payments, providing the businesses better control over their receivables.
Digital payments and cards were 3x more cost-effective on average than traditional purchase order process costs, due to reduced manual intervention and reconciliation effort.
The relative value of B2B payments for SMEs is greater than it may first appear when just comparing direct transaction costs such as bank fees or surcharges. Whilst the direct costs may be known or are estimable, often overlooked benefits beyond the transaction need to be considered, especially for SMEs where time or staff capacity is often the biggest constraint, which is the case for both making and receiving digital payments.
Key Next Steps for SMEs to Take:
|Step 1:||Identify the payment mechanisms that are available for your expenditure types.|
|Step 2:||Determine the cost of implementation and benefits of the payment mechanisms.|
|Step 3:||Shift payment processes towards digital mechanisms that provide the desired benefits for an acceptable cost.|
|Step 4:||Supplier and purchaser communication to discuss ways to make payments faster.|
In order to win potential and existing customers, it’s important for Small & Medium-sized Enterprises to utilize consumer-friendly digital ways to capture revenue, stay in front of the customers, and save time and expenses on the daily tasks necessary to run businesses. We hope you got well-versed with quite a few information regarding digital payment methods and how they boost the business.
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