Xero report reveals mismatch between Aussie shopper preferences and small business payment options

Melbourne — 15 August 2024 – New research by global small business platform Xero has revealed that a disconnect between the ways consumers want to pay and how small businesses want to be paid could be directly impacting customer retention and revenue.

Launched today, Xero’s latest report, 'I want to pay that way', delves into the changing payment habits among consumers and how small businesses are adapting.

Mismatch in payment expectations between small businesses and consumers

Aussies remain firmly in favour of using credit or debit card (86%) to make in-person and online payments, but only 55% of small businesses offer credit or debit card as a payment method. Bank transfer (68%) is the most common payment method offered by small businesses, followed by cash (59%). Over one in four (28%) Australians would seek out another business that accepts more payment options if a business didn’t offer at least one of their preferred ways to pay, highlighting the importance of meeting consumer expectations around payment preferences.

New payment methods are growing in popularity, with younger generations leading the charge. Gen Z consumers (40%) are more than four times more likely to use Apple Pay or Google Pay than Baby Boomers (9%), however, only 18% of small businesses accept mobile payments as a payment method.

Similarly, consumer demand for buy now, pay later options is outstripping availability of this payment option from small businesses (23% versus 14%). The demand increases for millennials, with 31% saying they use buy now, pay later for purchases.

New payment methods fast tracking payment times

Aussie small businesses that have implemented new payment methods say they are seeing clear benefits, including reduced time to be paid (24%), reduced time chasing late payments (18%), and increased sales (20%).

However, the research shows the majority of Australian small businesses (53%) have not adopted new payment methods in the past six to 12 months. The limited uptake could be due to perceived added costs, with expensive fees (36%) reported as the biggest barrier preventing business leaders from offering new or different payment methods.

Theo Konstantas, Sales Director Australia, Xero said: “Aussie consumers are increasingly embracing digital payment methods, particularly younger generations. However, small businesses don't seem to be meeting their customers where they are. There's still a gap when it comes to options like Google Pay, Apple Pay, and even traditional credit and debit cards among small businesses. You can really see the hesitation to adopt new payment methods.

“But there are many benefits to offering more ways for people to pay, such as faster payments and the potential to expand your customer base. With a drive to digital, small businesses that don't meet consumer preferences might find themselves falling behind,” Konstantas said.

Cash still king for Australian businesses

Nearly four in five small businesses (79%) say the sudden move to a cashless economy would have some form of impact on their business. But overall, the use of cash and cheque may be declining. Only one in four (25%) consumers actually rely on them to buy products and services, and two in five (41%) Australians say they rarely use cash and cheque payments, only when a business asks for it.

Future of payments is daunting for both small business and consumers

Despite the mismatch between what consumers want and what small business offers, their feelings align on future payment methods. Emerging payment methods are causing a level of anxiety amongst consumers and small businesses alike, with digital currencies like crypto causing the most anxiety (27%) amongst small businesses. Implantable payment chips are the greatest source of apprehension, with over one in three (37%) small businesses and nearly half (47%) of Australians feeling ‘terrified’ about this technology being used.

Bharathi Ramavarjula, SVP of Payments, Xero, said: “Understanding how different consumers prefer to pay and giving them the flexibility to pay the way they want, will help small businesses get paid faster and grow their revenue. To make it easier to collect payments, Xero is providing more ways to pay in Xero.”

As a commitment to delivering on its strategy, Xero is building payment solutions to make it easier for small businesses to make and collect payments more seamlessly, while helping them to maintain a healthy cash flow.

Check out the full report here.

ENDS

Media contact

Jess Brophy | Communications Director ANZ | +61 431 268 549 | jess.brophy@xero.com

About Xero

Xero is a global small business platform with 4.2 million subscribers. Xero’s smart tools help small businesses and their advisors to manage core accounting functions like tax and bank reconciliation, and complete other important small business tasks like payroll and payments. Xero’s extensive ecosystem of connected apps and connections to banks and other financial institutions provide a range of solutions from within Xero’s open platform to help small businesses run their business and manage their finances more efficiently.

About the report

The research was commissioned by Xero and was conducted by Lonergan Research in accordance with the ISO 20252 standard. Lonergan Research surveyed 6021 people aged 18 and over across the United States, United Kingdom, Australia, New Zealand and Singapore as well as 2547 small business leaders (SBLs) across those countries. Lonergan Research surveyed 1,000 Australians 18+ and 512 SBLs. Surveys were distributed throughout Australia including both capital city and non-capital city areas. The survey was conducted online amongst members of a permission-based panel, between 15 May and 24 May 2024. After interviewing, data was weighted to the latest population estimates sourced from the Australian Bureau of Statistics.