The New Financial Landscape for Small Businesses

Payment choices from credit cards to cryptocurrency


Small business owners are all too familiar with the challenges that come with getting paid, from high vendor acceptance fees to lengthy payment terms. However, radically changing consumer behavior, advancements in technology and a progressing regulatory system indicate the financial landscape is due for unparalleled transformation.

This revolution cannot come soon enough for people like Jon Eggleton, Decatur CoWorks member and Managing Partner of Traktion, a marketing and e-commerce strategy firm.

“A significant portion of my time is spent dealing with slow accounts payable departments, but in this line of work, that’s always part of the deal,” said Eggleton.

Gary Phillips, Vice President of Cybersecurity for Suntrust Bank, said, “We’re working overtime to make transactions easier, faster and safer. Fortunately, the high demand for convenient transactions has led to a renaissance of how payments are made and accepted. They must become faster and cheaper or they’ll fade away.”

The five primary methods of payments in the U.S. are cash, debit, credit, electronic transfer, financial technology (fintech) and cryptocurrency. Each of these has its pros, cons and security concerns.

“Cash is spent…no pun intended,” said Phillips. In fact, most point of service systems like vending and ticket machines, have credit card readers due to consumer demand for convenience and the high cost of stocking cash. In fact, he said, cash is likely going away in our lifetime.

Most small businesses accept credit card payments for both in-store and online purchases. However, technology has made it easier than ever for companies of all sizes to accept credit card payments for products and services. Even “one-man-shops” can afford the popular, low-cost payment options like PayPal and Square Reader. However, ensuring that customers’ personally identifiable information remains safe also is the responsibility of the business owner.

When accepting payment in a “card not present” scenario, for example, the Payment Card Industry (PCI) advises vendors to immediately and safely discard the 3-digit security code after processing the payment.

“Additionally, companies must always update their software because each new version ‘patches’ vulnerabilities, making it more difficult for hackers to access the company’s data and your customers’ personal information. In fact, most data breaches we hear about on the news could have easily been avoided with a series of software updates,” said Phillips

If credit card processing fees are cost-prohibitive, debit cards offer another option. With debit payments, there are no transaction fees for vendors. Traditional debit cards utilize an EMV chip, which has many security features. However, users are becoming less patient with the wait associated with using a chip card at point of sale machines.

To combat the relatively slow transaction times, both debit and credit cards now utilize “Tap and Go,” which is based on either RFID (radio frequency identification) or NFC (near field communication) technologies. Generally speaking, RFID is inherently insecure, said Phillips, so the trend is shifting toward more widespread use of NFC.

He said this is an exciting time in the fintech industry because it’s disrupting traditional financial services by giving consumers more payment options than ever before. “Mobile wallets” like Apple Pay, and peer-to-peer transfer services like Venmo and Zelle, are game-changers. These turn-key services are highly secure. They also open the door to a multitude of marketing strategies like loyalty programs to enhance the user experience.

Eggleton said, “E-commerce tools have become incredibly specialized; every aspect now has its own platform with unique features. Business owners need to carefully compare platform capabilities against their specific needs,” said Eggleton. “Payment platforms like Dwolla and WePay integrate with existing ecommerce platforms, improving efficiency and security for e-commerce.”

Fintech has significantly influenced e-commerce through alterations and improvements to online payment systems. In countries where consumers do not have credit cards, debit cards or bank accounts, fintech makes cross-border e-commerce possible.

Phillips said, “Banks are moving Heaven and Earth to compete against or support fintech services, so small businesses should look to embrace it in the future.”

Trending on the financial stage, cryptocurrency is currently considered an investment in the United States, while it is thought of as currency in some other countries. Used as a medium of exchange, this digital asset uses cryptography to secure its transactions, control the creation of additional units and verify the transfer of assets.

Eggleton said cryptocurrency is rapidly entering the e-commerce arena. However, before it can become a reliable payment method, standardization and consolidation must occur. There are a few tech companies accepting cryptocurrency for marketing purposes. While it’s not yet practical as a form of payment, it does make them look like they’re staying current.”

Phillips believes that mainstream acceptance of cryptocurrency will not occur until there is a central organization in the U.S. willing to back it. In the meantime, it’s primary use is for investment purposes and to make illicit payments since it’s nearly impossible to trace.

As a small business owner, selecting payment methods is an important decision for the life for the life of your business. Phillips recommends asking the following questions of any platform under consideration.

  1. What are the one-time and recurring costs of accepting payments in this manner?
  2. What security and regulatory requirements must I fulfill for this type of payment, and what requirements are fulfilled by the vendor, if any? Is the vendor PCI-DSS (Payment Card Industry Data Security Standard) compliant?
  3. If a vendor is involved, how are refunds and other disputes handled?
  4. Does the vendor offer 24x7 live support?
  5. Does the vendor offer fraud prevention services and what are the limitations of liability?

Small business owners have enough on their plates without having to pay excessive fees or become experts in technical payment systems. Thankfully, the financial industry has stepped up to the plate with a number tried-and-true and cutting-edge payment solutions that are effective and affordable for companies of all sizes. Best of all, these systems allow small business owners to more easily automate their payment processes so they can focus on the real reasons they went into business.

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