Cash or Card….What is your Payment Strategy?

What is your Payment Strategy?

Recent studies and news reports have shown that debit card payments have overtaken cash transactions, for the first time in the UK.

This is understandable from a technology and customer experience perspective. After-all as a small business owner in today’s fast- moving climate, you have to be flexible to accommodate the diverse demands of all your customers.

Customers like options. The more options that you make available to them, whether its product/service type or payment method, the better chance you have of creating customer loyalty, driving repeat business and ultimately generating greater profits.

Therefore one important decision you will have to make is whether or not your small business will accept debit/credit cards.

What does the research say?

A HMRC survey, undertaken at the end of last year found that 70% of small businesses said that they do not use an entirely cashless system, although 21% do choose to use chip and pin machines as part of their payment mechanisms.

This reluctance from small business owners to switch to a cashless payment system isn’t just stubbornness. It is borne out of many factors but the main ones were processing and mis-use costs and security.

To accept debit/credit cards. That is the question!

So while accepting cards may appeal to your customers, there are some aspects of these kinds of transactions that make accepting this form of payment more of a risk. In addition to the cost of paying to access the services, arguably the most costly drawback of accepting cards at your small business are chargebacks.

What are chargebacks?

Customers of major card companies have the power to dispute transactions, to protect themselves against fraud or unauthorized purchases. A chargeback happens when an issuing bank returns money to a customer in a forcible manner in order to settle a disputed transaction.

Banks have instituted chargebacks to protect customers from dishonest merchants, but they do not have a whole lot to offer when it comes to protecting honest merchants from dishonest customers.

There are also dishonest consumers who make a habit of purchasing products and services then disputing the charges.

Small business owners should be aware that buyer’s remorse can lead to their requesting a chargeback.

So unsurprisingly chargebacks are a concern for small businesses as it can find itself faced with enormous financial loss, and the prospect of fighting what seems like an uphill battle to retrieve the revenue you’ve earned.

3 Issues to consider when fighting a chargeback:

1 It’s Incredibly Time-Consuming

In order to retain the revenue business owners need to prove to a merchant that the services were provided in the first place. It can be hard to do, so you need to evaluate whether fighting the revenue will be worth as many as 10-12 hours of your time.

2.It Could Be Your Fault

Chargebacks aren’t always initiated by dishonest consumers. They can also be triggered when your customer doesn’t remember you when checking the credit card statement. So ensure:

• Your business is easily identifiable on the statement
• You are attentive to queries in case a customer doesn’t recognize the charge.
• If there is a genuine problem deal with it professionally before fighting a chargeback.

3.The Client’s Unlikely to Result in Recurring Revenue

Even if you ultimately win the chargeback battle against a dishonest customer, the benefits to your business are likely to be limited to the total amount of their bill

Considerations beyond Chargebacks

• Compliance – In these days of GDPR, it is vitally important we all adhere to security rules and regulations. If you record your calls, you must stop recording at the time that you verbally take a person’s card information. If you note down the details, then you must ensure that these notes are destroyed.
• Costs – The rules about passing on card charges within a transaction have recently changed. Should a person use a personal card to clear an account, irrespective as to whether it is clearing a business account, you cannot pass on card transaction charges. You can only pass card charges when using a business card.

As with any financial transaction, common sense is the key. By being educated as to the do’s and don’ts we’re all better placed to make those informed decisions and to ultimately succeed in this ever changing world of payment methods.