For Many Small-Business Owners, a Necessary Shift to Digital Payments

“Making It Work” is a series about small business owners struggling to survive tough times.

When Egypt Otis started his business, Comma bookstore and social hubThree years ago, a pandemic was in full swing in Flint, Michigan. But her neighbors welcomed the literature and art that she sold in her store, and the community programs she hosted.

Despite the warm welcome, Ms. Otis soon realized she had a sales problem. Customers wanted to pay with their mobile phones.

“I noticed that people rarely had wallets or physical cards, which limited their ability to sell and make money,” Ms. Otis said. So she upgraded her trading platform to include tap-and-go purchases on her mobile device. “People don’t carry cash,” she says. “It’s becoming obsolete.”

The number of Americans who say they are “cashless” has skyrocketed over the past five years. 41% of Americans said they didn’t use cash for their typical weeklong purchases in 2022, up from 29% in 2018. Pew Research Research It was released in October last year.

Small business owners are switching to cashless payments due to increased consumer demand, faster checkout, reduced labor costs, and increased security. Experts say those who are waiting risk losing their income.

However, there are also drawbacks to going cash-free, such as a learning curve for entrepreneurs who do not understand how to set up digital payments, the difficulty of using credit cards for low-income consumers, and privacy concerns.

Juanny Romero was an early adopter of digital payments for small businesses. 15 years ago when she founded Mothership Coffee Roastersa Las Vegas coffee shop chain, she started using Square, a low-cost digital payment system for small businesses.

“I was a young businessman and had no insight,” she said. But Square saved her $3,000 a month in merchant fees on credit card processing.

As Ms. Romero expands her business (4 locations in Las Vegas, with 2 more planned), She added more payment options like Apple Pay and Google Pay.

However, she has noticed a change during the pandemic. Customers didn’t want to use cash anymore, and employees didn’t want to handle it. “I didn’t know where the novel coronavirus came from,” she says. “There were people still bringing cash, but it was scary and dangerous.”

She completely ran out of cash when the coin shortage hit in 2020, but Romero realized she could save on labor costs. “Managers stood in line for two hours to deposit cash,” she said. “You cannot get an armored car service to receive $100 in cash.”

Still, customer demand has led to a return to cash sales, which Romero said has remained stable at about 11% of overall revenue. He said he would go cashless if the market share fell below 10%.

The pressure to adapt is increasing. As of the end of 2020, there were over 2.8 billion mobile wallets in use, projected to grow by nearly 74 percent to reach 4.8 billion, or almost 60 percent of the world’s population, by the end of 2025, according to the company. Studies published in 2021 By Mr. Boku, a fintech company

The United States lags behind other countries in adopting cashless payments. The UK is one of the most cashless countries in the world, where the pound accounts for just 1% of all transactions. Report from Merchant Machine, a payments research firm based in London. However, some small business owners in the United States do not understand the complexities of digital payments.

“Small sellers don’t always have the knowledge or resources to know what to do,” says a master who trains owners like Otis of Comma Bookstore. Ginger Siegel, who heads the North American small business division at Cards, said: .

Ms. Otis said she noticed a faster checkout process and increased sales when she started offering mobile payments. “As a retailer, she wants the experience to be as efficient as possible,” she said. “It’s a matter of survival.”

Benefits include instant payments, increased sales, and the ability to sell to customers who may use other currencies. “You have to launch it, but it’s worth it,” says Kimberly A. Eddleston, professor of entrepreneurship at Northeastern University.

But some executives say they are hesitant to act too quickly, fearing today’s technology will be obsolete tomorrow. And compatibility and cost issues also need to be considered, CEO Wayne Reid said. forging & formingis an online jeweler with a physical store, Studio D Jewelers, in Woodstock, Illinois. A quick transaction may not be appropriate in jewelry sales, where items can be expensive, he said. “We don’t want people to think we’re in a hurry,” he says.

Despite technological advances, many Americans still have little or no access to financial services such as credit cards and mobile wallets, but that is slowly improving. An estimated 5.9 million households will be unbanked in 2021, down from 7.1 million in 2019, according to the report. Investigation by the Federal Reserve.

Another barrier to adoption is privacy concerns. Some prefer the anonymity that cash offers. And cash is perceived as a way for consumers to stay conscious of their spending. Complicating the transition to a digital economy, the recent banking turmoil in the United States has led many depositors to question the safety of their financial institutions.

But experts agree that cash is unlikely to run out. Low-income consumers continue to rely on cash for payments, according to Fed research.

And small business owners say cash is still a viable option for their customers, despite the speed and efficiency that cashless payments offer.

“At the end of the day, I know the people I serve,” Romero said. “If you don’t do the right thing, you will feel conflicted.”

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