By Mike Elliff, CEO at Tyl by NatWest, discusses what shifting customer expectations mean for businesses since the radical evolution of technology in the payment industry, and why contactless payments is essential to SMEs

In a relative short period of time, the way we make payments has substantially changed. It was only 50 years ago that the UK switched over to the decimal point system for our currency and since then the rate of innovation has increased with ferocity, spurred on by the aim of making it easier for consumers to spend, and businesses easily accept payments.

In 1966, the first credit card was launched in the UK marking the introduction of first use of card payments. Just over 10 years later in 1998 and UK debit card payments exceed personal cheques for the first time with consumers spending more than £50 on average on their cards according to Payments Council.

At the same time as the proliferation of card payments, the internet was emerging from a nascent technology to a commonplace tool. With a flourishing ecommerce boom, digital payments became essential to enable this emerging industry.

Although it feels an everyday part to the 83% of customers that use them, it was only 15 years ago that contactless payments were introduced to the UK by Barclaycard. The more we all realise the benefits, the more adoption and innovation increases. The usage of contactless payment was further heightened during the pandemic, when the public was encouraged to switch from a hygiene perspective. This has had long-lasting effects changing customer behaviour and eventually preference. In fact, the majority (68%) of consumers say COVID-19 has permanently changed how they pay, with a preference for contactless, according to UK Finance.

The pace of innovation for payments technology is delivering clear benefits for consumers themselves. But with so many priorities within a small or emerging business, why should a business leader make time for payments tech and what are the benefits of contactless card payments?

Better customer experience to meet expectations

Whilst consumer adoption helps spur on innovation in the payments industry, in turn consumer behaviours themselves drive further development too. The ‘Amazon effect’, whereby rapid and effect payment and delivery of services or products means that a lightning-fast speed has become normalised. This can present a challenge to meet amongst large enterprises with huge development teams let alone smaller businesses. However, to compete small businesses can make small meaningful changes like introducing contactless payments to increase the speed of the checkout experience. In fact, 43% say they would not return to a shop if it didn’t take card or contactless payments, according to research by Tyl by NatWest

As we all know, speed is critical for time-poor shoppers. It is estimated that contactless payments are 15 seconds quicker than standard card payments meaning the overall experience offered to shoppers is much improved – less queues overall and when you’re at the till, a speedy transaction. For businesses though, this is adds up to an incredibly valuable saving.

With the reduced processing and handling of cash, customer experience can be significantly improved through faster transaction rates reducing wait times and queues. By taking a greater volume of payments in the same amount of time, businesses can reduce the number of staff needed behind the tills so these resources can be relocated elsewhere.  resources and save money, whilst offering an improved customer experience.

Accurate, Real-Time Insight into Business and Financial Performance

For time and financially pressured business owners having accurate and up-to-date insight on their business operations is essential. Manual data entry is a time-consuming process for business owners that is prone to mistakes. Fortunately, card and contactless payments ensure real-time automated data entry, removing the need for manual data entry into your accounting software as well as removing human error, providing accurate financial data.

This allows business owners to monitor peak sale times, revenue, and inventory. Business owners can, therefore, track when they need to have more staff available to ensure there is enough employees to meet the demand of customers. Staff can be redistributed to alleviate any other pressures, whether that is on the store floor, back of house managing stock or at the tills. This is true for inventory too, ensuring there is sufficient stock for peak sale times. As a result, customers have a better experience as there are more people on hand to help with queries, stock is available and payment queues are not too long.

Therefore, by offering card and contactless payments, the automated, accurate, data entry not only improves financial control but also operational control, enhancing customer experience. This also encourages repeat customers and referrals.

Innovative technologies such as open banking can enable accurate payments from suppliers to merchants within seconds. Recent research by Payit by Natwest showed that, on average, businesses are faced with £5,500 in outstanding payments every month, and over a quarter (26%) are owed between £5,000 and £20,000. Late payments can create a multitude of issues for business owners, resulting in nearly half (44%) of SMEs saying that late payments cause cashflow issues. Late payments are also hugely detrimental to business owners when trying to pay suppliers and staff. In fact, a quarter of business owners struggle to pay staff when payments are late. Therefore, by embracing new technologies to help speed up payments is absolutely essential to a business’s operations and overall performance.

Growth and Marketing

Adopting card and contactless payments and therefore embracing new technologies and platforms, is a step in the right direction for business owners to create an omnichannel business model. This can be mirrored in other parts of the business such creating a website and growing an online presence, allowing for more sales online through an increased reach to the target market. By creating an online database of customers, business owners can send out newsletters including coupons and rewards programmes. By offering rewards programmes business can increase brand value, encouraging repeat customers and therefore grow a loyal customer base. This is important to business owners as after all ‘a company’s most loyal customers are also its most profitable’.

By harnessing and using new technologies, business owners can save huge amounts time through more efficient processes. This time-saved can be reinvested, identifying other areas of the business which require support and work. Having more available time to spend on marketing, for example, will be beneficial to businesses owners as they can allocate more resources to developing promotional programmes and schemes. In turn, business owners will have a better understanding of their target market and the ways in which they can reach them through marketing.

To remain relevant and grow their customer base through both repeat and new customers, merchants must adapt to the new customer demands and expectations. By using the latest technology and payment methods, business owners can improve customer experience whilst alleviating financial and time pressures on themselves. Card and contactless payments therefore, go beyond just the point of sale, instead impacting customer experience in turn affecting overall business performance.