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Small Business Payments Spotlight Exploring payments-focused attitudes and behaviors among U.S. small business owners and consumers
FALL 2018
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2018 Small Business Payments Spotlight
As technology continues to evolve at breakneck speed, consumers are fundamentally changing the way they shop for goods and services. Small business owners and managers who continue to adapt to these shifts in behavior and preferences are being rewarded with a growing, loyal customer base. On the other hand, small businesses set in their ways — and those failing to recognize the grave consequences of a customer data breach — risk going out of business.
That’s what Bank of America Merchant Services reveals in this second-annual Small Business Payments Spotlight, based on surveys of more than 500 U.S. small business owners and more than 500 consumers who frequent small businesses. With a firmer understanding of emerging commerce trends, merchants can better position their businesses for success today … and tomorrow.
Bank of America Merchant Services, a global leader in payments, eCommerce and security, commissioned Forrester Consulting, one of the most influential research and advisory firms in the world, to conduct a study of payments-focused attitudes and behaviors among U.S. small business owners and consumers.
The Bank of America Merchant Services Small Business Payments Spotlight you’re reading presents the most notable findings from the study.
METHODOLOGYIn the summer of 2018, on Bank of America Merchant Services’ behalf, Forrester conducted two online surveys of 502 U.S.-based small businesses and 519 consumers who purchase goods and services from small businesses.*
Survey participants responded to questions about point-of-sale and digital payments, loyalty programs, merchant services, eCommerce and security.
To be considered for participation, small businesses had to be based in the U.S., generate between $100,000 and $5 million in annual sales, and employ no more than 499 people.
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KEY FINDINGS
This year’s Small Business Payments Spotlight presents a wealth of timely, actionable information for small business owners. Here are four key insights you should know.
Both small business owners and consumers are relying more on mobile devices to streamline the shopping experience.
Credit and debit cards remain the most popular payment method both in-store and online as the relevance of cash diminishes. Consumers are growing increasingly comfortable with shopping and paying for goods and services on their mobile phones. Small businesses that only accept cash or limit the range of credit and debit cards they accept run the risk of alienating customers and losing sales.
More small businesses are responding to this trend by accepting digital and mobile payment methods, noting that customers always have their phones on them.
Flexibility at the point of sale is also key. Accepting digital payments, multiple card brands and, for now, cash, allows small businesses to cater to a range of customer expectations and preferences.
To stay competitive and grow sales, small businesses are expanding and enhancing their eCommerce capabilities.In the 2017 Small Business Payments Spotlight, we found only 44 percent of the small businesses surveyed maintained an eCommerce site. In just a year, that number increased to 51 percent.
Small businesses know their customers are shopping online more today than ever before, which is why the most successful merchants are enabling their customers to buy from them via a website or app.
Data breaches, which threaten sales and customer loyalty, are only growing costlier.
Data breaches, and the associated costs to recover from them, can be devastating to a small business. In our latest study, nearly 40 percent of small businesses that experienced a data breach reported a financial hit in excess of $50,000 — including costs to remedy the issue and lost sales.
TABLE OF CONTENTS
Page 5 Ways to pay continue to evolve
Page 9 eCommerce is driving small business growth and opportunity
Page 10How a data breach could put a small business out of business
Page 13It pays to be loyal
Page 14Your business made better, together
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And the damage goes beyond strictly financial measures. More than a fifth of consumers said they would never again trust or shop at a small business that experienced a breach. Few small businesses are poised to sustain such a blow to their finances and customer base.
Fortunately, there’s good news. Since 2017, there’s been a rise in the number of businesses that have enabled EMV chip card technology — an important step in keeping payments data secure. This report details a number of additional steps merchants are taking to mitigate risks.
Loyalty programs are just as rewarding for small businesses as they are for consumers.
It’s obvious why loyalty programs are attractive and beneficial to consumers. Who doesn’t enjoy an occasional perk or saving a few bucks on their next purchase?
What is surprising, though, is the amount of personal information our study participants claimed they were willing to provide to achieve those rewards or savings. More than 60 percent of consumers we surveyed will sign up for loyalty programs at businesses they frequent. Is your small business seizing this opportunity to forge a stronger relationship with your customers and keep them out of the grasp of your competitors?
Read on to see how other small businesses are effectively managing, protecting and growing their operations, as well as what consumers are saying about their changing shopping behaviors and preferences.
As a trusted payments, eCommerce and security solutions provider for hundreds of thousands of small businesses across the U.S., it’s our privilege to present you with this 2018 Small Business Payments Spotlight.
Interested in discussing how the key findings and trends in this report can help you improve your business?
Call your Bank of America Merchant Services business consultant or 833.713.2151 today.
JOIN THE CONVERSATION
Bank of America Merchant Services invites you to share your perspectives on the company’s LinkedIn and Facebook channels, where you’ll find frequent posts about key insights from the Small Business Payments Spotlight.
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Ways to pay continue to evolve With each passing year, consumers are growing more comfortable with
shopping and paying for goods and services on their mobile device. Meanwhile small businesses are using digital wallet apps to streamline the payments
process, boost customer loyalty and stay ahead of the competition.
Here’s what we learned about changing consumer behaviors:
Digital payments are on the rise
36% of small businesses surveyed in 2017 reported they accepted digital payment methods, but that number climbed to 46% in 2018.1
There are several reasons why. First, they believe it provides customers with a better overall experience.
They also cited the fact that nearly everyone carries a mobile device these days. Finally, digital payments allow business owners to process more transactions per hour, creating efficiency.
Small Business Payments Spotlight
is the age range of consumers who are seven times more likely to use their mobile device to shop than those 65 or older.
18-29 years old are no longer willing to tolerate lines at businesses because of the convenience of mobile checkout.
35% of consumers
want to have the ability to pay with a mobile device or digital wallet.
24% of consumers 8% of consumers in 2018 reported being likely to pay with a digital wallet on their mobile phone in stores, compared with 5% in 2017.
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Limiting payment card acceptance puts sales at risk
If a consumer found that a business did not accept the brand of credit card he or she wanted to use...
would be annoyed but would still go through with the transaction
would not make a purchase and walk away from the transaction
Of the consumers surveyed, 32% never make purchases at businesses that do not accept
credit and debit cards. Small businesses that only accept cash or limit the range of credit and debit
cards they accept run the risk of alienating customers and losing sales.
Ways to pay continue to evolve
How small businesses expect consumer payment behaviors and preferences will change in the next five years
Small business owners’ beliefs and attitudes about the payments landscape remained consistent between 2017 and 2018.
Cash will become more irrelevant.
44% 45%
More small businesses will rely on a mix of credit/debit
cards, mobile and digital payments.
46% 51%
2017 2018 2017 2018
THOUGHT STARTER What types of payments does your business currently accept? How do your customers prefer to pay? Is there a gap between their expectations and the payment experience you deliver?
Customers' use of digital payment types will increase.
58% 59%
2017 2018
35% 18%
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Small businesses and mobile POS systems
Flexibility is key at the point of saleSmall businesses with flexible and mobile point-of-sale (POS) solutions are finding
they can do more and deliver a better customer experience.
Benefits small business owners achieve by offering customers a mobile checkout experience:
Personalized checkout is a win-win for customers and small businesses
of small businesses said they offered a personalized checkout experience.
Improved customer satisfaction
Faster checkout times
A smoother checkout experience
Improved customer loyalty
More efficient use of staff resources
Increased security
Shorter lines at checkout
Increased basket or sales size
Don’t have a mobile POS system Use a mobile POS Don’t know
60%3%37%
45%This means roughly half of small businesses are missing an opportunity to boost customer satisfaction and loyalty.
Ways to pay continue to evolve
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42%Service & Repair
Types of businesses most likely to offer personalized checkout
37% of consumers appreciate when their
credit or debit card doesn’t leave their possession and
they can pay tableside.
Only 13% of consumers prefer not to pay right
at the table.
Consumers under 45 feel strongest about their card not leaving
their possession.
How consumers feel about paying at the table in restaurants
Ways to pay continue to evolve
60%
THOUGHT STARTER Do you offer your customers a personalized checkout experience? If so, what has that done for your relationship with your customers? If not, are your competitors doing so?
Retail & Wholesale
34%Restaurants
43%Professional &
Consumer Services
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eCommerce is driving small business growth and opportunity
More small businesses are turning to eCommerce as a greater number of consumers shop online.
of small businesses run an eCommerce site. This is seven percentage points higher than 2017.
of small businesses with an eCommerce site ensure theirs is mobile-friendly.2
How consumers say they shop on their mobile devices
Top 5 eCommerce site features small business owners seek
(Most to least important)
Small Business Payments Spotlight
Look up a business’ contact info / hours
Order an item online seen in store
Research a productor service
Shop using a web browser
Compare prices while in a physical store
Ability for customers to purchase from my business using a mobile device
Secure shopping cart
Compatability with my point-of-sale systems
Support availability 24/7
Optimized search engine
%%FRAGILE
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Nearly 40% of small businesses that experienced a data breach suffered more than $50,000 in losses.
How a data breach could put a small business out of business
Costs associated with combating a breach of customer or payments data continue to rise. And even one incident could cost a small business
more than 20% of its customer base.
Consumers between the ages of 18 and 29 are TWICE as likely as those over 65 to never again frequent a small business that
experienced a data breach.
Breakdown, by age group, of consumers who would never again shop with a small business that suffered a data breach.
22% of consumers surveyed indicated their trust would be lost forever and they would not shop again at a small business that suffered a data breach.
Small Business Payments Spotlight
29%
23%
20%
14%
18-29
30-44
45-64
65+
AGES
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Tactics small businesses implemented in the past 24 months to improve security and reduce fraud
What small businesses are doing to combat data breaches
Small businesses increasingly understand the range of things they could and should be doing to improve payment security and reduce fraud. This includes updating point-of-sale
(POS) equipment, ensuring compliance with industry standards, and focusing on the “human element” of the equation – employees.
Small businesses are growing more aware that their employees can trigger (o en inadvertently) security risks.
Small businesses are looking to their payment providers to help them with security by:
Here are three ways business owners and managers are counteracting these threats:
Getting better educated about reducing fraud and security risks
Implementing special so�ware, like tokenization and encryption, to protect customer data
Achieving PCI-DSS compliance
43% – Ensured compliance with industry security standards
37% – Purchased security so�ware
49% – Updated POS equipment
38% – Trained/coached employees to gather complete payment details from customers
Small Business Payment SpotlightHow a data breach could put a small business out of business
Using a firewall to prevent unauthorized access to or from a private computer network
Prohibiting employees from using POS devices for anything but processing transactions
Blocking access to unsecure internet sites on business devices
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The number of small businesses that have adopted EMV chip card technology continues to rise. The larger the small business, the more likely it is to use EMV at the point of sale.
EMV chip card technology continues to protect small businesses and provide assurance to customers
EMV chip technology adoption by small business size
51%68% 76% 83%
1-19employees
20-49employees
50-99employees
100-499employees
How a data breach could put a small business out of business
1
4
7
*
2
5
8
8
3
6
0
#
of small businesses surveyed have enabled EMV chip card technology.
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More than 60% of consumers sign up for loyalty programs offered by the businesses they frequent.
It pays to be loyal Both consumers and small businesses reap rewards from loyalty programs. According to Bank of America Merchant Services’ research, consumers are most enticed by rewards points and instant discounts, and they’re willing to
provide personal information to get these benefits.
While 80% of survey respondents will share their email address, only 12% will share their Facebook, Instagram, Twitter or other social media username.
August
XXX-XXX-XXXX
1 2 3
4 5 6
7 8 9
0 #*28
The incentive that most entices a consumer to sign up for a small business loyalty program
Rewards points for purchases or visits that can be redeemed
with that business
Access to exclusive announcements (about upcoming
sales or events for example), coupons or personalized discounts
Instant discounts
42% 40% 10%
Small Business Payments Spotlight
To get the benefits offered as part of small business loyalty programs, consumers are apparently willing to share multiple pieces of personal information — but don’t ask for their social media handles.
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of small businesses consider their merchant services relationship important to their success.
Your business made better, togetherSmall businesses report receiving various benefits by having an integrated merchant services and banking relationship, including overall cost savings, faster funding and
streamlined customer service.
Percentage of small businesses that have an integrated merchant services and banking relationship...
…and benefits small businesses report receiving from the integration.
$$$
Pay with touch IDPay with touch ID
Pay with touch ID
Done
69% 25% 6%
Integrated Not integrated N/A
Save on overall costs
Receive fast funding(next business day)
Customer service is streamlined
Access exclusive special offers and incentives
Why work with Bank of America Merchant Services?
• Want to take your business online? No problem.
• Need help preventing fraud? We have solutions for that.
• Is it time to expand to a new location? We're here to help.
• Looking for quick answers to all your questions? We have 24/7 support.
As a global leader in payments, eCommerce and security solutions, we can help you with a range of business needs.
Small Business Payments Spotlight
Are you benefitting from an integrated merchant services and banking relationship?
THOUGHT STARTER
1 For the 2018 Small Business Payments Spotlight, Bank of America Merchant Services surveyed US-based small businesses on payment acceptance “via a digital wallet,” “website” and “app” in lieu of the singular “digital payments” used in the 2017 edition.
2 Base: 257 U.S.-based small businesses.
Source: A commissioned study conducted by Forrester Consulting on behalf of Bank of America Merchant Services, July 2018.
Base: 502 U.S.-based small businesses & 519 U.S.-based consumers.
© 2018 Banc of America Merchant Services, LLC. All rights reserved. All trademarks, service marks and trade names referenced in this materi al are the property of and licensed by their respective owners. Merchant Services are provided by Bank of America, N.A. and its representative Banc of America Merchant Services, LLC. Banc of America Merchant Services, LLC is not a bank, does not offer bank deposits, and its services are not guaranteed or insured by the FDIC or any other governmental agency.
The Small Business Payments Spotlight is provided as a courtesy and is to be used for general information purposes only. The research contained herein was conducted on behalf of Bank of America Merchant Services by research firm, Forrester Consulting. Bank of America Merchant Services shall not be responsible for any inaccurate or incomplete information. Neither Bank of America Merchant Services nor Forrester shall be responsible for any inaccurate or incomplete information.
LinkedIn is a registered trademark of LinkedIn Corporation and its affiliates in the United States and/or other countries.
EMV is a registered trademark in the U.S. and other countries, and an unregistered trademark elsewhere. EMV(R) is a registered trademark owned by EMVCo LLC. ARR49ST8
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Call your Bank of America Merchant Services business consultant or 833.713.2151, or visit merch.bankofamerica.com/small-business
