While businesses may be used to reports sounding the death knell for cash payments, they might be more surprised to hear ones signalling the end of card payments. The evolution of digital payment presents opportunities and challenges – how can firms afford to keep pace?

First it was cash and now it is cards. Plastic payments cards are on their out according to a new report as people increasingly choose to use digital wallets, online bank payments, buy now pay later and other alternative payments methods.

While the demise of plastic cards may be a little overstated – cash still changes hands on a regular basis and it feels that there is still a newness to contactless card payment – the rising popularity of alternative payments methods is a trend that small businesses need to be aware of and plan for.

Digital payment and the benefits of investing in new systems

The move away from cards owes much to the pandemic and in particular the rapid growth of ecommerce and the use of smartphones to shop in this way. Against this backdrop of increasing awareness, the quick hop from online card payments to alternative payments methods is a logical step. And it is one that makes sense for small businesses.

Firstly, alternative payments methods are more cost-effective – cards come with transaction fees and other costs for merchants. Secondly, these methods are simpler – tasks such as cashing up and issuing refunds are much more straightforward.

Furthermore, and critically for smaller firms, the greater automation of processes allows for a clearer view and analysis of cashflow. Better data visibility brings many advantages, including in terms of cashflow and related financial planning and accessing credit.

Of course, there is a significant barrier to upgrading payments systems and taking advantage of the benefits that alternative payments methods offer – and that is cost. Such a step requires investment and at a time when there is unprecedented pressure on cashflow and capital reserves, this represents a major challenge.

Upgrading payment tech and how alternative finance can help

How can smaller firms manage their cashflow and find the capital to investment in upgrading payment systems? Alternative finance can help.

In the wake of prolonged caution from traditional lenders, which is an issue that has returned during the pandemic, services such as invoice finance, asset finance and peer-to-peer lending, are proving a vital source of capital for small businesses, both for maintaining cashflow and for essential investment.

These facilities, which offer a more easily accessible and personalised approach to lending, are helping small businesses survive and target recovery and regrowth.

Furthermore, alternative lending is playing a prominent role in the government’s headline emergency support scheme, the Recovery Loan Scheme (open until the end of June 2022). Invoice finance and asset finance between £1,000 and £10 million per business are available under the initiative. This profile is helping cement the reputation of alternative finance in the business sector.

Business investment and small firm finance options

While cards are still widely used, more and more consumers are leaving them at home and choosing not to use them for online purchases. The switch to alternative payment methods is progressing and small firms need to be in position to benefit from it, which means including new payment systems in their financial planning. As such, it is important that decision-makers are aware of all the small business finance services available to them, including alternative finance facilities.

To find out more about A&T Business Associates services, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.