SMBs Struggle to Accept Mobile Payments — And Lose Customers as a Result

Cash is out. So are plastic credit cards. Since the pandemic began, use of contactless mobile payments has soared. According to eMarketer, in-store mobile payments grew 29% last year as more consumers sought out safer payment options at the point-of-sale. But in the rush to meet this demand, small businesses are being left behind.

Use of contactless payments has grown 150% since March 2019, and 83% of consumers now say they would use tap-to-mobile payments if they were offered by a business due to convenience and speed. However, 34% of small and medium-size businesses in the U.S. don’t currently accept contactless payments, and 78% of cash-only SMB owners say they’ve lost a sales opportunity in the past month because a customer didn’t have cash.

If small business owners know that they need to accept mobile payments to stay competitive, why aren’t contactless-enabled payment terminals more common within the SMB community? Jeremy Gumbley says it boils down to cost.

As chief information and security officer at NMI, a payment processing platform, Gumbley frequently works with business owners struggling to set up mobile payment systems. He says the biggest challenge these business owners are facing has to do with onboarding. Many SMBs aren’t able to absorb the cost of purchasing contactless-enabled payment terminals. 

Gumbley sees tap-to-mobile payments as the solution that SMBs have been looking for, offering a unique opportunity to combat the biggest pain points in the onboarding process by turning a device merchants are already familiar with—their smartphones—into a payment-accepting device, without special setup processes or external card readers.

“For SMBs, it can be difficult to invest in feature-rich contactless-enabled payment terminals,” he says. “[Tap-to-mobile] reduces operational costs and offsets the impact of transaction fees due to the nature of the technology.”

Recent data from NMI found that the biggest hurdles to mobile payment adoption among SMBs were paying for the system and system setup (47%), setting up the system equipment and hardware (46%), and training employees how to use the system (39%). 

Eighty-five percent of consumers said they would be more likely to shop at a business that offers tap-to-mobile as a payment option, according to NMI’s data.

Delivering on Demand

Vendors at live events and delivery drivers have had an especially difficult time making the transition to mobile payments, but Gumbley believes that tap-to-mobile solutions will allow these businesses to deliver on customer demand.

As consumers become more familiar and comfortable paying by mobile wallet in places like transit systems with open-loop ticketing, contactless payments will become the standard in other settings, like restaurants, as well, Gumbley says.

“One opportunity unique to tap-to-mobile is how quickly SMBs can get up and running using this technology with less expensive hardware and therefore increase businesses’ revenue opportunities,” Gumbley says. “Digital onboarding is necessary for payment providers to grow and scale their merchant base, [but] the longer the onboarding process, the greater the risk for payment providers losing out on that business.”

Research showing more widespread adoption of contactless payment technology among SMBs in the U.K. than the U.S. has Gumbley feeling optimistic about what’s to come. He believes contactless payments will become the method of choice for both consumers and merchants in the coming months, especially as more small businesses come to realize the opportunities they’re missing out on by only accepting cash.

“Heading into the holiday season and 2022, SMBs can’t risk breaking customer trust and loyalty, especially when it’s something in their control, like payment offerings,” Gumbley says. “Catering to customers’ needs by offering contactless payments such as tap-to-mobile offerings will allow them to have a successful holiday season and prime them for further success in the new year.”

​​Stephanie Miles is a senior editor at Street Fight.