In 2002, PayPal changed the small business landscape by allowing small businesses to make online transactions independent of markets like eBay and Amazon; but until recently, their near-monopoly kept service expensive and buggy. With half a dozen challengers finally breaking out in the last few years, small businesses have seen online payments get cheaper, more responsive, and more feature-rich. Here are a few of the ways the new online payment environment is changing the way we do business.
Boutique operations are thinking globally
Historically, if a small business wanted to remain small, employing just a few workers, they were limited to their immediate geographic area. It was simply too costly to market and distribute a product globally without scaling everything else up, too. With secure online payments, operations of two or three people can fill orders all over the world. By reaching out to customers in diverse markets, small businesses are insulated from local economic troubles, and less bound by local tastes—so that a surfboard maker living in Kansas can compete just as effectively as their rivals in Southern California.
Fixed costs have fallen through the floor
For many entrepreneurs, getting permanent office or storefront space is the most expensive hurdle they face. Setting up shop in a place where customers can actually find you isn’t cheap, and many niche startups are simply unable to build up the customer base to stake out good real estate. Now, with online payment and international shipping, startups can afford to settle for out-of-the-way commercial space (or none at all) and focus their marketing efforts online. This means that startups become profitable earlier, with risky, innovative businesses becoming far more viable than before.
Small businesses can be just as credible as the big guys
Having a professional, encrypted payment and invoice system is one of the most powerful signs of a business’s credibility. Amazon and eBay made a fortune in the early 2000s by lending their trusted name and financial infrastructure to hundreds of thousands of tiny retailers. Customers didn’t have to independently research every single online supplier to prevent fraud—Amazon did the work of compiling ratings, and served as a trusted intermediary for financial transactions. Customers didn’t have to trust the thousands of nameless businesses they interacted with; they just had to trust Amazon.
Now, with dozens of options for cloud payment and web based invoice software, the role of the middle-man has shrunk down further, without compromising the security of day-to-day transactions. Any business with decent web design and a WordPress plugin for online payment can work directly with customers, while cloud-based financial institutions monitor the paper trail to ensure that everything is above-board.
The path to checkout is shorter than ever before
The rules are the same in any kind of sales or marketing—the easier you make it for customers to buy, the more they’ll do it. Labyrinthine web design, an out-of-the-way location, or unhelpful customer service are enough to dissuade many fence-sitting customers; but online payment allows customers to impulse buy, right from home in their pajamas. It’s the equivalent of having a 24-hour, 7-days-a-week storefront open, at almost no cost. Even for face-to-face sales, the ability to transact via cell phone makes it easy for sales reps to strike while the iron is hot, and seal deals quickly.
Startups can do more with fewer employees
In general, cloud services allow small businesses to outsource essential functions, at a fraction of the cost of doing them in-house; and online payment is no exception. The cost of buying your own point-of-sale structure and having employees process payments manually is a major albatross, especially for companies that thrive on a lot of small transactions.
Overall, the businesses that benefit the most from the new mobile payment environment are:
- Businesses with fewer than five employees
- Niche and high-risk startups
- Businesses that do face-to-face sales
- Companies that do a high volume of micro-transactions.
Guest article written by: Tara Wagner is a staff writer for [tp lang=”en” only=”y”]TechBreach[/tp][tp not_in=”en”]TechBreach[/tp]. She has worked from home for over a decade, and loves sharing news and advice with fellow telecommuting moms and dads. She’s fascinated by new tech and new ideas; and when she finds time to unplug, she enjoys long hikes in the mountains near her home. She lives in Denver.