Whether it’s a quick tap on a phone or splitting payments over time, the way consumers like to pay is increasingly varied and personal. For small businesses, failure to align with these preferences isn’t just inconvenient—it can represent a missed opportunity to connect with customers and drive growth. Along with payment trends for a range of demographics, Xero’s 2024 Global Payments Report reveals the impact of this disconnect and why understanding payment preferences is essential for success in today’s marketplace.
The Gap Between Businesses And Consumer Payment Preferences
A key finding from the Xero report is the sharp divide between consumer payment preferences and the options businesses provide. For example, 89% of consumers in the United States rely on credit or debit cards for their purchases, yet nearly 30% of small businesses do not offer these options. This misalignment can result in lost sales, as 21% of U.S. consumers indicate they would switch to a competitor if their preferred payment method was unavailable.
Mobile wallets, such as Apple Pay and Google Pay, further illustrate this disconnect. While 43% of Gen Z consumers use mobile wallets regularly, only 45% of small businesses in the U.S. provide this option. As consumer expectations evolve, businesses that fail to adapt risk alienating younger customers and losing relevance in an increasingly cashless economy. Bridging this gap requires businesses to prioritize customer preferences and implement payment systems that enhance satisfaction and trust.
Payment Preferences Vary Across Generations
Payment preferences especially vary by generation. For example: Gen Z leads the way in adopting mobile wallets, with nearly half of this demographic relying on platforms like Apple Pay and Google Pay. Millennials, meanwhile, are early adopters of Buy Now, Pay Later (BNPL) options, leveraging these tools for financial flexibility. Gen X continues to favor credit cards but is increasingly adopting online payment gateways, while Baby Boomers remain steadfast in their preference for traditional credit and debit card transactions.
Since the option of a consumer’s preferred payment method can impact conversion, it’s crucial for businesses to get clear on what audience they want to reach and how they prefer to pay. For example, 21% of Gen Z, and 18% of Millennial consumers only take their mobile phone when going shopping—so a business’s failure to offer mobile payment options means losing a chunk of sales from these generations. Therefore, a tailored approach that accounts for generational preferences can significantly broaden a company’s appeal and customer base.
Payment Preferences Depend On The Industry
Consumer payment behaviors also vary significantly by industry. In retail and e-commerce, credit and debit cards remain the dominant payment methods, though mobile wallets and BNPL options are gaining popularity, particularly among younger consumers.
On the other hand, industries such as housing and utilities see higher usage of direct debit and bank transfers, reflecting the recurring nature and higher average value of these payments. Meanwhile, cash remains prevalent in food and hospitality sectors, though mobile wallets are rapidly gaining traction, particularly among Gen Z customers. Evidently, businesses that align their payment systems with both industry norms and customer demographics can better position themselves to meet evolving expectations.
The Common Barriers To Adopting Modern Payment Systems
Despite the clear advantages of offering diverse payment options, many businesses encounter barriers to adoption. According to the Xero report, these challenges include:
- Cost Concerns: Transaction fees and surcharges are a significant deterrent, with 33% of businesses citing costs as a primary barrier.
- Security Risks: Concerns over fraud and data breaches discourage many businesses from adopting mobile wallets and online payment systems.
- Complexity: The perceived effort required to integrate modern payment platforms often overwhelms small business owners, preventing them from exploring new solutions.
However, with the clear relevance of payment preferences to revenue, consumer loyalty, and more, the risks of inaction can quickly outweigh these barriers.
The Top Benefits For Updated Payment Options
Survey results from the Xero Payments Report revealed several tangible benefits of adopting new payment methods for small U.S. businesses. Going far beyond convenience, below are the key advantages realized for those who added an option in the last 6-12 months.
Increased sales: 41% of U.S. small businesses reported increased sales after adopting new payment options.
Expanded customer base: 31% of U.S. businesses found that adopting new payment methods helped access new customer segments.
Improved retention: 28% of small businesses reported that retaining more business was a benefit of adopting a new payment method.
Reduced time chasing payments: 27% of businesses reported saving time chasing late payments by adopting flexible systems.
How Xero Empowers Small Businesses
Xero’s payment solutions are designed to address the unique challenges faced by small businesses and help them adapt to their audience’s preferences. By integrating diverse payment options, automating invoicing, and strengthening security, Xero simplifies the process of integrating modern payment systems. These tools enable businesses to reduce administrative burdens, improve cash flow, and enhance customer satisfaction.
Whether supporting mobile wallets, streamlining direct debit processes, or enabling credit card payments, Xero offers solutions that empower businesses to meet diverse consumer needs and remain competitive in an evolving marketplace.
Gain Clarity Into Consumer Payment Preferences With Xero
Consumer payment preferences are more diverse—and impactful—than ever, and businesses must find ways to understand and adapt to these demands. Xero’s 2024 Global Payments Report reveals these invaluable insights that help businesses bridge the gap between consumer expectations and their offerings. By adopting flexible and modern payment systems better tailored to their audience, businesses can enhance customer experiences, drive loyalty, and unlock new growth opportunities.
For further insights and strategies, download the full Xero Payments Report today.
