8 in 10 Small Businesses Changed Payment Methods Because of Pandemic

Cash may no longer be king with small businesses, as challenges caused by the pandemic have prompted many companies to embrace digital payment methods instead.

In a survey of small business owners to find out how they have handled financial challenges caused by the coronavirus pandemic, global payments technology company Mastercard found that 82% of firms have made changes to the way their business sends and receives payments.

One of the biggest changes is a move away from cash. In fact, nearly two-thirds of small businesses — 64% — are now actively trying to dissuade customers from making payments with cash and checks, and 68% said cash and checks simply take too long to deposit during these challenging times.

Cash flow troubles abound among small businesses

Customer payments are the lifeblood of any small business. Yet slow payments during the pandemic have led to cash flow problems and created a major source of pain for small businesses:

  • More than a third — 38% — of business owners said they are facing cash flow issues because customers are paying late and the processing time for depositing cash and checks is too long.
  • Another 48% said their company is only one missed payment away from having to shut down.

There are a number of reasons why businesses have been adversely affected during the pandemic. Some firms had to close their doors due to temporary shutdowns designed to halt the spread of the coronavirus. Others were negatively impacted when consumers started having their own financial challenges.

However, many small business owners have met the challenge by being proactive, with solutions such as:

  • Adding a digital service to help them collect funds due to struggles with cash flow and the collection of payments (50%)
  • Making the transition to electronic invoicing (25%)

Such moves have made a difference. In fact, during the pandemic, small businesses reported a 60% increase in online card payments. In contrast, the usage of cash and checks for payments has decreased by 34% and 24%, respectively.

Small businesses have also expressed a willingness to invest in infrastructure and even employees in a move to weather the storm caused by the pandemic.

Creating a new normal in payments

Though the changes small businesses have made may have been born of necessity, some business owners believe they can have a positive effect even after the pandemic is over.

More than two-thirds of small business owners — 67% — said a silver living of the pandemic is that it has led them to upgrade their electronic payment methods. Of those who are happy about making those changes, 81% said the changes have also led to increased customer satisfaction.

A majority of small business owners are even looking ahead to how they can continue to move their payment methods forward. In fact, 70% said they are open to the idea of investing in the technology needed to further advance their payment systems. Likewise, 73% said digital payments will be a normal part of their operations going forward.

Methodology: Mastercard surveyed 1,000 small business owners in the United States and Canada with fewer than 100 employees and annual revenue between $50,000 and $1 million. The survey was conducted between July 13-17, 2020.

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