Small businesses in Australia play a vital role in the nation’s economy, accounting for over 40% of GDP and employing nearly half the workforce. However, as consumer payment preferences shift, small businesses face increasing pressure to adapt. To foster growth in a competitive marketplace, staying ahead of emerging payment trends is critical.
The Xero Global Payments Report 2024 provides actionable insights into these trends and how they impact small businesses in Australia. Below, we delve into key findings from the report, exploring how businesses can embrace these changes to boost cash flow and enhance customer satisfaction.
1. Digital wallets are becoming mainstream
In Australia, digital wallets such as Apple Pay and Google Pay are quickly becoming a standard payment method. According to the Xero report, 24% of Australians use digital wallets, with Gen Z leading adoption at 40%. For younger consumers, the convenience of tap-and-go payments via smartphones is a significant driver of this trend.
Opportunities for small businesses:
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Faster Transactions: Digital wallets enable quicker checkouts, reducing queue times and improving customer satisfaction.
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Attracting Younger Customers: Businesses targeting Gen Z and Millennials can benefit from offering mobile-friendly payment options.
By integrating digital wallets into their payment systems, small businesses can stay relevant in a tech-forward marketplace.
2. Buy-now-pay-later (BNPL) drives sales growth
Australia has emerged as a leader in buy-now-pay-later (BNPL) adoption, with platforms like Afterpay and ZipPay enjoying widespread popularity. The report reveals that 31% of Millennials prefer BNPL services, making it a crucial offering for businesses targeting this demographic. BNPL allows customers to purchase high-ticket items and spread payments over time, lowering the barrier to entry for costly goods and services.
How BNPL benefits small businesses:
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Higher Average Order Values: Consumers using BNPL are more likely to make larger purchases, boosting revenue.
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Expanding Customer Base: Offering flexible payment options appeals to budget-conscious buyers, particularly younger consumers.
Retailers in industries like fashion, electronics, and furniture are especially well-positioned to capitalise on this trend.
3. Cash payments are declining
Although 69% of Australians still use cash, reliance on physical currency is steadily decreasing. The Xero report highlights that only 25% of Australians primarily use cash and cheques, while digital and contactless payments continue to grow. This shift is particularly evident in urban centres, where convenience and speed are prioritised.
For small businesses:
Transitioning to cashless operations can streamline accounting and improve security. Adopting digital and contactless payment methods ensures businesses remain competitive, particularly in metropolitan areas.
4. Contactless payments dominate in-store transactions
Australia leads globally in contactless payment adoption, with consumers favouring tap-and-go technology for in-person purchases. The report notes that one in four Australians now carry only their mobile phone to pay, driven by younger generations’ preference for convenience.
Why contactless matters:
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Enhanced customer experience: Contactless payments are faster and more secure than traditional methods.
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Reduced operational complexity: Integrated systems simplify payment processing, benefiting both customers and business owners.
Small businesses that prioritise contactless options can expect improved customer loyalty and operational efficiency.
5. Transparency in payment practices is key
Australian consumers are highly sensitive to hidden fees, with 72% citing these as their top frustration. Strict regulations around surcharge disclosure further emphasise the importance of transparency. For businesses, this means clearly communicating all fees and payment terms to avoid eroding trust.
Best practices for businesses:
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Transparent Pricing: Clearly display any additional charges or fees upfront.
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Compliance with Regulations: Partner with payment providers that adhere to Australian laws, such as the ban on excessive surcharges.
Transparent practices not only build trust but also differentiate businesses in a competitive market.
Leveraging payment trends to boost cash flow
Adapting to these payment trends isn’t just about customer satisfaction—it directly impacts cash flow. Faster payment cycles, reduced cart abandonment, and higher sales conversions are just some of the benefits businesses can achieve by diversifying their payment options.
The Xero Payments Report reveals that businesses offering modern payment solutions experience up to 15 days faster payment cycles than those relying on traditional methods. This improved cash flow allows businesses to reinvest in growth, manage inventory more effectively, and reduce financial stress.
How Xero supports small business growth
Managing multiple payment systems can be challenging, especially for small business owners wearing many hats. Xero simplifies this process by integrating with leading payment platforms like Stripe, Square, and PayPal. Through Xero’s tools, businesses can:
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Automate payment tracking and reconciliation.
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Gain real-time visibility into cash flow.
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Ensure compliance with Australian payment regulations.
These features empower small businesses to focus on growth without being bogged down by administrative tasks.
Future-proofing Australian small businesses
The payment landscape in Australia is evolving rapidly, and small businesses must adapt to remain competitive. From digital wallets and BNPL to contactless and transparent payment practices, embracing these trends is essential for driving growth and improving cash flow.
By leveraging tools like Xero, small businesses can navigate these changes with confidence, ensuring they not only meet customer expectations but also secure their long-term success.
For more insights into payment trends and actionable strategies for your business, download the Xero Payments Report.
