Digital Payments’ Big Payoff for Small Sellers

One legacy of the pandemic is how the shift to contactless, remote, and other forms of payment has enabled small businesses to compete with big enterprises.

During the pandemic, retail commerce shifted almost overnight from primarily cash, card, and in-person transactions to primarily contactless, digital, and remote payments. For merchants, this meant quickly adopting new contactless technologies to align with changing customer demands.

This change, which is still evolving, is now essentially permanent. As shoppers become more comfortable with newer iterations of these payments systems—like tap-to-pay and digital wallets—point-of-sale (POS) technologies are increasingly performing more and more tasks, both for businesses and consumers.

It’s no longer just about simplicity and convenience for customers. POS technologies are now transforming how small enterprises manage their businesses, and these technologies are even becoming drivers of growth.

At first glance, digital payments systems have often been seen by small merchants as expensive. And some people are, in general, reluctant to embrace new technologies.

But smart POS technologies are not costly, are fast evolving, and the services they provide are quickly moving up the value chain. The whole smart POS ecosystem gives merchants access to fintech startups offering all kinds of previously inaccessible specialized solutions and innovative technologies. For small enterprises especially, this can be an absolute game-changer.

The Data Trove

Convenience aside, merchants now expect POS technology to do much more than before. They want it to handle tasks like inventory control, omnichannel sales management, shipment tracking, invoice distribution, and fraud detection.
If a customer places an order online, for example, it’s expected that
the order should be trackable via a POS terminal.

But the most significant long-term benefit of the third-party app ecosystem in POS tech will likely be leveraging data in the network to get unique insights into customer preferences and trends that small retailers could not see otherwise. This will likely become so much more important that the actual transaction of money will become part of the background in the customer’s shopping experience.

It’s important to realize that big retailers already have most of these capabilities. What these new technologies mean is that the “little guy” can, for the first time, compete with the big tech platforms on things like loyalty programs, customer acquisition, and retail trend-spotting. This is a critical concern for many small businesses, as one of the economic consequences of the pandemic was how it solidified the power of giant tech platforms over brick-and-mortar retail in much of the U.S. economy.

Many retailers clearly see new technology as enabling them to compete. According to a Chase Small Business Pulse Survey published in May, 73% of small-business owners say they are likely to adopt new technology in the next year.

Smart POS helps level the playing field, even if entering the digital-payments ecosystem means the retailer temporarily gives up some control over the customer relationship. Restaurants, for example, might dislike using third-party delivery companies—which cut into profits and risk degrading the quality of service—but through POS technology they can now use the customer data collected by those services to build and reach their own customer base.

The same opportunity exists for other retailers that are willing to work with third-party applications to broaden their reach.

Growth Driver

Shoppers will continue to migrate from cash and cards to digital as these shopping experiences become more familiar. And as they do, they will expect retailers to both know them and anticipate their preferences, making their shopping experiences more personal, convenient, and delightful.

For both consumers and merchants, what started as a reaction to a crisis has now settled into a likely permanent habit. Digital payments systems will continue to transform the shopping experience and help drive business growth by giving retailers access to essential data that they couldn’t access otherwise.

Chase is developing our own smart POS capabilities, and supporting other best-in-class providers for commercial clients. By embracing this technology—ideally through or with a partner that has a broad and deep ecosystem of startups and innovators—merchants can set themselves up for long-term success.

—Brad Brodigan is managing director and global head of SMB payments at J.P. Morgan Chase.