Accelerating cash flow: why payment flexibility is a must for retail businesses
Cash flow is the lifeblood of any retail operation, and in an era of varied payment preferences, staying successful means offering the flexibility consumers demand. Retail businesses that provide diverse payment options not only cater to a broader audience but also ensure faster payments, reduced financial stress, and a competitive edge in a dynamic market.
The changing face of payments in retail
Consumer expectations around payment methods have shifted significantly over the last decade. Credit and debit cards, once the dominant forms of payment, now share the spotlight with digital wallets, buy-now-pay-later (BNPL) services, and other innovative options. According to the 2024 Xero Payment Report, 86% of consumers still rely on credit or debit cards for purchases, but alternative methods like Apple Pay, Google Pay, and BNPL are growing rapidly in popularity. However, less than half of businesses offer these alternative methods.
For retail businesses, particularly small and medium enterprises (SMEs), these trends represent both a challenge and an opportunity. Failing to adapt can mean losing sales while embracing new options can accelerate cash flow and foster customer loyalty.
The case for offering more payment options
Retailers who expand their payment methods gain several key advantages, including:
1. Faster payment cycles
When customers are presented with their preferred payment options, they’re more likely to complete transactions promptly. Xero’s report highlights that businesses offering modern payment solutions experience payment cycles up to 15 days faster than those relying on traditional methods. Whether it’s through systems that allow customers to buy now and pay later (BNPL) or digital wallets that enable seamless tap-to-pay transactions, flexibility translates into quicker revenue.
2. Reduced cart abandonment
Cart abandonment is a persistent issue for e-commerce retailers, often driven by limited or inconvenient payment options. Offering services like PayPal, Stripe, or BNPL reduces friction at checkout, encouraging customers to finalise purchases. A smoother checkout process can directly lead to higher conversion rates and, subsequently, improved cash flow.
3. Broader customer appeal
Expanding payment methods is not just about convenience; it’s about inclusion. Younger consumers, particularly Millennials and Gen Z, are more likely to use digital wallets or BNPL services. By catering to these preferences, retailers can attract a more diverse customer base, widening their revenue streams and reducing the risk of falling behind.
4. Streamlined Operations
Modern payment platforms often come with integrated features such as real-time tracking and automated reconciliation. These tools reduce administrative burdens and improve cash flow visibility, allowing businesses to plan expenditures and manage inventory effectively.
Payment trends retailers need to know
The evolution of payment technology has introduced several trends that retailers should consider:
Digital wallets and mobile payments
Platforms like Apple Pay and Google Pay have gained significant traction, especially among younger demographics, with 50% of Gen Z using these methods and 21% reporting that they only take their phone with them. For retailers, accepting these methods can lead to increased foot traffic and sales, especially among younger audiences.
Buy-now-pay-later services
BNPL is not just a trend—it’s a game-changer. Services like Klarna and Clearpay enable consumers to spread costs over time without the need for traditional credit cards. Retailers adopting BNPL often report higher average order values (AOV), as customers are more willing to purchase premium items when given financial flexibility.
Bank transfers and direct debit
In industries where recurring payments are common, such as subscription services, bank transfers and direct debit remain highly relevant. These options offer retailers the benefit of predictable cash flow while providing consumers with a simple, low-cost way to pay.
Cryptocurrency and blockchain
Though still niche, cryptocurrency is slowly gaining acceptance in certain retail sectors. Blockchain technology promises secure and transparent transactions, appealing to tech-savvy consumers. While it’s not yet a mainstream requirement, keeping an eye on this trend could future-proof retail operations.
How retailers can implement payment flexibility
Retailers looking to diversify their payment methods should focus on these steps:
- Understand your audience
Analyse sales data along with the Xero Payments Report to determine which payment methods your customers prefer. Gen Z shoppers might lean towards mobile wallets, while Baby Boomers may still prefer credit cards or bank transfers. - Choose the right payment partners
Work with providers that align with your business model and customer base. Solutions like Xero integrate seamlessly with trusted platforms such as Stripe, Square, and GoCardless, enabling smooth payment processing and automation. - Focus on user experience
Ensure the payment process is simple and intuitive, both online and in-store. A clunky checkout system could drive customers away, negating the benefits of offering multiple options. - Stay compliant
In the UK, regulatory scrutiny around services like BNPL means retailers must work with providers that adhere to Financial Conduct Authority (FCA) guidelines. Transparent communication about fees and terms is essential.
Xero: simplifying payment integration for retailers
For retailers navigating the complexities of payment systems, Xero offers an all-in-one solution. By integrating with leading payment providers, Xero ensures businesses can offer flexible options while automating tasks like invoice tracking and payment reconciliation. These features not only save time but also improve cash flow visibility, empowering retailers to focus on growth.
Download the Xero Payments Report to explore actionable insights and discover how payment innovation can transform your retail business.
The future of retail payments
The payment landscape will continue to evolve, driven by technology and consumer demand. Retailers who embrace these changes—adopting flexibility, enhancing customer experience, and leveraging tools like Xero and insights from Xero Payments Report —will be well-positioned to thrive.
By accelerating cash flow and meeting the expectations of modern shoppers, payment innovation is no longer a “nice-to-have” but a key demand. Retailers who seize this opportunity stand to unlock new growth and secure their place in an increasingly competitive market.
