4 Ways COVID-19 Has Changed Credit Card Processing — and What Merchants Can Do About Them
The coronavirus has disrupted literally every industry on the planet, including payment processing. The dust has yet to settle, but it’s worth looking into the changes that merchants can expect from credit card networks, merchant services providers, and consumers.
Below, we shed light on 4 ways that COVID-19 is changing the payment processing landscape.
Have a look below and keep these insights in mind when determining where to take your business going forward.
1. More Leeway from Credit Card Networks and Payment Processors
The vast majority of businesses (SMBs in particular) are struggling, and many companies are unsure of their survival. The Atlantic cites a survey, which found that only 30% small businesses — including retailers, hospitality, tourism companies, and restaurants — expect to survive a lockdown that lasts 4 months.
Those are pretty dire results, and players in the payments space recognize this.
As such, many are offering leeway to help merchants weather the storm.
Visa and Mastercard Have Delayed Fee Changes
Let’s start with the fact that Visa and Mastercard have postponed the changes to their interchange fees to July instead of April.
Nathan Grant a senior credit analyst at Credit Card Insider points out that “both companies have also said that they are committing millions to help small businesses during the crisis.”
What this means for you: Keep yourself updated with how these changes are affecting your business and see if you can take advantage of ways to save money or gain funding.
Nathan’s advice? “Keep in touch with your banks to stay ahead of the curve on any changes that may come down the line.”
Lower Interest Rates from Card Issuers
If you’re using credit cards in your business, you may be able to avail of lower interest rates, says William Taylor, a career development manager at VelvetJobs.
“As the coronavirus pandemic spreads, credit card issuers are stepping in to give customers resources during this unprecedented crisis. In this time of need, many credit card issuers are moving quickly to assist their customers by providing them with information and resources that may alleviate some of their financial burdens.”
What this means for you: According to William, see if your bank or credit card issuer will allow you to skip a payment or waive interest.
If this isn’t possible, discuss the possibility of having lower interest rates.
“You might qualify for a better rate if your credit has improved since you applied for the card, or the issuer might be open to changing your rate,” he adds.
2. The Death of Cash
Cash has been on the decline for years, and the coronavirus could be just the thing that puts the final nail in the coffin.
“I think merchants can expect to process more card payments permanently going forward as a share of total revenue,” says Ian Wright, founder of Merchant Machine.
What this means for you: According to Ian the shift away from cash payments “will likely mean higher total fees since you’ll be paying fees on transactions that used to be done in cash before.”
This may not be the best news if you’re trying to lower costs, but bear in mind that you’re leaving more money on the table by not accepting credit cards.
And don’t forget that you can always find ways to lower your rates.
For instance, you can choose a merchant services provider that doesn’t take a cut out of your sales. Payment Depot, for example, uses a membership-based model, in which we charge a flat monthly membership fee and give you access to wholesale interchange rates.
Instead of marking up these interchange fees or taking a percentage out of each transaction, Payment Depot allows you to keep more of your revenues so you can reinvest in your business.
3. Contactless Payments Accelerate
Contactless payments, which power things like tap-and-go and mobile payments, have been making inroads for some time now. But with COVID-19, we can expect the adoption of these technologies to accelerate.
With people keeping their distance and consumers being warier of touching too many surfaces, many will opt for ways that don’t involve physical contact.
“Card processing will become even easier, with contactless transactions becoming even more popular in order to pay efficiently and without the need of human contact when using cash transactions,” shares Ethan Taub, CEO of Goalry.
“Credit card network policies will become more lenient on the amount we spend using contactless transactions with the limits reaching $500-$1000.”
That said, Ethan says that the rise of contactless will prompt additional security measures.
“With this also comes the question of security. How we can ensure that we keep safe when travelling, shopping and spending our money? Banks may look to introduce fingerprint or other biometric security measures to ensure that we and our money stay protected.”
What this means for you: If you haven’t done so yet, start giving your shoppers “contactless” options to pay. It’s high time to upgrade your payment terminals so you can process tap-and-go credit cards, as well as Apple Pay and Samsung Pay.
4. SMBs Will Move to Online Processors
With social distancing and lockdown orders being enforced, consumers are increasingly turning to ecommerce.
As such, SMBs are finding ways to serve shoppers online.
“More and more small-to-medium sized businesses are moving to online processors who might not have offered it before to keep their businesses afloat,” says Nathan.
What this means for you: According to him, “if your company is an SMB that is making the move to more online or mobile credit card processing, make sure to understand the various fees involved.”
“Some credit card processing fees are fixed, like monthly network fees and authorization costs, but be sure to familiarize yourself with the variable fees the most, such as interchange fees between your bank and the customer’s bank, discount rates, and tiered plans that can charge different fees based on how a credit card transaction is processed and the type of card used.”
Pro tip: Work with a processor who looks out for your best interest. Payment Depot, once again, can help. Our specialists can look at your merchant statement or proposal from another payment processor and provide unbiased advice on how to save.
There’s a reason why people call us the good guys and gals of payment processing. We bring transparency to the world of credit card processing and work with merchants in finding the best deal.
As a fellow small business, we look out for SMBs and ensure that you’re not paying more than you have to
Get in touch with Payment Depot today — and let’s talk about how you can lower your payment processing costs.
10 Easy Ways to Save on Business Expenses During the COVID-19 Pandemic
Whether you are open for business or your doors are still closed, saving money is always on your mind. We haven’t hit a new normal yet, we are still in the throes of the “now normal”, where things change daily and will for a while. Learning to pivot is critical. Here are some ideas to help keep on track, cut costs, and increase your bottom line:
1. Talk to Your Landlord
Until business picks up, rent will continue to be an issue. If you haven’t yet, talk with your landlord to determine if a rent reduction is possible.
Linda Flaherty, owner of two Once Upon a Time upscale children’s boutiques in Alabama, contacted both of her landlords. One waived the rent for a month, a savings of $1000. The other deferred half the rent for one month, the difference to be paid by the end of the year; it’s not perfect but it gave her some breathing room. Here’s the thing: Nothing will happen unless you ask.
2. Go the DIY Route Whenever Possible
Before she was able to reopen her stores, Linda furloughed all employees and ran the business herself. This equaled a $4500 per week savings for six weeks.
Mike Simon owns The Little Traveler, a store within a sprawling mansion of sorts in Geneva, Illinois that takes you “around the world in 38 rooms.” The store is now closed but when it’s operational, shoppers arrive by the busload to spend the day exploring its treasures and enjoying lunch in the Atrium Café. It takes a lot of hands to run a store of this size but lately Mike has been on his own.
“I have used this time to keep our name out in front of the customer via social media and videos without paying for ads. We quickly built an online store and have had good initial results from it. With almost all of our people on furlough, I’m doing the picking, packing and shipping, so I’m learning a lot about how things like product positioning and timing of Facebook posts and email blasts influences sales. It’s fun to experiment like this but I have never worked harder in my life.”
3. Put your Merchandise Out There
Get product out of the stockroom and onto the sales floor – that’s cash sitting on those dusty shelves. Merchandise, unlike fine wine, does not get better over time. If it’s in season and saleable list it on your website or include it in your Facebook Live sales events. If it’s old and has lost its appeal, mark it down, and if it’s too far past its sell point donate it and take the tax write off. Think about what that old product is costing you each month. Move it out.
4. Be Proactive with Your Orders and Supplier Relations
Push back ship dates wherever you can, cancel shipments for items that will be past their sell date once you reopen, and ask vendors if it’s possible to return any unsold goods. Again, be proactive – your vendors are your partners and will try to help when they can.
If you don’t already, add “Start Ship”, “Complete By”, and “Cancel If Not Shipped By” dates on every order you write. Some vendors will give you a percentage off late goods if you decide to keep them.
5. Shop Your Associations
Many trade associations offer special member discounts on everything from cleaning and office supplies to email marketing to gas and everything in between. Visit the “members only” section to see what you’ve been missing.
6. Lower Your Credit Card Interest
Sort through the piles of pre-approved credit card offers you receive and look for one that offers a lower interest rate than what you are currently paying. Call your current company, tell them you’ve received a lower rate offer, and ask for a rate reduction. If they are eager to keep your business, they will likely say yes. Then smile and ask them to waive the annual fee.
7. Optimize Your Credit Card Processing
Cash used to be king but during a pandemic no one wants to handle it. Now it’s all about credit cards, debit cards and contactless payment. Credit card processing fees can add up quickly so it makes sense to shop around for a processor that best fits your needs.
Instead of a myriad of confusing fees, Payment Depot charges a monthly membership fee and gives you access to direct wholesale rates for all your card transactions, putting more money in your pocket. SwipeSimple, Payment Depot’s contactless payment app allows you to accept payments on almost any iOS or Android mobile device without any physical contact. It’s perfect for keeping shoppers and employees safe.
8. Find Ways to Lower Operating Expenses
Little dollars can add up to big savings. Operational expenses add up quickly. We saved a bundle when we opted not to renew the service contracts on some of our office equipment. Linda Flaherty dropped the loyalty program she was paying $600 for monthly and found one with the same bells and whistles for just $100 per month. Stop paying for subscriptions to magazines that you never read, and memberships you renew just because they send you a bill.
9. Save on Shipping
Weigh the packages that are delivered to your store, then check to see how much it would cost you to return the package to the sender. Review each invoice to ensure you were charged the correct amount.
Even little overages add up, as do the refunds you are entitled to when a package you shipped to a customer via UPS or FedEx arrives late. Check out Refund Retriever, a company that automatically detects issues with your shipments, applies for refunds, and verifies that those refunds are credited back to your account. There is no contract, all you play is a percentage of what is retrieved.
10. Reopen Your Store When You Are Ready
Once you get the all clear it’s okay to take your time. You don’t have to bring everyone back at once; start by opening fewer hours than normal. You’ll save on payroll, utilities and other operating expenses that occur when the store is open.
Shopping in-store isn’t back yet at full capacity. If you continue to run your store as you did in pre-COVID-19 days your money won’t go as far. Keep a closer eye on non-profit-producing expenditures and you will be in much better shape for the long run.
How COVID-19 Changed the Way Americans Grocery Shop
The novel coronavirus/COVID-19 pandemic has changed so much of our world in 2020, and while we hope our routine activities return to normal soon, many aspects of our daily lives can be expected to fall into a “new normal.” At the head of that list for many Americans is how we shop for groceries.
In March, almost immediately, grocery shopper behavior changed tremendously, and several trends have emerged that look to become the new normal for well beyond the short-term. Grocery stores were forced to adapt and do the best they could in late spring, and those rapid prototypes and trials have resulted in a functional test-and-learn process that guides their plans for meeting today’s new grocery shoppers on the shoppers’ own terms.
Below are four ways grocery shopper behavior has changed and driven changes in the grocery segment.
Shoppers Make Fewer Grocery Visits
Before the concept of social distancing swept the nation, American grocery shoppers went to the store when they needed food. Now, they organize their grocery shopping missions to buy in quantities that limit their number of trips to the store, and, in theory, limit their exposure risk to the novel coronavirus.
According to a McKinsey & Company study, prior to the pandemic 19 percent of grocery shoppers visited the store three or more times a week. Post-pandemic, that number is almost halved, down to just 10 percent. Since the pandemic struck, 72 percent of American grocery shoppers visit the store once a week or fewer, compared to 55 percent prior to the pandemic.
Americans visit grocery stores less often, and when they do visit, they are shopping much differently.
Sales Surge in Frozen Foods and House Brands
According to the American Frozen Food Institute, frozen food sales for the month of March, as measured year-over-year, increased 94 percent. That’s the reason the frozen food aisle was so barren early in the pandemic!
It has slowed down since, but the growth is still significant. In August, frozen food sales were up over 17 percent versus the same time period a year previously. Americans are stocking their freezers, making the freezer the new pantry, and affording easy, more convenient ways to prepare meals at home rather than dining out as an alternative to the grind of home cooking.
Both at the freezer and in other areas of the store, shoppers are also shifting their purchase dollars to more store and house brands. In a July report, the Food Industry Association reported that three out of 10 shoppers stated they were buying more store bands than they were prior to the pandemic, and it’s a trend that’s not likely to reverse very quickly.
Once in the store, shoppers are shopping differently, and stores are changing to accommodate their needs and values.
Stores Change Layouts in Response
In the midst of this 100-year pandemic, shoppers shared they want fewer shoppers and less congestion in stores, with higher cleaning and disinfection standards in place.
In response, many stores tested wider aisles to minimize the perception of being overcrowded. Others, like Publix, experimented with one-direction aisles, much to the disdain of shoppers – Publix recently announced stores were eliminating the one-way aisles, but continuing to provide social distancing reminders through in-store signage, floor markers at queueing areas and public address announcements.
End caps have also changed as a result of shoppers’ new behaviors. Formerly, those high-profile displays at the ends of aisles were home to new product introductions and special product promotions. Specialty items and free samples are now a thing of the past. Now, many end caps have been transformed to housing large-quantity or bulk SKUs.
Lastly, at the end of the shopper journey, checkouts are changing, with dramatic changes perhaps just over the horizon. Shoppers are keen to eliminate personal contact and want more contactless payment options. In response, Walmart is piloting a new store checkout concept in Fayetteville, Arkansas, featuring 34 registers in a plaza-like setting.
Expect grocers to use in-store retail analytics to test, measure and learn which new concepts get embraced by shoppers. Dwell zone analysis and shopper flow analysis will prove critical in developing data-driven, insights-backed store designs. Additionally, at the same time, grocers will be doing the same for their online stores.
Online Grocery Shopping Comes into Its Own
For years, the better part of a decade, online grocery shopping has seen steady, but slow growth. In fact, in 2019, 81 percent of respondents to a Gallup survey reported they never shopped online for groceries. As a result, sales were growing slowly, and in August of 2019, online grocery racked up $1.2 billion at checkout.
In June of 2020, online grocery accounted for $7.2 billion in sales that month alone!
Grocers are having to respond and adapt to online ordering on the fly. Order fulfillment is straining labor and various infrastructures to the breaking point. Physical stores are having to redesign order pickup facilities, both in-store and at curbside. Some grocers, like Whole Foods, are opening new “dark” stores to fulfill online delivery orders only and better meet the rising consumer demand – and expectation – for grocery delivery services.
Consumers vote with their purchases, and shoppers are certainly leading the grocery industry into a new era. It will be important for grocers to quickly ideate and deploy test-and-learn strategies to discover the changing value-driven behaviors of grocery shoppers. And once data insights have been developed, over time and at scale, it will be important to immediately act and engage with shoppers in the new normal.