Cards And Convenience Reign Supreme In Aotearoa

Barriers to payment innovation prove challenging for Kiwi small business owners

Wellington — 20 August 2024 – New research by global small business platform Xero has uncovered payment convenience is key for Kiwi consumers, but key barriers such as expensive fees are turning off small businesses from embracing new digital methods.

Launched today, Xero’s latest report ‘I want to pay that way’, delves into the changing payment habits among consumers and how small businesses are adapting.

Three quarters (75%) of New Zealanders typically use their physical bank card to pay in store, while one in seven (14%) take only their mobile phone to pay in store. Cash is one of the least used - only 8% of Kiwis have cash readily on them to pay in store.

However, small business owners say they have a much higher reliance on cash payments, with 72% believing if cash disappeared tomorrow, it would have an impact on their business.

Bridget Snelling, Aotearoa New Zealand Country Manager at Xero, says it’s essential for Kiwi small businesses to consider their digitalisation options when it comes to customer payment methods.

“Aotearoa New Zealand has a long history of embracing innovative payment solutions, starting with the introduction of EFTPOS, which made us an early leader in digital payments. As technology continues to evolve and convenience remains king, it’s important we continue to progress in this direction,” says Snelling.

From a consumer perspective it appears payment preferences are starting to shift - a quarter of Kiwis use Apple Pay or Google Pay to make payments, with younger generations leading the way in mobile payments. Looking at Gen Z in particular, 48% of these consumers use Apple or Google Pay to make payments, compared with 28% of millennials, 17% of Gen X and 11% of Baby Boomers..

But small businesses are slower to embrace this technology, with only 17% of Kiwi small businesses offering Apple Pay and/or Google Pay payment facilities to their customers.

“It’s clear there is a strong preference for using digital payments by Kiwi consumers. Despite this, small businesses across the country are keen to hang on to cash payments, creating a mismatch between consumer desire and small business payment capabilities,” says Snelling.

Just one-third (39%) of Kiwi small businesses have adopted a new payment method in the last 6 - 12 months, while 87% of Kiwi small business owners say there is a barrier preventing them from offering new/different payment methods to their customers.

Expensive fees limited almost one-third (32%) of Kiwi small businesses from embracing new payment methods, while a quarter either see no clear advantages (28%) or believe it’s too complex/time-consuming to set up (26%).

For those Kiwi small businesses who have adopted new payment methods, the most popular reported benefit is reduced time to be paid (19%), followed by increased sales (16%) and reduced time chasing payments (14%).

The move to digital payments also has a broader benefit for the New Zealand economy.

“Our work with the New Zealand Institute of Economic Research shows a 20% increase in the number of businesses adopting cloud-based business tools in the future could add up to $7.8 billion to Aotearoa’s annual GDP through improved productivity,” says Snelling.

It’s essential we support small businesses to embrace digital tools to unlock their full economic potential.”

As a commitment to delivering on its strategy, Xero is building payment solutions to make it easier for small businesses to make and collect payments more seamlessly, while helping them to maintain a healthy cash flow.

Bharathi Ramavarjula, SVP of Payments, Xero, said: “Understanding how different consumers prefer to pay and giving them the flexibility to pay the way they want, will help small businesses get paid faster and grow their revenue. To make it easier to collect payments, Xero is providing more ways to pay in Xero.”

Check out the full report here.

About Xero

Xero is a global small business platform with 4.2 million subscribers. Xero’s smart tools help small businesses and their advisors to manage core accounting functions like tax and bank reconciliation, and complete other important small business tasks like payroll and payments. Xero’s extensive ecosystem of connected apps and connections to banks and other financial institutions provide a range of solutions from within Xero’s open platform to help small businesses run their business and manage their finances more efficiently.

About the report

The research was commissioned by Xero and was conducted by Lonergan Research in accordance with the ISO 20252 standard. Lonergan Research surveyed 6,021 people aged 18 and over across the United States, United Kingdom, Australia, New Zealand and Singapore as well as 2,547 small business leaders (SBLs) across those countries. In New Zealand, Lonergan Research surveyed 1,005 New Zealanders 18+ and 508 SBLs. Surveys were distributed throughout New Zealand including both capital city and non-capital city areas. The survey was conducted online amongst members of a permission-based panel, between 15 May and 29 May 2024. After interviewing, data was weighted to the latest population estimates sourced from Stats NZ.

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