You know you’re on your smartphone a lot. If you track screen time, as many do, you’re well aware of how much you’re texting, posting on Instagram, listening to podcasts, and watching cat videos.
And you aren’t alone. Depending on the source, half to two-thirds of the world’s population use smartphones – somewhere between 3.8 billion and 5.2 billion people. But it’s how we’re using them, and how often, that’s really fascinating. Recent statistics say:
Given those statistics, it’s time that businesses put our obsession with smartphones to good use by giving people a way to pay via text. Also known as SMS (Short Messaging Service) payment, text-to-pay allows customers to make a payment via texting on their smartphones. This quick and seamless process is good for both businesses and their customers. Here’s why.
Text-to-pay is easy to use. With text-to-pay, a business sends a notification via text when an invoice payment is due. Customers can easily authorize the payment with a simple reply to the text on a smartphone. They no longer need to write a check or call a business to make a payment, and it’s even easier than paying online, which is pretty easy as it is.
It’s convenient. Remember those smartphone statistics? Here are a few more: 91% of U.S. users have their mobile device within reach 24/7. And text messages have a 98% open rate, while email has only a 20% open rate, at least one source claims. That means a person will likely view a texted payment reminder earlier than on other messaging channels – and can act on it faster. Which leads to our next benefit . . .
Text-to-pay can improve cash flow. Since text-to-pay can mean faster payments to businesses, it frequently helps reduce days sales outstanding and improve cash flow. And that’s welcome news to small and mid-size enterprises (SMEs) in particular. Cash flow problems make life difficult for SMEs, preventing them from paying their own vendors, making capital expenditures, and issuing paychecks on time. Worse still, cash flow constraints are the cause of some 80% of small business failures, according to one source.
Text-to-pay meets customer demand. 72% of business professionals prefer texting to other messaging platforms. Offering text-to-pay addresses that preference, especially among businesses serving clients under age 35. One survey found that 35% of small business customers are interested in paying with a text from their phone, but that number rises to 62% among people under 35.
But it’s still up to the customer to choose. As with other text-based services, customers must opt-in to enable the service, then select the payment method to associate with their text payments – choosing their preferred method from options that include all major credit and debit cards as well as ACH. So no one is forced to adopt text-to-pay; customers get to decide whether to use it in the first place and which payment options they prefer, potentially encouraging their loyalty to it.
Text-to-pay reduces administrative costs. Text-to-pay doesn’t altogether eliminate the work involved in paying an invoice. But since the payor already has input payment details, there’s no manual handling of payment cards or ACH data. And for the seller, text-to-pay does away with paper checks to handle, input, and deposit. So text-to-pay can considerably reduce administrative work and associated costs.
It can lead to a significant competitive advantage for small and mid-size businesses. The survey that said 35% of customers want to pay by text message also reported that only 4% of small businesses offer it as a payment option. Businesses that are early adopters of text-to-pay stand to gain a real advantage over their competitors.
And finally, text-to-pay improves the overall customer experience – and all-important customer retention. Customer experience, or CX, is a popular term that many people interpret in their own way. But for our purposes, let’s consider it as encompassing all aspects of a business that affect a customer’s perception and feelings about it. As Amazon’s Jeff Bezos said, “We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better.”
Whether or not you appreciate Amazon’s business model (and enormous impact on commerce), it’s hard to argue with the company’s success at creating an experience that has customers hooked. But just how important is customer retention to the bottom line? According to the Harvard Business School, increasing customer retention rates by 5% boosts profits by 25% to 95%.
That’s right: A relatively small increase in customer retention can almost double your profits.
When it comes to payments, you don’t have to be an Amazon to make customers’ lives easier, improve their experience with your business, and have them stick around for good. You just need to take advantage of the billions of smartphones out there and add text-to-pay to your payment toolbox. The results should speak for themselves.
Check out MerchantE Invoice with Text-to-Pay. Contact us to learn more.