As cash usage continues to decline sharply, both franchisors and franchisees are offering new channels for customers to pay for goods or services.
A Reserve Bank of Australia (RBA) survey released in June highlights the number of cash payments made by Australians halved in the three years to 2022 – from 32 per cent to 16 per cent of all in-person transactions. Of all payments, including online transactions, cash made up just 13 per cent by number in 2022.
The question for the franchising sector is how to provide payment options which cater for all customers in this environment, including the just over one-quarter who indicated to the RBA they would suffer a “major inconvenience” or “genuine hardship” if cash was hard to access or use.
Businesses are already responding to this challenge, exploring ways to enhance their acceptance of digital payments as consumer purchasing habits evolve, encompassing online transactions, digital wallets and buy now pay later payments.
However, the increasing number of payment channels means there is no one-size-fits-all solution for franchisors or franchisees seeking to adapt their business model to this new environment.
The key to making the right choice is to consider which technologies and payment channels are most suited to your business model.
1. Tailor a solution
Understanding the end user and third parties involved in a transaction is critical to getting the right functionality for a business – as the nature of the franchising varies widely.
Hotel chains, for example, often use other providers such as online travel platforms to secure bookings and need to ensure payments infrastructure is compatible not just with each hotel’s system but also those of a platform.
Their needs are very different to businesses who takes over the counter payments for small ticket items. Such operators are more interested in easy access to branches or a local post office with banking facilities, as well as merchant terminals.
And fast-food operators with a high turnover are likely to benefit from packages which include merchant terminals, a payments app and cash collection.
In all instances, the aim should be to fashion the right package for each business model and its customers. In the franchising sector, an integrated reporting system is likely to be a core component of any package and an efficient online banking platform is an obvious must have.
There are several other distinct characteristics to the payment solutions available to the franchising sector. Franchisors, for example, can arrange group deals for transaction banking for their franchisees via banks such as NAB which include the feed set-up for merchants, franchise credit cards and bonus rates on savings. These allow franchisees to take advantage of the buying power of their franchisor to gain access to corporate-style rates on day-to-day banking.
Of course, franchisees don’t just receive payments – they also make their own payments to third parties. Corporate credit cards are a foundation for this service, as is online banking which allows bulk payments.
2. Consider cost and access to cashflow
Cost is always a pain point for business, no more so than in an environment of high inflation and rising interest rates. This applies to payments solutions as much as any aspect of operating a business, so it’s important to understand the bottom line.
The pricing offered by banks can vary widely in this hotly competitive market, it’s important to consider all options.
Managing cashflow is vital. If a customer pays online, how quickly does that money hit the business account? Or if another pays via a merchant’s terminal, is the cash settlement complete within the same 24 hours, or do you need to wait until the following day to access it?
Most banks tend to provide same-day settlement to a business which holds both its merchant’s terminal and business account with them. But for those who hold a terminal with one bank and an account with another, settlement is usually on a next-day basis.
3. Have a contingency plan
All businesses need a backup in case a merchant terminal goes down due to an outage, or there is another technical issue that could cause a potential loss of sale.
For a small business, this plan B could be as simple as a contactless solution which allows users to operate a phone as a payment terminal like NAB Easy Tap.
Such solutions are on offer with no up-front setup cost and don’t require a separate terminal. Same day settlement is still provided, and all payments are secure. The fact there are no minimum contract terms makes it an ideal option for occasional use and the technology has the added advantage of offering data insights that can help establish sales trends.
Rapid advancements in technology have without question transformed the manner in which Australians expect to make and receive payments. The advent of the National Payments Platform – or the system which allows fast payments to occur within minutes – has further changed peoples’ expectations of how everyday transactions should occur.
The good news for the franchising sector is that major Australian banks are at the forefront of these developments – and able to support business in their efforts to maximise the opportunities on offer.
Written by Despina Kathestides, Head of Franchise Banking, NAB