Small businesses are sceptical on alternative payment services

The majority of small business owners still rely on banks for their payment services, a new survey has found. Many said they were sceptical of, or didn’t entirely trust, alternative payment providers.

The study, by Visa Europe, found that 59% of small businesses trusted their business bank or building society to act as their payment provider. This compared to 40% for online payment providers, 11% for telecoms companies and just 6% for social media providers.

Sole traders are the most trusting of banks, with almost two thirds (65%) reporting that they enjoyed a fully trusting relationship with their bank or building society.

Sole traders are also more likely to embrace alternative payment methods when it came to making payments, with 56% being comfortable using online banking and 32% making online payments with a debit or credit card. Despite this, fewer were happy to take such payments on behalf of their businesses.

Only 9% of sole traders accepted online card payments from customers. Overall, two thirds (36%) of small businesses used debit cards to make payment themselves, with just 22% accepting such payments in return.

The top three barriers to change cited by small business owners are perceived cost, risk and a focus on other priorities.

Despite the growth of alternative finance options, banks are also the first choice for the majority of small and medium-sized businesses when it comes to borrowing and securing funding for growth. However it is important to recognise the role that other options could have, should firms be unable to secure the finance needed.

According to a report by Cambridge University and financial charity NESTA, the alternative finance sector grew to £3.2 billion in 2015. SMEs were the biggest beneficiaries, with 20,000 receiving around £2.2 billion. Alternative finance platforms such as crowdfunding and peer-to-peer lending can be particularly useful for start-ups.

15.6% of alternative funding in 2015 went to start-ups. 12% went to existing businesses who could not secure funding via traditional routes but business bank loans were still by far the most common option.

According to the British Bankers Association (BBA), £6bn of new lending was approved quarterly last year.

By Phil Smith

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