By Andrea Dunlop, managing director of Access PaySuite.
Responding to the economic downturn
Many businesses and consumers came out of the huge disruption caused by Covid-19 with a sigh of relief, but the rise of new and complex challenges throughout 2022 has meant that positivity and optimism has quickly evaporated.
The surge in prices for fuel, energy and food, as well as other essential commodities has placed a huge strain on household and business finances alike throughout 2022 and current predictions by the Bank of England suggest that the first half of next year will continue to be impacted by high levels of inflation.
As macroeconomic factors continue to tighten consumer spending and impact commercial efficiencies, a key focus for businesses in 2023 will be to retain customers, process payments quickly and efficiently, and add as much value in order to upsell new services.
Keeping pace with a changing consumer
The macroeconomic environment will continue to have a significant impact on payments over the course of 2023, but there is still cause for optimism. Consumers certainly have less cash, but for many there is still some discretionary spend available for luxuries.
The current conditions mean that those consumers will be more selective about where they spend their disposable income, but quick and easy payment experiences will become even more important over the next twelve months.
Consumers increasingly want in-app payment options, and wider choices about when and how they make payments. This is a vital consideration for those who have lower financial resilience and are more vulnerable to the wider impact of a recession. Empowering customers and providing more flexibility can help to avoid a rise in customers defaulting on payments and having to chase for outstanding funds.
Solving the age-old challenge of late payments
The Business Secretary recently launched a review into payment practices to protect small firms from the impact of late payments, with government figures showing that more than £23.4billion is currently owed in outstanding invoices to UK businesses.
The Federation for Small Businesses also reported that cost pressures for businesses had hit a seven-year high in 2022, as even those businesses with the strongest track record for paying invoices on time faced increasing cashflow difficulties.
External factors such as energy costs, business rates or changing market trends cannot be controlled, so businesses need to take control of their payments processes to stabilise cashflows and mitigate for what could be turbulent trading circumstances.
A new approach to automating payment processes is increasingly being utilised by businesses to improve cash flow, save time and energy chasing customers, and improve customer experience with more flexible payment methods. This is a trend likely to continue into 2023 as businesses look to improve operational efficiency to spend more time on value-add activities.
Integrated payments
The trend towards digitisation is likely to reach new heights across all industries over 2023 as part of the drive towards greater productivity and profitability. This is particularly important for businesses without the reliable payments infrastructure or expertise to increase efficiencies and improve customer relationships.
Embedding payments systems into existing business software is nothing new, but brings the advantage of turning numerous lengthy processes into a single, simple transaction – saving additional admin tasks and costs, as well as providing a seamless experience for customers.
With such a challenging economic outlook for 2023, having insight to the latest data and trends will be essential to understanding overall business performance. With all data outputs from linked software readily accessible, businesses can achieve a single, transparent view of financial performance to react to up-to-the-minute information and drive growth.
Securing cashflows
The subscriptions-based business model enjoyed a surge in popularity over the course of the pandemic as lockdowns forced more home-based purchases and increased the amount of discretionary spend available for consumers.
There is little doubt, however, that the end of lockdowns and the rising cost of living has led to an increase in cancellations of these subscription-based apps. Research from Access PaySuite shows that dating apps and video streaming services were among the types of apps seeing the biggest growth in cancellations.
However, as businesses look to navigate the upcoming economic headwinds, we could see a return towards more traditional Direct Debit-based business models which offer the opportunity for more secure cashflows for businesses, as well as helping households to increase control of their expenditure.