In 2007, Market Platform Dynamics undertook a study, supported financially by eBillme, to better understand the online buying, payment, and purchasing behavior of small business. As part of the study, they conducted a survey of 700+ small businesses in the U.S. The survey tested the attractiveness of a series of online payment product attributes to determine the essential elements of an online purchasing solution for small businesses (SB). The findings reflect the many similarities that exist between consumer and small business online buying and payment behaviors. Like consumers, small businesses worry about security, credit fraud and internet fraud, and prefer to transact without disclosing payment card information, and like built-in controls that allow them to approve and monitor their payment.
By studying online spend preferences, online payment preferences and their online purchasing processes; Market Platform Dynamics came to a number of conclusions.
- Small business online purchasing and payment behavior mirrors consumer behavior. On many levels, the online payment preferences of small businesses are very similar to that of consumers. Preferences begin to diverge as the SB’s annual revenue grows or as the years the small business has been in operation increase.
- The accounting department plays an important role in the purchasing and approval process of small businesses. While in the smallest SB (less than $1 million in revenue), the CEO is both the purchase maker and purchase approver, the responsibility of approving the purchase quickly shifts to accounting for most SBs.
- Credit is an important feature of any payment method. Not surprisingly, for a majority of small businesses, corporate cards and other payment instruments tied to credit are the payment devices of choice. But there is also a growing interest by SBs in alternative products tied to checking products.
- Transaction security is a chief concern and small businesses prefer not to disclose payment card information when transacting online. Secure solutions that offer the ability to transact without disclosing payment card information online are very attractive to small businesses regardless of size.
- Built-in controls and end-to-end monitoring of payment and shipping are highly valued. The purchasing process does not end with a point-and-click for small businesses. Given their size and resource constraints, SBs seek solutions that offer built-in approval processes and integration with existing accounting systems.
- The market is big enough for new entrants and products. A large percent of overall small business spend is still being transacted by check. An estimated $3 trillion worth of small business spend has yet to be captured on payment cards or with other payment alternatives representing spend on core business services and operating expenses.
Download the complete version in .PDF: Small Businesses use Alternative Payment Options.
