What it takes for businesses to compete in the digital economy

Attributed to Karl Durrance, Managing Director ANZ at Stripe and Wei Li, Discipline of International Business at The University of Sydney Business School. 

Australian businesses are attuned to the importance of adopting new forms of digital payments to increase their competitiveness – even as they weather this period of economic uncertainty. However, competitiveness remains uneven across states, industries and different sizes of businesses, with nearly half of Aussie businesses acknowledging the need for upgrading their current payment systems. 

That’s what was uncovered in new research by Stripe and The University of Sydney Business School who have produced a report called The Future of Digital Payments for Businesses in Australia, surveying more than 1,000 business leaders about digital payment trends to provide insights on how they can best thrive and compete in the burgeoning digital economy. 

In a bid to win customers, Australian businesses are turning to digital payments 

Customer experience came out as the top reason for businesses choosing to adopt digital payments with 73% of companies stating they want to make it faster or easier for customers to purchase. It comes as no surprise then that nearly half (46%) of business leaders plan to invest in digital payments in the next 12 months. This awareness extends to the highest levels, with 40% of respondents reporting that investment in new payment technologies is being discussed at the executive or board level.  

Customer choice is also a significant driving force behind the importance of digital payments. In many instances, consumers are adopting digital payments at a faster rate than businesses, presenting a clear opportunity for businesses to expand payment options. The research indicates 46% of businesses use and accept four or more types of payment methods at present and this is set to grow as customers take advantage of the growing payment options available to them.

Worryingly, the report also found 50% of businesses consider late payments to be a serious threat to their survival. Solving this problem is one of the key reasons they are accelerating their transition to digital payments. Accounting software platform, Xero, is a prime example. Since adopting Stripe, it has seen customers get paid on average 14 days faster via e-invoicing which greatly simplifies customer payments to help businesses combat late payments.

Australian digital payment leaders 

The adoption of digital payment methods varies at both the state and industry levels. At the state level, the report found Victorian (VIC) businesses are at the forefront of digital wallet adoption, with 38% using payment methods such as Apple Pay and Google Pay. Following closely are businesses in New South Wales (NSW) and Queensland (QLD), with a digital wallet adoption rate of 34%. 

When looking at the usage of online payment links, such as a URL, button or QR code that takes customers directly to a unique checkout page to complete a purchase, businesses in NSW are at the forefront with a 23% adoption rate, followed closely by QLD at 21%.

Examining industry-specific trends, unsurprisingly, the retail sector has emerged as a pioneer of digital wallets with 57% of retail businesses embracing them. The finance and insurance service sector takes second place at 49%. The top adopters of payment links are businesses in the professional, scientific, and technical services sectors at 36%.

The food and beverages sector has particularly seen interesting innovations like  Wolki Farm - Australia’s first self-serve butcher that allows customers 24/7 access to its store. All people have to do is scan the barcode of the product they want to buy and then they can purchase it on the spot through Stripe. Likewise, leading mobile menu ordering platform, Mr Yum, has revolutionised the way restaurant brands allow customers to order their food and drinks, using Stripe to scale up astronomically to transform food ordering.

The digital payment competitive advantage 

The competitive advantages of adopting these digital payments are well documented. The report found half of Australian businesses have invested in new payment technologies over the past three years and have reaped the rewards. 

Eighty-three percent of businesses cited improved revenue growth and a further 74% found it easier to expand into new markets, underlining the role of payment technologies in global expansion. Crucially, 60% of businesses reported digital payments improved their company’s competitiveness - an imperative aspect for thriving in the digital economy where greater agility and responsiveness are required to keep up with market changes. 

Similarly, businesses investing in digital payments have witnessed remarkable improvements in customer relationships (84%) and an expanding customer base (82%). Interestingly, it's the medium-sized and large enterprises that see the most value in adopting digital payments, with 81% acknowledging its critical role in their digital transformation journey, compared to 59% of small businesses. We expect to see more SMEs adopt similar trends to their larger counterparts over the next few years so they too can be empowered to navigate our increasingly digital world with confidence. 

The barriers to digital payment adoption

Despite the tremendous potential of digital payment technologies, businesses are grappling with barriers to adoption, largely in the form of fraud and scams. More than half (54%) of businesses identified these as their primary concern when it comes to adopting new payment technology. This anxiety is understandable given the sensitive nature of financial data and the potential for financial and reputational damage if a breach occurs. 

These concerns highlight the critical need for payment service providers to prioritise robust security and fraud prevention strategies in their solutions to protect businesses and their customers. One such example is parcel delivery service, Sendle. It expanded into the US in 2019 where it was met with an unprecedented number of sophisticated fraud attempts that it had never experienced in Australia. Sendle worked with Stripe to implement a clever machine-learning scoring algorithm to detect and block future fraud attempts, allowing the brand to undergo its US expansion much more seamlessly.

The future of digital payments in Australia 

The current momentum toward digital payment technology adoption is promising, with businesses gearing up for significant investments. While the progression may manifest incrementally and there are barriers to overcome, the findings show businesses are gravitating towards a more sophisticated and inclusive digital payment framework, paving the way for a transformed and resilient economic future. 

One such example is mobile payments which has emerged as the top area of investment for digital payment technologies. Thirty-four per cent of businesses plan to invest in tap-to-pay NFC features on mobile devices, including mobile phone-enabled payments and wearables. Additionally, 24% of businesses are planning to invest in AI-related payment technologies within the coming year, promising a wave of new digital innovation in the not-so-distant future. 

This proactive stance highlights a collective awareness within the business sphere and a readiness to embrace technological advancements in payments that will step up.

This article was provided by Stripe.