Data breaches can affect any type of business – large, medium, and small. Larger enterprises usually have the money, resources, expertise, and customer base to help them recover from a breach. But smaller companies often face greater challenges recovering from breaches, both financially and in terms of customer loyalty. A report released by Bank of America Merchant Services highlights some of the problems that data breaches create for small businesses and how SMBs are dealing with related issues such as payment methods.
Based on a survey of consumers and small businesses, Bank of America Merchant Services’ third-annual Small Business Payments Spotlight found that 21% of SMBs reported a data breach within the last 24 months, up by 17 percent from two years ago. A full 41% of small businesses said they were hit by a breach that cost them more than $50,000 to recover. Further, almost 30% of the consumers surveyed revealed that they would never return to a small business that suffered a breach, up from 20 percent two years ago.
SMBs have been trying to protect themselves from the impact of data breaches using various methods over the past 24 months. Some 57% of the respondents say they’ve updated their Point-of-Sale (POS) equipment, 44% have implemented industry security standards such as PCI compliance, and 43% have trained their employees on how to improve security and reduce fraud. Further, a full 80% have started accepting EMV chip cards, a more secure method than using magnetic stripe credit and debit cards.
POS systems have also become more advanced and sophisticated, a factor that’s helping SMBs with sales reporting and inventory management, according to the survey. Some 60% of respondents said they have a POS system that can do more than just accept payments, while only 35% use standalone systems not integrated with a POS.
Customers are increasingly choosing other payment options beyond credit cards, but credit is still king. From 2017 to 2019, the use of debit cards declined, while credit card use rose, both online and in person. When shopping in person at a small business, the percentage of people who pay with digital wallets such as Apple Pay and Google Pay doubled from 5% to 10% over the past two years. When shopping online, the percentage of customers who use payment methods such as PayPal jumped from 11% to 27% over the same period of time.
Looking at the payment methods accepted by SMBs, 90% said they take credit cards, 84% debit cards, 83% cash, 66% check, 42% digital wallets, and 35% gift cards. The payment methods supported or not supported by small businesses can sway a customer. When asked what they do when their preferred payment method is not available, 35% of customers said they would be annoyed but still make the purchase with an alternative method. However, 17% said they would not make the purchase.
More small businesses are establishing an online presence, with 70% of the SMBs surveyed engaging in ecommerce and 51% running their own websites. But small businesses do face certain challenges when selling online. A full 42% of the customers surveyed said that the shipping costs are too high when buying from a small business website, 23% said they feel that shipping takes too long, and 22% complained that small businesses don’t have the products they want.
Commissioned by Bank of America Merchant Services and conducted by Forrester Consulting in spring of 2019, the survey elicited responses from 522 small businesses in the US and 509 consumers in the US who purchase goods and services from SMB.