A woman uses her phone for a purchase at a store
Small business

Why small businesses need more digital payment systems

Payment innovation is one way that small businesses can stay competitive and grow their customer base, experts say

A woman uses her phone for a purchase at a storeWith many Canadian consumers moving to digital payments for the long term, it’s important for small businesses to keep up (Getty Images/Luis Alvarez)

Digital payments are one of the fastest growing areas for small businesses. Although most large enterprises have implemented digital payment processing, small- and medium-sized enterprises (SMEs) that have yet to make the move need to catch up.

While the adoption of digital payments accelerated in the preceding two years, “during the pandemic, SME’s key concerns were improving overall efficiency, investing in their business and reducing debt,” says Jon Purther, director of market insights at Payments Canada. “Sales, spend and profitability were substantial issues. Small businesses are least likely to consider payment innovation as key to supporting their business.”

As a result, recent research from Payments Canada shows only 22 per cent of SMEs believe that payment innovation will be key to supporting their business, compared to 38 per cent of large SMEs and 47 per cent of commercial businesses.


Small businesses that don’t adapt to modern payment options risk their ability to attract and retain customers, while possibly missing out on key business opportunities. The Payments Canada 2022 Canadian Payment Methods and Trends report showed that over four in 10 Canadians changed payment processes to digital/contactless for the longer-term (not just one off and everyday payments) with no plans to go back. “It’s something that businesses just can’t ignore,” says Purther.

“If small businesses are not accepting every form of payment online, they risk losing customers,” says Mahesh Kedia, vice-president of GTM (go-to-market) strategy and revenue operations at Marqeta, a payment platform services provider. “Many people don’t want to give their personal banking information or credit card information to smaller businesses and prefer to use online wallet providers for sharing their payment details.”'

Demand is happening from the supplier side as well, says Purther. “If anything, digital payments offer a lot more opportunities for small businesses to improve relationships with suppliers and get products more quickly.”

There is every indication that supply chain payments are transitioning to digital at a significant pace. Purther reports that 80 per cent of all buyer-supplier transactions could be done digitally by 2025.


Digital payment processing improves overall efficiency and cash flow. “The key is speed and timely payment that is seamless, including when paying multiple suppliers. Faster payment helps streamline business and take advantage of potential discounts,” says Kedia.

Modernized payment solutions can also bring significant time and cost savings to businesses by reducing reliance on cheques and paper-based methods, which often require greater costs and manual effort to process, says Lisa Lansdowne-Higgins, SVP business transformation and deposits at RBC. “They allow key data, such as invoice details, sender messages or other contextual information, to travel with each payment. This offers businesses the ability to automatically reconcile transactions and to streamline labour-intensive back-office processes.”

An important obstacle for small businesses that can be mitigated through digital tools is payment fraud. According to Purther, businesses were more likely than consumers to experience payment fraud in 2021. “Small businesses especially saw an increase in payment fraud attempts, such as credit card or wire fraud. Modern payment options help to increase security, protection and convenience. One in two businesses perceive e-commerce and mobile payments to be more secure when making and receiving payment over paper and cards.”


In assessing options, consider the marketplace and who your suppliers are, advises Kedia. “Make sure you choose the right fit based on the country, services and sector you are in. Are you a B2B or B2C business? Do you pay Canadian or international suppliers? There are platforms, for example, that enable automation of international currency payments.”

He suggests starting by reaching out to financial services providers for what options are available. Fintech and next generation modern payment stack players provide a range of payment services that only require simple API integration.

Organizations that use multiple payment products—including ACH, credit cards, cheques and wire—struggle to integrate data from those tools into back-office platforms like QuickBooks, Sage and Xero, says Lansdowne-Higgins. “Fortunately, advancements in technology have made it easier for two different systems and/or applications to talk to each other, allowing them to integrate with accounting software solutions with their payment products and banking platform.”

Small businesses should note that fees can vary depending on the customization and volumes. A number of e-commerce platforms, for example, will waive setup fees for standard implementations but charge a percentage per transaction plus a nominal processing fee, or a flat rate based on the number of transactions. “There can be some basic one-time implementation fees for more customized approaches,” notes Kedia.

Monthly minimums fees may also be applied, he adds. “These are designed to prevent low usage or no usage, as there is a cost associated with having a merchant on the platform. These can also be waived once transactions reach certain volume levels.”

Whatever the choice, businesses cannot afford to wait much longer, says Purther. “Businesses need to make the transition now, if they haven’t started already.”


Hear how new forms of payment will change the way we do business with deeper insights from Purther and Kedia, who recently spoke at CPA Canada’s Money and the World Virtual Conference. Plus, check out our small and medium businesses resources for tips to help you better manage your organization’s finances.