Study: Digital Wallet Use Has Doubled for Small Biz

Consumer use of digital wallets and third-party payments at small businesses has doubled in two years, but more and more consumers are saying they avoid small businesses that have experienced a data breach, according to new research from Bank of America.

The survey of 522 small business owners and 509 U.S. consumers, done in conjunction with Forrester Consulting, found that 10% of consumers now choose to pay with digital wallets when they’re shopping at small businesses. That number was just 5% in 2017. Online shoppers’ use of third-party payment methods such as PayPal spiked from 11% in 2017 to 27% in 2019 as well.

“Today’s consumers are constantly looking for easier, faster and safer ways to shop – both in-store and online,” Bank of America Merchant Services Small Business GM Sydney Ivey said.

“Credit and debit card acceptance is at an all-time high, up from 87% and 76% in 2017, respectively,” the study also noted.

Consumers have become more conscientious about how and where they share their data, however. According to the data, 29% of consumers said they will never return to a small business that has had a data breach. In 2017, just 20% of consumers said the same.

Those preferences could affect a lot of small businesses — 70% engage in eCommerce via a website, app or third-party market, and 21% said they had a data breach in the last 24 months. 

To boot, 41% of small businesses that suffered a breach paid $50,000 or more in 2019 to resolve the issue, according to the data.

The survey also found that 55% of consumers paid with credit cards when buying something online from a small business in 2019. Only 40% paid with a debit card, which was down from 51% in 2017.

More than two-thirds (69%) of retail and wholesale small businesses said they accepted digital wallets, but only 41% of restaurants, 38% of service and repair businesses, 14% of veterinarians and 10% of dentists said the same.

“When you compare the data from our last three Small Business Payments Spotlight reports, it’s plain to see that business owners are increasingly technology savvy and attuned to their customers’ changing expectations to stay competitive,” Bank of America Merchant Services’ CEO Tim Tynan said.

Other insights from the Bank of America/Forrester survey included:

• 79% of small businesses said an integrated relationship between merchant services and business banking is important or critical.
• Fewer than half of small businesses (43%) said digital wallets speed up checkout.
• 42% said digital wallets provide a sense of security.
• 80% of small businesses have started accepting EMV cards.
• 44% of consumers under 30 said they use their phones more often while shopping than they did five years ago.
• 25% of small businesses think consumers are more likely to walk away from a purchase after using their phones to compare prices.