Why Don’t More Small Businesses Accept PayPal?

Lack of small business PayPal use for payment option could be limiting small business revenue

E-commerce platforms have really begun to overshadow traditional retail locations. Although some consumers go out of their way to support small, local businesses, countless others value convenience over locality. Therefore, more local businesses are starting to embrace digital platforms as a supplement to their physical locations or will offer additional ways for customers to pay their invoices, like through ApplePay or PayPal.

But according to a study recently conducted by PayPal Canada, Canadian small and medium-sized businesses are much more reluctant to implement these features and are thus leaving a lot of money on the table.

Electronic bill payment, which is a common feature of online banking, allows customers to instantly send money from their account to pay for anything from a utilities to clothing. In both the U.S. and Canada, consumers are eager to shop online and pay their bills in more convenient ways. This is evidenced by the fact that nearly half of all U.S. retail jobs — nearly 7.5 million — are at risk of disappearing due to computerized e-commerce options, according to an analysis based on U.S. Bureau of Labor Statistics data.

Therefore, if small and medium-sized businesses want to survive, they need to make e-commerce work to their advantage. Businesses that use electronic invoicing tools, utilize an online marketplace, or have an e-commerce website of their own typically have a much stronger revenue stream in today’s digital world.

But PayPal’s Canadian Small and Medium-Sized Business Landscape Study found that only 17% of Canadian small businesses use these tools. And since 80% of Canadians shopped online in 2015, it’s having a big impact on what they’re able to bring in.

The study found that businesses that accept supplemental online payments (in addition to their offline revenue streams) reported an average of $175,000 in revenue.

That number is more than double of what businesses that don’t use these tools bring in: when they don’t have online payment capabilities, their average yearly revenue is $80,000. In contrast, businesses that accept only online payments report average yearly revenues of $150,000.

According to the study, 83% of Canadian SMBs don’t accept online or mobile payments. What’s more, 71% of this group said they would never even consider selling their goods or services online. While it’s safe to say that most of the 28 million small businesses that exist in the U.S. understand the importance of having a website, 34% of the businesses surveyed in the PayPal study that don’t accept online payments said they don’t have any foreseeable plans to build a website at all. Only 7% of Canadian SMBs have a website that would even be capable of processing payments online.

The 1,000 Canadian business owners surveyed gave several reasons for their hesitancy. Around 30% are concerned about being able to provide the same level of customer service, and 21% are worried about online fraud. Approximately 19% have limited technological understanding or have delivery or distribution issues that hold them back. But 72% of offline businesses gave the reasoning that they weren’t particularly tech-savvy or that they don’t possess e-marketing knowledge.

In response to the findings, the Honorable Navdeep Bains, Canadian Minister of Innovation in the Science and Economic Department, told Business Wire:

“Virtually every sector of the economy is rapidly being reshaped by technology. In a global and digital economy that allows consumers to purchase goods and services from anywhere in the world, more Canadian businesses should invest in the development and adoption of new technologies. That’s how Canadian businesses will remain globally competitive and create well-paying jobs for the middle class.”

Although PayPal is likely hoping to reach these businesses by offering viable solutions for these issues, they’re by no means the only company that’s trying to make electronic invoicing more attractive for SMBs. Mastercard just launched their B2B Hub, a tool that reportedly improves the speed, security, and ease of Mastercard commercial payments while offering more convenient invoicing and processing solutions for small and medium-sized businesses.

The service will launch in the U.S. later this year. But whether it will be available for our neighbors to the north — and whether they’d even be interested in it — remains to be seen.

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Valerie M.

Contributor at Small Business Marketing Tools
Valerie M. is a writer from Upstate New York. She received her Bachelor’s degree in Journalism from The State University of New York at Fredonia in 2016 and is currently working at a digital marketing agency where she writes blog posts for a variety of small businesses all over the country. Valerie enjoys writing about music, animals, nature, and traveling.