Drawbacks of electronic payments

Electronic payment systems let customers pay by card, phone or online, but they can raise a business's costs, reduce its sales or put customer data at risk.

Transaction fees

Each electronic payment usually carries a transaction fee paid to the payment provider. This is often a small percentage of the sale plus a few pence, so the fee takes a bigger share of a low-value sale than of a large one. For example, a florist charging £2.50 for a bunch of daffodils might pay about 25p in fees, which is 10% of the price. Across hundreds of sales a week, these fees add up to a real cost that reduces profit.

System failures and cash customers

Electronic payments depend on working equipment and a reliable internet connection. If a card machine freezes or the provider has an outage, the business cannot take payment, queues build and customers may leave without buying. A business that refuses cash may also lose shoppers who prefer notes and coins or who have no card or smartphone. A mobile dog groomer who only accepts card could lose a regular customer who always pays in cash.

Fraud and cyber security

Taking payments electronically raises the risk of fraud, such as stolen card details being used to buy goods, and of cyber attacks that could expose customer data. The business may then need to spend more on security software, staff training, insurance and refunds. Fees, lost sales and security costs all push up costs, so electronic payments are rarely free for the business.