Card payments have gained popularity as a convenient method of payment, especially in developed markets. However, in Kenya, many small businesses remain hesitant to adopt card payment systems. This reluctance is influenced by several critical factors that make card payments less appealing to small business owners. In this blog, we explore the main reasons behind this trend.
1. High Commission Rates Charged by Payment Providers
Small businesses operate on tight profit margins, and every additional cost can significantly impact their bottom line. Payment providers in Kenya charge high commission rates for processing card transactions, often ranging from 2% to 5% per transaction. For small-scale businesses, this is a considerable amount that could otherwise be used to support operational costs or increase inventory.
2. Lack of Knowledge About Payment Options
Many small business owners in Kenya lack awareness or technical knowledge about card payment systems. This knowledge gap makes it difficult for them to adopt and integrate such payment options into their operations. Training and onboarding processes for card payment solutions are often inadequate or expensive, further discouraging small businesses from making the transition.
3. Delayed Access to Funds Slows Business Growth
This is arguably the most significant reason small businesses avoid card payments. Card transactions can take up to three working days to be processed and deposited into a business’s account.
For example:
- A card payment made on a Friday may not reflect until Tuesday.
- This delay disrupts the ability of small businesses to restock products or replenish supplies promptly, especially if the payment involves a large amount.
For online shops or small local stores that need to restock quickly after a sale, such delays are unacceptable. In contrast, cash payments allow for immediate reinvestment, ensuring the business continues running smoothly.
4. Risk of Funds Reversals
Card payments can sometimes be reversed, posing a significant risk to small business owners. In cases where funds bounce back within 24 hours due to technical issues or disputes, small businesses often lack the resources or knowledge to resolve these issues.
For instance:
- If a customer disputes a payment, the funds may be reversed, leaving the business without compensation.
- Many small businesses cannot afford to absorb such losses or navigate the complex dispute resolution process, making card payments an unsafe option.
5. Unreliable PDQ Machines
Point-of-sale (POS) machines, commonly known as PDQ machines, are prone to technical glitches. Shop owners have reported instances where:
- Transactions are delayed due to machine malfunctions.
- Help from service providers is either too slow or unresponsive, leaving both the business owner and the customer frustrated.
Such interruptions not only slow down operations but also tarnish the customer experience. For small businesses striving to build trust and loyalty among their customers, these setbacks are detrimental.
6. Inconvenience and Lack of Support
Small business owners in Kenya value efficiency and reliability. Unfortunately, card payment systems often fail to meet these expectations due to:
- Delays in resolving technical issues.
- Limited or poor customer support from payment service providers.
This inconvenience discourages small businesses from relying on card payments, as they prioritize faster and more reliable payment methods like cash or mobile money.
Conclusion
Card payment systems may offer convenience in theory, but for small businesses in Kenya, they come with significant drawbacks. High transaction fees, delayed access to funds, the risk of payment reversals, unreliable machines, and poor support make them unsuitable for many small-scale operations.
If you are a small business owner looking to grow your business, focusing on faster and more reliable payment options—such as cash or mobile money—may be a better choice. While card payments might seem modern, the challenges they present can slow your business down and hinder its growth.
This is very true