Payment Pulse – Ep. 11

Payment Pulse: The Power of Social Proof: Learn how influencer endorsements, online reviews, and peer behavior shape our buying habits.

Status Spending and Luxury Psychology: Understand why consumers use high-end payment methods to signal prestige and how brands capitalize on the “Keeping up with the Joneses” mentality.

FOMO and Impulse Purchases: Explore the role of limited-time offers and BNPL services in reducing purchase friction and triggering rapid spending.

Digital Trends on Social Media: See how platforms like Instagram, TikTok, and YouTube are revolutionizing product discovery and checkout experiences.

Cultural Influences on Spending: Discover how global payment preferences vary and why adapting to local norms is key for businesses expanding into new markets.

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Episode Transcript

Steve Bell: Welcome to Payment Pulse, a podcast by Clearent by Xplor, where our goal is to humanize and simplify the complex world of payments. My name is Steve, and as always, I’m here with my co-host, max. Max. How are we doing today and what exactly are we gonna be covering in today’s episode?

Max Kent: Yeah, I’m good, Steve. It’s, it’s gonna be a good episode today because today we have a conversation about what the state of small businesses are currently looking and what to expect for the year ahead. We’re gonna start where on where we landed at the end of 2024, and what small beam sized businesses are looking for out for, in terms of technology and payment stacks.

So lots to talk about today.

Steve Bell: Yeah. Max, you think maybe this time before we dive in here just recap what we want to do. ’cause I think we want to continue these sta, state of small business updates. So maybe if you could just give some brief insight into why we’re doing these episodes on a monthly basis.

Max Kent: Yeah. So unlike our usual cadence where we’re talking about technology, we’re talking [00:01:00] about payments we’re talking about how various stakeholders should be involved in the payments experience. We’re gonna talk about the state of small business on a monthly basis, to, to give small business owners to give partners, whether it’s an ISO or a an is SV provider and people in the payments industry.

An update on where small businesses or, and how they’re doing. Because at the end of the day, like. Much of our economy and our merchant base are small business owners. So our goal here is to inform educate and investigate the state of small business so that our listeners have a better grasp of how the economy’s doing how the market’s doing.

Goal today give a recap on what 2024 held for, small business owners, a lot happened. We had an election, we had inflation challenges, and now in 2025 under a new administration under, lot with lots of events already after Q1, we’re facing a really crazy [00:02:00] year ahead, I’m assuming so let’s get right into it, shall we?

Steve Bell: Yeah, no that’s perfect. And appreciate you giving that insight into kinda the point of this episode. And episodes like this moving forward. So I think that’s great. But yeah, let’s start this conversation off and, let’s look at first where we landed in 2024 and also 2025 in this first queue as you mentioned.

Max Kent: Yeah. So let’s first start with 2024. So the key survey that we looked at to understand how small businesses did in 2024 was a small business cons customer survey and consumption survey, sorry. And at the end of 2024, the way that we looked at this is we said, we first looked at revenues.

Small businesses across the country in total had revenues drop around 3% year over year in 2024. Most firms reported that a lot of this came from [00:03:00] challenges to growth in their business and it particularly affected the industries of retail and hospitality. Whereas healthcare and professional services shows some of the greatest improvement in terms of revenue growth.

On top of some of the revenue growth challenges there was the challenges of employment and cost challenges. I’m sure if you were in the job market in 2024 and even into the early parts of 2025, it has been just a slog or it was a slog to find a job. And part of that is that there just is higher demands by employees to.

Earn more than in previous years because of inflation. And so we saw wage growth in 2024 grow about 3% for small businesses. Which again, after revenue, you think of the, just a simple p and l of revenue, cost, revenue and gross profit like that, 3% growth in in cost or revenue impacts your profitability.

[00:04:00] All that being said, revenues dropped wage costs went up. It’s a do, it’s a double-edged sword at the end of 2024. Not only that, bus small businesses reported at the end of 2024 that they were also facing operational challenges. Reaching customers, growing sales, retaining staff utilizing technology.

They were all. Massive barriers for these customer, for these businesses. And as we look, to the future into 2025, as I’m gonna do in a second, like these operational challenges will continue to be cha, an issue. So let me pause there. Anything on that, Steve?

Steve Bell: We’re hearing a similar story really across the payment industry to what you’re describing here. And, it’s just that it’s getting harder and harder for SMBs to grow revenues and to minimize costs, particularly in the industries where consumers are most likely to hold back spending. [00:05:00] And where there’s, and especially when there’s the economic uncertainty ahead, which there’s there’s been that trend.

So those are the industries where merchants really are gonna be the most cautious for the future. And ones that we gotta look out for. Yeah.

Max Kent: Yeah. And before I move on to what’s what other challenges are facing small businesses, I’m gonna just correct myself.

Small business credit survey. So for those nerves out there with me that we’re gonna get, that we’re gonna check me. We have a p and l problem from four small businesses going into 2025, right? Like we have. Revenue’s cha revenue’s declining because it’s getting harder to get customers.

The operational challenges of bringing more customers in the door or ensuring that you can retain employees is getting harder and employees are just more expensive. On top of that, there’s this kind of macro challenge for small businesses going into 2025, and that is that access to capital and access to financing.

Got, got a bit, essentially got a little bit [00:06:00] easier, right? And so it is the one kind of thing that as we were looking into 2025, we were looking and saying, Hey, this might be actually be a good time to be a small business owner because we basically went through 2024 with inflation, skyrocketing.

I think we all can think of like the spring springtime last year where we’re. Inflation was all the rave because of the drawback of interest rate. As we, that cooled down, we got to the end of 2024, the Federal Reserve decreased federal fund rates to a pretty large extent over the course of three months.

And so it is now cheaper for small businesses. To access capital, so to, to take out loans, small business loans, or to find capital from investors because the federal funds rate is lower. So that is one thing going into 2025 that I was very keen on, like understanding. And I think as we, we’ve gone through the first three months we’re seeing that small business owners are pretty optimistic.

And so [00:07:00] we just talked about where we jumped off from in 2024. How are people feeling right now? How are small businesses feeling overall, according to some of these surveys? We’ve found that like at, the first three months of 2025 January, February, March, small business owners were pretty optimistic.

One, there was a huge amount of optimism around the new Trump administration and what, they would the, what policies they would be introducing. There was optimism because there was, the federal funds rate were going down, in order to grow the economy again. Again we felt like we were past the inflationary period and it just generally, like going into a new year, you typically see higher optimism from small businesses.

However, because we’re still in April, we’re not gonna know kind of April re results around sentiment until May. I would venture guess that people are feeling a little bit differently right now, and that is because, there’s increased [00:08:00] pressure around tariffs and international trade and import imports from other countries.

And so while there might be some things that aren’t gonna really change too much, such as the ability to access capital and the interest rates on loans. I am gonna guess that like throughout the course of the rest of the year, we will see optimism by small business owners continue to be questioned and put into put under pressure because we’re just continuing to operate.

We’ve had a solid month of uncertainty around, around business environment basically rules meaning like tariffs and international policy. What does this kind of, where do we go from here? I would just say we’ll wait and find out for the next month, but we are early days in terms of knowing how small business owners are gonna operate and take in stride the changes that are happening on a week to week basis.

Let me pause there. What, anything that you, you feel like you can grasp at there, Steve?

Steve Bell: [00:09:00] Yeah, no, there’s a couple questions that come to mind. And I’m gonna, I’m gonna fire these off a little rapidly here to you, just a few. Yeah. But based on 2024 data and what we know so far in 20 25, 1, are there any, who are the particular winners and losers in this case?

Who’s affected most. And then also, what’s some of the roles that software providers as well as payment technology firms, help in managing the growth of their businesses.

Max Kent: Yeah. So a good way to think about, it’s a little bit too early to say that one industry or one type of a business owner has one.

We’re like first innings of knowing how changes in administration or changes in technology or just yeah. Really, those two things, like changes in administration and a change, the technological change we’re experiencing has created winners or losers. I think there’s probably a macro view around this that you could say, in an economy, you look at how much who’s creating as [00:10:00] like the most output. And if you think of output being the mix of how much labor there is and how productive that labor is, you would expect that. Any industry or any type of business that can, maximize both, bring in the most amount of work workers and make those workers as productive as possible are gonna do the best.

And so I think on like early on where we’ve seen, some industries win, such as professional services, is that they’ve adopted, they continue to expand their workforce and they continue to make their workforce more productive. Whereas small business owners who don’t maybe have the capital to bring on more labor or have challenges keeping that labor and maybe don’t have access to the technology to make that labor more productive.

Are starting to feel the pain of not being able to grow at the rate of other, bigger businesses. And so to take that [00:11:00] kind of early prediction around winners and losers and saying we’re starting to see some dispersion between, the big bus, like big box retail and small, mom and pop shop or even, the, those in the middle.

It’s, it reinforces the point I’ll make about your second question around the role of payment technology providers and SaaS providers. And that is that small businesses are at the mercy of technology partners who are willing to work with them and help them build productivity. So you’re small.

Stores on Main Street aren’t gonna be able to, increase labor, their labor costs by fool to meet the new requirements in terms of the output. But if they can partner with, an awesome SaaS company or a hardware company, or payments technology company that can improve margins or can make their labor more productive.

Then all of a sudden they, they start to play on more even playing field with their bigger, more sophisticated [00:12:00] competitors. Does that make sense? Like before I move on to like how I think payment providers can, like a clearance can really play a massive role for SMBs. I wanna make sure that those points make sense.

Steve Bell: No. Yeah, it hits home, right? Like it’s leveraging technology over the physical costs of labor. And it’s bringing that technology to life with automation and various tools that are just making the things that you’re doing more efficient with the resources that you have. So I think it makes, it’s, it makes perfect sense.

Max Kent: Yeah. So then when I think of like. Why we have this podcast, like why you and I started this to begin with, like one of the key reasons we did this is like we wanted to explore and we wanted to justify like the role that a payment provider like Clarence has in the lifecycle of small businesses.

Like we care about Main Street, we care about like helping. People have the most profitable businesses they possibly can and ensure that [00:13:00] they, can keep those, expand the longevity of those businesses as long as they can. And like just honing in on where a payment provider like clearance can really provide that technological and really for like informational and guidance for small businesses is like three tranches. The first is helping small businesses develop transparent, surcharge to cash discount implementation packages tailored for the small business vertical they’re playing in. As I said, like small businesses, like they’re most, they’re the most sensitive to processing costs and to any.

Swings in terms of cost to the business. So again, clearance is rec is because of our history working with small businesses across the country. We recognize that small businesses are gonna, feel the hurt of a payment pricing structure that, that isn’t clear or doesn’t make sense [00:14:00] or is murky or doesn’t have extremely thoughtful terms or customer service that’s not, serviceable.

And now more than ever, when we have this marketing certainty going forward into 2025, that’s gonna come into question even more. Like that part, that element of a payment processor is gonna be put into question even more. So the second piece is helping to prevent fraud and to ensure the trustworthiness of payments.

As I said, if your payment provider, if you’re a small business owner this year, my guess is we’re you’re gonna go throughout the course of the rest of the year thinking about how do tariffs impact my business? How am I. How are my customers feeling based on market uncertainty? Am I gonna be able to grow my revenues?

The last thing you want to have to think about is, is there fraud going through my system? Am I gonna be like, chased down by the banks or by my payment processor because [00:15:00] there’s fraudulent card or, chargebacks or fraudulent transactions? That’s the last thing that they want to think about.

Clear. A big, like a processor like us, our big focus, we have teams and legions, people working on identifying and minimizing the risk of chargeback and frauds happening for small businesses. And then the last is just that because payment providers are experts in payments, like their role is to educate and provide resources for, emerging technologies and, new areas to play.

And take ai, right? Everybody in their mother talks about AI this, AI that, how to implement that into your small business. If you’re a small business owner, like you’re probably like looking at very like the opportunity. There’s gonna always be opportunities to implement new technologies into your stack and to help you become more productive.

And. The focus here at clearance is to ensure that, we’re continually [00:16:00] exploring functional uses for emerging technologies such as ai that always put the quality and security at the of the customer and our SMB at the forefront of development because. It’s not worth, putting your business like a small business owner’s business at risk because we wanna implement new technology because that’s what the market is demanding of us.

We wanna do so because we know it will help them and ensure that like they are getting quality and consistency that they are expecting. So I wanted a little bit of a ramble but I do think, like now more than ever in a, in a. For in a year and at a time where there’s gonna be a lot of like uncertainty and movement and, noise in the market, it’s as important as ever for small businesses to be really conscientious of who they’re working with as a payment provider and that the payment providers understand the [00:17:00] gravity at which their services are, helping or hurting a small business.

Steve Bell: Yeah, absolutely. Clearent was founded on pricing transparency, believe it or not. And we we vouched to, to continue to carry that torch. Same with the educational piece. That’s why Max and I are here and it’s it core part of my daily job as a marketer with Clearent. And security and fraud prevention.

Those are pretty givens and standards, I would hope at most places, but something that we take very seriously. Great points Max. Moving on here, what should ISVs be prioritizing as it pertains to helping SMBs grow their productivity and navigating this uncertainty ahead?

Max Kent: Yeah, a hundred percent.

So the model I explained earlier is a little bit more like payment provider. Merchant relationship is a direct relationship. We are moving in the direction where there’s gonna be that intermediary, right? The software solution that has payments integrated. And the thing that we, that I would recommend to our ISV [00:18:00] providers who are working with us or those who will work with us one day, is to prioritize seamless payment integration as a core feature rather than like an add-on capability of.

Their relationship with merchants. So in a time where small businesses are gonna be wanting to focus on doing their business, ensuring that your ability to integrate with them and to have them onboard seamlessly is gonna be super important. They’re not gonna wanna mess around for weeks on end trying to get in, onboarded into your program.

They’re gonna wanna be able to do it pretty quickly. The second is to be able to develop and ship technology advancements such as AI functionalities or, security measures that demonstrate clear ROI for these budget conscious SMBs. If I were a business owner, the last thing I would want is like for my software provider to be like shipping out really.

Cool cool tech, but like stuff that I’m never gonna use or that’s [00:19:00] not gonna provide this like clear return on investment when like maybe other parts of their business are failing or not as good as they could be. So again, like now more than ever, double down on what you’re good at and what makes you like the sole provider for these merchants.

And then third is design implementation processes. Specifically for resource constrained businesses with limited IT support. I think it’s really safe to assume that like most ISVs have their, I like their ideal customer profile, and for those that have an ICP of businesses that are like lower, like smaller businesses, right?

Teams of, five or six people. Not much technology capacity ensure that you’re building for that type of consumer. It’s, it goes without saying that, like you, you gotta know your consumer before you build for your consumer. But again, like now more than ever, if you’re working with.

[00:20:00] Contractors or you are working with teachers or school, hairdressers, ensure that you’re building implementation tools that are appropriate for your audience because you know they’re gonna move on and find somebody else who will build for them. If you don. So does that kinda make sense?

Anything else to cover on that piece, Steve?

Steve Bell: No I think the one thing that I think of, and it alludes back to, the behavioral trends episodes just from more of an s and b and, the merchant level. The trends in the changes of the market create expectations from consumers and from merchants.

And so the only thing I can say to, to all your points here, if not now, then when, yeah. The, the time is now to make these changes and to really pay close attention to these things because again, as the expectations for faster payments, faster onboarding, whatever it is, a lot of times those expectations stick around.

Maybe not all of them, maybe not all of them, but it’s something that we’ve seen, like I mentioned in the [00:21:00] behavioral aspect of consumers. But again, for merchants I believe that to be true as well. So all really good points there, max. That being said, let’s put a bow on it for the the audience here.

How would you summarize what the outlook for the new Year ahead looks like for SMBs? And off the bat, off the back of that, what are ways software providers and payments providers can help mitigate risks for these businesses over this uncertain period of time?

Max Kent: Yeah, in essence, if I were to wrap up the rest of the year, if I were to guess how the rest of the year goes, again, we’re gonna do these each month.

The rest of the year is quite uncertain. I don’t think anyone I. Questions that, at a macro scale, we have tariffs that are still left un question. And with that trade implications for many small businesses, they rely on imports or things that are produced via imported goods.

Because of that it could cause us to have it, could cause inflation to go up again. Over the course of the year. Because of that, we might see an interest rate change. Per, perhaps, [00:22:00] hopefully it’s it’s unchanged and, the cost of borrowing doesn’t go up, but it could also it could go up.

And with, and lastly, like we, we haven’t even spoken too much on, on this pod yet, but what type of federal legislation or, industry legislation might happen as it pertains to. Small businesses, whether that’s, legislation about how small businesses can consume, or sorry, produce or sell or for the payments industry and how payment providers can do their business.

So there’s just a lot of uncertainty that we still won’t, we can’t predict here. But on a more micro scale at the business level, we are still seeing some resilience and modest optimism from most small business owners across most industries. So it is it is. I’m not, it’s not all doom and gloom on our side.

I don’t want to send that message, but there, there’s stuff in the horizon that I think are well worth considering. At clearance to your second question [00:23:00] around what are ways software providers and payment providers can provide, help mitigate risk? Again, like software providers, it’s all about understanding who your customer is building for them and ensuring that the technology stacks that you are providing our reliable, safe, consistent.

But also, when you’re building these, features that are. Features essentially right with emerging tech that you’re building them for the right reasons and that you have a clear ROI roadmap for your customers, for payment providers. We are always looking to the point of this show right is to help demonstrate that we are always looking out for small business owners and that we’re looking at the state of the economy and of the markets.

So that we can help predict and guide our customers, meaning our merchants in the right direction. And our goal is to help mitigate risk, whether it’s at the transactional level or at the business level [00:24:00] for, the year to come. And without going into. Too much more detail, like as volatility increases in the market and as uncertainty grows merchants should be intrigued to work with people like ourselves who aren’t just, distracted by shiny objects or new technologies, but are thinking about, the fundamental, components of business for now and in the future, and want to help them guide that, help and guide them towards, profitability and long term growth. So look, I’m ex, this gets me super jammed. I, as you can tell, I can rip on this for another half hour. But we we probably need to wrap this one up.

Steve Bell: No, I think that was a great summary there. And yeah, like Max has mentioned a couple times in this episode we plan on doing this monthly and so hopefully it’s not all doom and gloom for the future episodes to come, but.

We’re discussing the state of real world situations and where we are today and we have to discuss those realities. And for the payments [00:25:00] industry it’s clearly impactful and instrumental. And, small businesses, our partners and us as well. An important topic to, to cover and to continue to monitor.

But excited to to, to dive into these episodes in the future. Again, we’d love to hear your feedback on this episode, how you’re feeling about the state of small business today, a lot of these changes, tariffs, whatever the case may be. We want to hear about it. Share your questions, your comments, experiences on our social channels and the YouTube comments of this video below as well.

But until, excuse me, until next time, this has been Payment pulse and we appreciate you tuning in to listen. We will see you next week.