Payment Pulse – Ep. 8

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: Payment Pulse, a podcast by Clearent by Xplor, a leading full-service payments provider. Welcome to Payment Pulse, a podcast by Clearent by Xplor, where our goal is to humanize and simplify the complex world of payments. I’m Steve, and as always, I’m here with my co-host Max. How are we doing today, Max? It’s been a crazy week already.  

Max: Yeah, it has been. I am really looking forward to this discussion today. Definitely important. Looking forward to it, Steve. But good, how are you?  

Steve: Yeah, I’m good. Got back from a little bit of a work trip and some travel, but ready to get back into things. I did miss last week’s episode. 

Max: The market was ready for you to come back. It was you being gone that caused everything on the market to go up and down.  

Steve: You can blame me. We’re back at it. This is gonna be a little bit of a shorter episode but an important one and something that we want to start sprinkling into our normal rotation of episodes. For this podcast we’re essentially going to be doing a small business update. We’ll dive into the topic here in just a second, but let us know what you think in the comments of these videos on socials, how this impacts you, that kind of thing or if this is of interest to you and want us to go deeper. 

But that said, diving into today’s, topic we’re talking about economic and policy uncertainty, particularly tariffs, it’s been everywhere. We’re all seeing it right now. But really the point of today’s discussion is how it impacts obviously the payment industry and consumers overall. 

But before we get into the specifics, Max, do you think you could just explain what tariffs are and why they matter?  

Max: Yeah, of course. So tariffs are a tax imposed by a government on imported goods. Simple as that. So if we’re importing goods from China, the government imposes a tariff on those imports coming in. 

Now they’re paid by the import, the folks buying those goods. So if you’re a domestic business in the US paying for Chinese goods, you are gonna be paying for that good at a higher price. The idea is to encourage the American buyers to buy domestic products from domestic producers. So it’s just making imported goods less competitive from a price standpoint. But, tariffs because of how interconnected our world is these days and the decades of interdependency from our country on the rest of the world that can just lead to this greater escalation of tariffs abroad towards American goods. And so as we’ll discuss later in the episode, these tariff announcements by the administration have much greater effects than just the effects on American businesses. So let’s get into it.  

Steve: Yeah. No, I appreciate that breakdown. Again, we’re really just diving into the uncertainties that we’re looking at here. But again, to kind of really highlight what the news is there’s been a, if you haven’t seen it, of course, but it’s everywhere, like I said. But there have been significant developments, in this front. On April 2nd, President Trump announced a series of sweeping tariffs on imports from numerous countries, which initially led to market turmoil. Turmoil which most analysts believe come from the uniform approach the administration took to calculate such tariffs. However,, after historic market decline, Trump has pulled back on these changes for 90 days for all countries except China, where tariffs were increased to 145%. During this 90 day pause, all imports will face a minimum tariff of 10%.  

Max: Exactly right, Steve. I’ll correct one thing you said and that was just the uniformity of all this was what caused the market to kind of go into panic. I think if anyone was watching the news on April 2nd, what the administration called Liberation Day, what caught the market off guard was not that there were tariffs, but how the tariffs were calculated. The extent to which we tariffed so many countries, almost every country in the world imposed some type of tariff at a rate that I think we weren’t expecting. And as I said before, it’s not that the concept of a tariff is inherently bad or good, but that the business community likes to know and have more certainty about what the economic landscape is gonna look like and how expensive goods are gonna be in a year, two years, all that for planning purposes. It creates a lot of uncertainty in the market. And so businesses and consumers are left guessing about what future costs might look like, whether it’s your business buying goods or your consumer buying the goods from that business. It makes planning a challenge down the road.  

So, that’s really why the market and policy makers were making so much noise following last week’s announcement. And now we’re kind of sitting in this moment of uncertainty where over the next three months we’re gonna see whether the administration decides to reimpose those tariffs or kind of go a different route. 

Steve: That makes sense. I appreciate the correction on the uniformity of this. All right, now and we’re going to kind of ask a couple questions here and really break it down from a few different angles, including consumer spending, the producers, and then ultimately we’re gonna wrap up the episode with really the impact of the payments industry as well. So stay tuned for the end, but starting out, Max, how do tariffs contribute to inflation and affect consumer spending?  

Max: Yeah, so let’s, we’ll keep it really simple. When tariffs are imposed, the cost of imported goods rises. Simple businesses that are importing goods then have to pass that increased cost onto the consumers in the form of higher prices. So that leads to inflation. It’s just a simple economic law almost. As prices go up for consumers, they may cut back on spending because their purchasing power has now decreased. What used to cost a dollar now costs a $1.50, so on so forth. Additionally, because the market’s now more volatile, more uncertain, it impacts things such as retirement accounts, savings, these institutions that make consumers feel confident in not just the present but the future of their purchasing power. And so again, consumer confidence falls spending will probably follow their end and the first industry is to feel the pain will be the discretionary spending category, so restaurant spending, retail spending and, luxury spending. But depending on how long this period of uncertainty in the markets exists, I wouldn’t be surprised if we see this expanded consumer confidence like consumer confidence wane onto bigger items such as cars, boats, houses, and that has so many downstream effects to the economy because of how many ancillary industries are attached to these bigger ticket purchases. So that’s why this is such a crazy time and why people are reacting so viscerally. 

Steve: Yeah, it’s a tough situation for consumers. But kind of to your point, which I think is an important call out, it’s starting with the smaller ticket items, the things that we buy every day. But there is potential for that long-term trickle effect into the larger purchases like you mentioned. I appreciate that insight. But what about the producers? Does it benefit them at all? Is there any benefit to the tariff in that regard?  

Max: Yeah, this is where you have to kind of put a sound economics hat on and not just listen to the noise on the news because tariffs can provide some temporary relief to domestic producers. The small businesses, the producers of raw goods in the US because it makes Ford competitors’ products more expensive. It can help the most competitive domestic producers gain a larger market share but it’s not guaranteed for all producers. Tariffs don’t necessarily lead to a growth of new domestic industries immediately, maybe over the course of a longer period of time and its success in building new domestic industries is dependent on existing infrastructure, workforce availability and skills and just broader economic conditions for new industries. So, take the iPhone, it’s been talked about in the news a lot. Just because the cost of an iPhone imported from China will go up, doesn’t necessarily mean that new higher cost of an import is higher than if we tried making in the US where we don’t have a huge manufacturing base of labor. 

So just one example to show that it has value in some industries, there’s probably some that we’ll see have a huge impact from this, but it’s gonna be a question mark around how quickly that takes place and what the long-term implications are from a growth and industry perspective.  

Steve: Yeah, that’s really interesting. When you were breaking that down earlier, that was a critical learning point for me. So hopefully there’s value in that for everybody listening as well. But that was not something that I was fully read in on or understanding. So, I appreciate the breakdown again, bringing this all back to the payment industry, how does you know this economic uncertainty affect payment providers ultimately?  

Max: Yeah, so economic uncertainty, inflation, can lead to changes in consumer and business spending. For payment providers, this could lead to lower transaction volumes and changes in the type of transactions that are processed. So, if people decide to pay with credit versus debit or vice versa, depending on the type of purchase. I would venture to guess that if people are spending on lower ticket items because of inflation or shifting how their basket looks, we could start to see that people are going with greater debit transactions because they want to avoid credit card fees or they want to avoid any credit card debt because of raising credit fees and interest rates. For small businesses, it offers a good opportunity to look at these fees and address where they’re being priced at, their relationship with their payment processor and ensure that they understand how their fees work and ensure that it’s the appropriate processor to be working with. So, just from a payments it’s pretty simple because, as things become more uncertain, it’s just really important to fully understand how your business functions, who your consumers are, how they’re paying, and it’ll make like navigating this uncertain time a bit easier and more fruitful. 

Steve: Yeah, I think that’s critical and now more than ever, really paying attention to your business. The card fees, understanding how it’s being priced, all the things that Max mentioned are critical for where things seem to be trending. But it’s critical for every aspect of business, even when it’s in a more positive situation. 

It’s really key to know these things. And again, that’s why we’re doing this podcast. It’s really critical for us to be educational and we want to continue to push that down. If you are a small business or even an ISV and want to chat about some of these things, please give us a call, check out the website. Education for us as a company is really from the top down. So, give us a call in that regard if you do need some assistance there, but to address your comments a little bit more directly there, adaptability really is key. And so I think that was a critical point in your statement there. 

Before we wrap this up today, what are the practical takeaways for our listeners, especially small business owners?  

Max: First, just stay informed with these policy changes and understand what the new costs might be based on tariffs if there are new costs and identify pricing strategies. It’s not unusual to have to pass those new costs onto consumers. But it’s understanding whether that’s viable in your arsenal for your business and the industry that you’re playing in. Second, is trying to diversify the supply chain. Understand the risks associated with the tariffs on your supply chain. Then lastly, to go back to my earlier point, I would highly recommend exploring the software solutions that can help manage cash flows and provide convenience to customers. Because if there’s ever a reason for a customer to want to work with a business, it’s that they make their lives simpler and that they can create value above and beyond just transacting with your business. So, there’s kind of this chicken before the egg question of what’s more valuable, having a great business software, great ISV partner that can help you navigate your business or a great payment processor. But honestly, both are really important during these times. 

And so if you’re a small business owner, being able to feel good about both the ISV and the solutions that are being built from a software standpoint as well as the underlying payment processor are incredibly important because that will ultimately drive your customers’ engagement and experience. 

Steve: That’s really great advice Max. Yeah, to have confidence and reliability in both of those aspects. Software providers as well as the payments providers that you’re working with. It’s really key. But to our listeners, we’d love to hear your thoughts on this topic today. It’s obviously gonna be in the news quite a bit. It’s gonna be impactful in a lot of areas of our lives. But share your experiences or your questions with us on this this episode today on socials or in the comments of the YouTube video. But yeah, starting to wrap it up here. Max, any other additional comments before we move on?  

Max: No, I think just check out the resources we’ve linked. We have loads of experts in the world of payments and people with long histories of navigating challenging economic times. We certainly have the expertise in-house to be a great partner whether you’re a small business or an ISV, so Steve, I think you said it best, reach out.  

Steve: Yep. Absolutely Max. Again, always appreciate the time. Thank you everybody for tuning into Payment Pulse by Clearent by Xplor. Until next time, keep your payments simple, stay informed, and we will see you next week.