While credit card companies research and develop new anti-fraud measurements, alternative payment solutions providers are cashing in on the demand for online security and customer choice.
Alternative payment solutions are often less expensive for the merchant and can be easier to use than setting up the merchant account that is required to process credit card payments. What’s more, there is strong data to bolster the use of these alternative payment solutions.
Quality Research Associates polled 147 of the leading online retailers last year to determine the benefits of offering multiple payment options.
Converting Customers
The poll, commissioned by CyberSource (Nasdaq: CYBS) , discovered that sellers who accept four types of payments — such as credit cards, online checks, PayPal and similar services — have more visitors convert to customers than do merchants who offer a single payment method.
According to the data, merchants can convert as many as 20 percent more customers by offering them more payment types to choose from. Those merchants offering one payment type, such as general purpose credit cards, for example, convert 60 percent of their shoppers.
“Adding payment types can be effective because the Internet is now reaching well beyond the early adopter,” said Doug Schwegman, CyberSource director of customer and market intelligence.
“We’re hitting different demographics now; people who may prefer not to use credit cards and people who don’t have them. Others simply prefer the convenience of an alternative payment method for a single transaction.”
Schwegman said some amount of shopping cart abandonment is to be expected in online commerce, but there are certainly ways of keeping that to a minimum. One of those is making a variety of payment options available.
Paying With PayPal
PayPal lets consumers send money to anyone with an e-mail address. Fund are drawn from the consumer’s credit card, debit card or checking account. PayPal has more than 86.6 million registered users and offers 100 percent protection against unauthorized payments sent from a user’s account.
PayPal’s per-transaction fee is 3.3 percent, which is much more affordable for many smaller businesses that use PayPal to skirt the merchant setup and transaction fees associated with credit card use.
Mary Margaret Gibson, president of MirrorsandLight.com, told the E-Commerce Times her company uses PayPal for all financial transactions that involve credit. Her company’s average sale is more than US$400, with frequent sales of more than $3,500.
“We stay an arm’s length away from ID theft and liability and PayPal security is outstanding. That’s very important from our corporate view of the world as a great e-commerce market with lots of pitfalls,” Gibson said. “Our international clients can buy with confidence and security from an international entity instead of a small company.”
MirrorsandLights.com is protected from rip-off artists by PayPal’s security and ID verification, she added, and her company does not have to open merchant card programs to provide every available card on the market because customers can use the card they prefer via PayPal.
An Eye for Commerce
Then there’s I4 Commerce, a provider of alternative online payment solutions for multichannel retailers. The company has developed a technology called Bill Me Later that is catching the attention of major online retailers
With Bill Me Later, customers who do not have a credit card, or those who, for security reasons, prefer not to use a credit card online, can still complete their holiday shopping via the Internet.
Bill Me Later lets users enter some basic information, such as date of birth, to make a purchase. Within a few seconds, Bill Me Later qualifies the customer, completes the purchase, and sends a bill. The customer can pay the cost in full or finance the purchase over time.
Companies like Walmart.com, Overstock.com , and SmartBargains are using Bill Me Later. I4Commerce claimed the alternative payment method reduces merchant transaction costs and decreases shopping cart abandonment rates.
“Since we began offering the Bill Me Later service, SmartBargains has experienced a higher average ticket on Bill Me Later transactions and new customer acquisitions,” Mark Weinberg, vice president of Business Development for SmartBargains. “The result is that we have been able to further differentiate ourselves in an increasingly competitive retailing environment.”
Zapping Payments
Western Union lets online retailers accept checks through its MoneyZap service. Western Union said the service opens up the world of e-commerce to consumers who write 18 to 20 billion checks annually at point-of-sale locations and to the more than 80 million Americans who don’t use credit cards, and relieves the burden of processing online check transactions.
Most recently in the alternative payment solutions arena, NPW Development acquired GreenZap, an online payment service that launched in June 2005. The service resembles PayPal in that you can send money to anyone with an e-mail address. But GreenZap charges a flat fee versus a percentage of each transaction. NPW acquired the company and is bolstering revenues by promoting its own online store.
“We continue to add merchants to our online store every day. Right now there are approximately 500 merchants offering their products at a discount to our account holders,” said GreenZap COO Michael Bernstein.
Global Payment Solutions
In preparation for the 2005 holiday shopping season, electronic payment processor Paymentech launched a new service in July designed to make it easier for merchants to expand their businesses globally and accept payments in the customers’ currency of choice.
Paymentech’s Global Currency Management enables Internet catalog and recurring billing businesses to accept payments in more than 150 presentment currencies and to settle transactions in four popular currencies: the U.S. Dollar, the British Pound Sterling, the Euro and the Japanese Yen.
Paymentech said chargeback risk and customer disputes are greatly reduced, because merchants are able to bill customers in their local currency, greatly reducing customer confusion over the final price. Paymentech guarantees the exchange rate for each transaction, including chargebacks.
“Our merchants conduct business all over the world, and we felt it was important to offer Global Currency Management, so no matter how their customers choose to pay, merchants can accept that payment,” said Paymentech COO George White. “It’s the easiest, fastest, most cost-efficient way to expand into the global market without establishing in-country banking relationships.”
Temporary Credit Cards?
What about the notion of temporary credit cards? Do they alleviate concerns of online shoppers? Do these disposable credit card numbers eliminate the risk of hackers gaining personal data ?
American Express (NYSE: AXP) became the first company to offer disposable credit card numbers in 2000. Citibank offers a Virtual Account Number Program designed to protect the consumer by providing them with a substitute number for each transaction.
Laura Gingiss, a spokesperson for Discover Financial Services, Inc., told the E-Commerce Times that Discover does not currently offer temporary credit cards.
“We offer Cardmembers shopping online Secure Online Account numbers, which are a free shopping tool that substitutes a secure number for your real Account number — so their real account numbers are never revealed,” Gingiess said.
MNBA and other banks offer similar services. But analysts said they are not necessarily making a transaction more secure.
“Temporary credit cards and transaction numbers are helpful if there is a theft, but I would rather work on preventing theft in the first place,” Matt Ornce, COO of EPX, a payment processing company that works with Visa, MasterCard, Discover and American Express, told the E-Commerce Times.
An Excellent PR Maneuver
Vic Dolcourt, senior product manager for risk products at CyberSource Corporation, said temporary credit cards are an excellent public relations maneuver, but fairly unspectacular when it comes to usage.
“Temporary credit cards have a faulty basis. It’s for consumers who want to shop with really risky merchants,” Dolcourt said. “It’s a competitive move by the banks to show they are interested in security, but only a small portion of the population use them.”
The fact remains that a large portion of consumers are using other alternative payment options — analysts expect that number to increase as new options become available and more consumers without credit go online to find bargains.
READ MORE
January 5th, 2006
Stanley Spencer
Expert Author
Published: 2005-10-13
For a number of e-Businesses, discovering the best way to accept payments is a frustrating task. As the Internet is an instant medium, it is highly recommended that a ecommerce website must accept credit/debit cards and online checks as modes of payment.
In order to accept credit card transactions, you require setting up a merchant account with a merchant bank. As soon as you set up a merchant account, an online processor can provide you with the software or gateway you need to transact.
Selecting a suitable merchant account is considered to be one of the most tough business decisions you make as their existence has almost doubled and are now into more than hundreds. At the time of choosing a merchant account, you should be aware of the cost involved in setting up the account. Refer to the list below and don’t forget to ask about each of these items before agreeing to an account.
Application Fee
The application fee is compulsory so an agent or bank can “research” you as a potential customer. Few firms are more likely to repay this fee if your application is not accepted while others won’t. It is always advisable not to pay an application fee that will not be refunded in case you are rejected.
Minimum Account Billing
This fee requires you to do a least amount of business with a merchant bank. A majority of banks require a monthly minimum of at least 25 dollars in transaction fees. Anything less than 35 dollars minimum is satisfactory.
Statement Fee
In case there is a considerable minimum-billing need, then there should be no statement fee. Still, a number of banks charge this to cover administrative costs. If you are assessed a statement fee, it shouldn’t exceed 10 dollars per month.
Charge back Fee
In case a customer is not satisfied with their purchase, can’t get a refund, or is just looking for something free, you may be faced with a charge back attempt. Under this, the bank will return customer’s fund and debit your account for the full amount. Always make sure to ask about your bank’s charge back policy. Most banks tend to be more loyal to cardholders than merchants so protect yourself by preventing charge back fees.
Transaction Fee
This fee, which is usually about 2-3 percent of the purchase, is assessed on every transaction. If a product costs US$100, the bank would receive US$2-3 for their services. While rates are relative to the nature of your business, anticipated volume and your credit history, you should never pay more than 3 percent.
READ MORE
November 10th, 2005
(JND) - Stolen credit cards:
Most Internet fraud is done through the use of stolen credit card information which is obtained in many ways, the simplest being copying information from retailers, either (online or offline). There have been many cases of hackers obtaining huge quantities of credit card information from companies’ databases. There have been cases of employees of companies that deal with millions of customers in which they were selling the credit card information to criminals.
Despite the claims of the credit card industry and various merchants, using credit cards for online purchases is inherently insecure and carries a certain risk. Even so called “secure transactions” are not fully secure since the information needs to be decrypted to plain text in order to process it. This is one of the points where credit card information is typically stolen.
Get wire transfer info:
Some fraudsters approach merchants asking them for large quotes. After they quickly accept the merchant’s quote, they ask for wire transfer information to send payment. Immediately, they use online check issuing systems as Qchex that require nothing but a working email, to produce checks that they use to pay other merchants or simply send associates to cash them.
READ MORE
November 10th, 2005
October 25, 2005 08:30 AM US Eastern Timezone
Acies Corp. Reports Continued Merchant Account Growth in September
NEW YORK–(BUSINESS WIRE)–Oct. 25, 2005–Acies Corporation (OTCBB: ACIE):
– Total accounts increased 30% in fiscal second quarter, 62% in the past six months, and 142% in the past twelve months
– Strong growth in seasonally slow period
Acies Corporation (OTCBB:ACIE), a financial services company specializing in payment processing and online banking services to small, medium and large size merchants across the United States, today announced growth statistics for its merchant account portfolio as of September 30, 2005.
Total merchant accounts grew 30 percent during the second fiscal quarter, ending September 30, 2005. For the first six months of fiscal 2006, total merchant accounts grew 62 percent. Total merchant accounts grew 142 percent during the past twelve months. Acies noted that the rapid growth in merchant accounts has been generated organically, with little addition to the Company’s infrastructure or overhead.
“Our merchant account portfolio continues to build critical mass, marked by rapid growth in the fiscal second quarter,” said Oleg Firer, President & CEO of Acies. “The total number of new accounts generated this quarter is nearly four times higher than the total number of new accounts generated in the same period a year ago. Based on this increased sales traction, we expect a significant positive impact on top-line performance as newly signed merchants come online and begin to contribute to revenues going forward.”
“We believe this success illustrates the scalability of our business model and the quality of our sales and marketing efforts, and we are especially pleased to realize such a high rate of growth during what is seasonally a slow sales period.”
READ MORE
October 27th, 2005
NEW YORK –(Business Wire)– Sept. 26, 2005 — Acies Corporation (OTC BB: ACIE), a financial services company specializing in payment processing and online banking services to small, medium and large size merchants across the United States, today announced growth statistics for its merchant account portfolio as of August 31, 2005.
During the first five months of fiscal 2006, total merchant accounts increased 48%. For the trailing twelve month period ended August 31, 2005, total merchant accounts grew 129%. Acies noted that the rapid growth in merchant accounts has been generated organically and without any addition to the Company’s infrastructure or overhead, effectively demonstrating the Company’s scalable operating model and overall new business success.
“We continued to grow at an accelerating pace, even through the typically slow summer season, by capitalizing on significant opportunities in new and existing markets. We have successfully implemented a flexible, multi-tiered approach to our marketing strategy, with growth being derived from our direct sales force and national network of ISOs and independent agents,” said Oleg Firer, President & CEO of Acies.
“The strong growth in our merchant portfolio demonstrates that we have gained significant traction in the marketplace with our ability to provide quality, cutting-edge solutions to our merchant customers. We attribute our strong organic growth to increased sales and marketing initiatives, and remain committed to enhancing our capabilities for continued success.”
READ MORE
October 20th, 2005
Stanley Spencer
Expert Author
Published: 2005-10-13
For a number of e-Businesses, discovering the best way to accept payments is a frustrating task. As the Internet is an instant medium, it is highly recommended that a ecommerce website must accept credit/debit cards and online checks as modes of payment.
In order to accept credit card transactions, you require setting up a merchant account with a merchant bank. As soon as you set up a merchant account, an online processor can provide you with the software or gateway you need to transact.
Selecting a suitable merchant account is considered to be one of the most tough business decisions you make as their existence has almost doubled and are now into more than hundreds. At the time of choosing a merchant account, you should be aware of the cost involved in setting up the account. Refer to the list below and don’t forget to ask about each of these items before agreeing to an account.
Application Fee
The application fee is compulsory so an agent or bank can “research” you as a potential customer. Few firms are more likely to repay this fee if your application is not accepted while others won’t. It is always advisable not to pay an application fee that will not be refunded in case you are rejected.
READ MORE
October 20th, 2005
Four major merchant associations filed an antitrust, class-action lawsuit alleging that Visa, MasterCard, Bank of America, Citibank, Bank One, Chase Manhattan Bank, J.P. Morgan, Chase, Fleet Bank, Capital One, and other banks are engaging in collusive practices by setting credit card interchange fees at supracompetitive levels.
The suit’s plaintiffs — the National Association of Convenience Stores (NACS), the National Association of Chain Drug Stores (NACDS), the National Community Pharmacists Association (NCPA) and the National Cooperative Grocers Association (NCGA) — represent hundreds of thousands of drug stores, convenience stores and food stores across the United States that accept Visa and MasterCard as a form of payment.
In the United States, interchange is the largest component of credit card fees and has a significant impact on American consumers, who are affected by interchange rates that are among the highest in the world. Interchange rates cost the average American household approximately $232 a year in 2004.
READ MORE
September 29th, 2005
By Martin H. Bosworth
ConsumerAffairs.Com
September 27, 2005
Visa and MasterCard, along with major banks such as Capital One and Bank of America, face an accelerating legal challenge by merchants ranging from chain stores to photo shops to grocers.
Credit Card Fees
• Credit Card Companies Rocked By New Merchant Lawsuits
• Merchants Sue Credit Card Issuers Seeking Lower Fees
• Suit Challenges Credit Card Fees
The lawsuits allege that major banks and the Visa and MasterCard associations charge excessive “interchange fees” to retailers when customers pay for goods using a Visa or MasterCard.
READ MORE
September 29th, 2005
THE NEWS TRIBUNE
Published: September 29th, 2005 12:01 AM
The state Department of Revenue has notified businesses they should not charge sales tax on purchases made using cash assistance cards issued by the American Red Cross or debit cards issued by the Federal Emergency Management Agency.
Such purchases should be treated as tax exempt, the agency said.
Merchants who charged the tax should provide refunds upon request. People who were charged sales tax but cannot get a refund from a business should contact the Department of Revenue at 1-800-647-7706 or www.dor.wa.gov.
September 29th, 2005
NEW ORLEANS Sep 29, 2005 — Streams of cars filled with business owners started to make their way back into newly reopened sections of hurricane-ravaged New Orleans on Thursday, and they pledged to rebuild their city.
A month after Hurricane Katrina hit the Gulf Coast, New Orleans Mayor Ray Nagin invited business owners back into the city, and prepared to allow most residents to return over the next week.
For some, Thursday marked their first view of what was left. For others, they didn’t need a formal invite to return. Those who had already slipped in were ready to welcome back their fellow business owners and patrons.
READ MORE
September 29th, 2005
Previous Posts
