The terms “push” and “pull” are now commonly mentioned when on-line billing is being described, but what do these terms actually mean in this context and what is the advantages of one over the other?
A “push” based on-line billing process essentially means that a consumer is prompted or alerted directly with a full invoice, statement or other document describing what has been purchased and what needs to be paid. This is therefore what is commonly called a “rich” document. For the most part, push-based on-line billing systems are carried out as e-mail notifications with attachment files (such as a PDF for example).
A “pull” based on-line billing process will still alert a consumer that an invoice is ready to be paid but instead of including the rich document, invites the consumer to go to a nominated web site where they can find the full bill to be viewed and subsequently be paid in digital form. Both e-mail and text messaging can be used to simply alert the customer, but merchants may elect to use off-line notifications (letters, paper-based invoices etc) as well.
Both push and pull models on online billing offer merchants the opportunity to reduce or eliminate paper invoices over time but each has advantages and disadvantages.
The advantages and disadvantages or Push-based on-line billing
Push based on-lined billing has the advantage of using a very common and familiar system that most businesses and consumers now use with relative ease -their email. Recipient addresses are unique and go straight into an inbox to be read either immediately or when the person opens their email system. In addition, emails are now readily received on mobile phones and other portable devices, allowing for very fast delivery, flexible viewing and (in some cases) access to online payment options.
Despite the above, there are a number of drawbacks with this push-based delivery model. They include:
* An email address may be incorrect or not reach the right recipient directly
* Many individuals and even organisations may have inbox restrictions the size of incoming emails. This will limit the opportunities for presenting invoices (especially when the attachment is large in size).
* Staff turnover in businesses and changes to email addresses by consumers means that it is often difficult to ensure the complete integrity of email addresses.
* Recipients can claim that they never received an email with an attached e-bill
* It is not always easy to differentiate copy invoices from original invoices with push on-line billing.
* An attachment (such as a PDF) is still only a piece of paper. A consumer may just print it and pay it offline and/or a merchant cannot easily reconcile the data (needing to key in the data again).
The advantages and disadvantages or Pull-based on-line billing
In Pull-based on-line billing, an email is more equivalent to a paper-based notification in the physical mail and simply serves to alert the customer that an invoice is available for viewing and processing at the nominated billing website (the biller’s own or a third-party aggregator’s one). As well as presenting the invoice a fully digital and therefore clickable format, web 2.0 internet technology also makes it possible to distinguish between the original and copy invoice. In addition, this fully digital format makes for very simple upload or transfer to an accounting system, thus eliminating any requirement to key in data manually and greatly aiding the reconciliation process. In addition, full digitisation allows the recipients to view their bill and render payments all on-line, at the same web site (which they may choose to do as soon as it is received).
Just as with Push based on-line billing, there are nonetheless a number of drawbacks with this pull-based delivery model. They include:
* Recipients may forget their logins and passwords to the billing web site to which they are being directed
* Recipients may not trust the web site to which they are being sent, or least feel nervous about the security offered (especially where payments are concerned)
* Consumers may be confused with what is likely to be a simplified bill or one which approximates to the one they receive in the mail-it is often similar but not the same.
* The billing web site may not be very user-friendly (leading to consumer abandonment)
So, in summary, we can say that both push and pull on-line billing have many advantages worth considering but also have a range of disadvantages that need to be considered one-by-one according to each merchant’s needs. In overall terms perhaps there are less onerous disadvantages on the “pull” side, and it is this approach consequently has the present advantage. However, as usual in the online world, choice and convenience are always key considerations, and it may well be that offering both a push and a pull-based solution offers the best outcome of all (and most quickly attains the paperless system than many merchants may crave).
Wednesday 29 June 2011
Thursday 9 June 2011
Why do all businesses need a Merchant Account and what is the best way to go about getting one?
Traditionally, to be afforded the opportunity to accept credit and debit cards from their customers any organisation (typically called a “merchant” by the financial services industry) must be granted so-called “proper” status as a bank. This proper status is given to a merchant through the vehicle of a unique Merchant ID (or MID) from the bank and allows them to participate in the payments chain. Pretty much all large businesses have a merchant account like this. However, the smaller the organisation gets, the less likely that they will have one and may be missing out on the benefits.
The banks which provide a merchant account are not quite the same as the ones with which we are most familiar as personal current account holders. All major high street banks have what is known as an “acquiring” bank arm or division. For example, in the UK NatWest has 'Streamline', Lloyds-TSB has 'Cardnet', HSBC has 'HSBC Merchant Services' and so on. In addition, some organisations outside the high streets banks (like American Express and PayPal for instance) have a license and do their own acquiring. Subject to a range of pre-conditions, all these “acquiring banks” issue a Merchant ID and allow an organisation of any sort to start taking credit and debit cards. They will then approve or decline each customer transaction made, collect any payments on the merchant’s behalf and pay the money into a merchant’s nominated bank account.
There are clearly costs involved in setting up this merchant account - in most circumstances the acquiring bank will include setup charges, monthly or annual fees, monthly rental of a physical terminal (or PDQ machine) for the merchant to process card details, and they may require a merchant to pay for a dedicated telephone line for the terminal. A merchant will also be charged a percentage of each transaction which they process, may have a minimum monthly volume of business imposed, and in some cases, have to provide a substantial “bond” or deposit as additional security (to cover any potential card “charge-backs” that may occur).
Sadly perhaps, that's the relatively easy part of the process! - before a merchant can even start the process, they will have to convince the acquiring bank that they are worthy of their trust, and a merchant will usually have to provide two years audited accounts and demonstrate a sound business track record in order for the application to proceed (which is why some banks also require a cash bond and an full business plan if a merchant cannot satisfy all that, for whatever reason).
Even if a merchant meets these requirements, they will usually only be able to accept card payments in the “traditional” part of the business only. If a merchant wants to set up a web site to accept card payments they will find that the acquiring banks will not accept any information coming from the merchant directly via the Internet. The banks will only accept information from a web site which has been processed by an approved Payment Service Provider or PSP (who will do this on a bulk basis and in a safe and secure way –and according to PCI or Payment Card Industry compliance rules).
A Payment Service Provider’s function is to integrate a merchant’s e-commerce enabled web site with the major credit card networks so that orders generated by a merchant’s own or chosen 'shopping cart' software can be authorised and payment collected. This payment is then transferred to a merchant’s account for onward remittance to another receiving bank account as necessary.
As you might expect every merchant has to go through quite a formal application process in order to get an agreement in place with a PSP. Their terms and conditions and charges vary enormously from one PSP to another and it is very difficult to make exact comparisons. Merchants also need to be aware that whatever charges any PSP makes will always be added to those charges which are levied by the acquiring bank providing the Merchant Account. This means any merchant may well end up paying two lots of set-up charges, monthly/annual fees, and, worst of all, two lots of percentages (plus fixed fees in some cases) on every transaction.
So, you might be thinking, with all of these hurdles:
1. why would a small organisation in particular bother with all of this? and
2. are there better ways to go about the necessary merchant account sign up steps if the journey to doing so is deemed to be worthwhile?
The answer to the first question is relatively straightforward. For most businesses turning over say more than £100,000 a year, the ability to offer credit and debit cards payments will bring not only extra revenue but will also accelerate cash-flow (to some extent at least). This will usually easily recover the outlay made on setting up a merchant account and make incremental profit into the bargain. Fixed fee payback would be expected to be within the first 6-9 months and thereafter the benefits would typically be significant for most businesses.
The answer to the second question is also a positive one. As the Internet (and web 2.0 technology in particular) has evolved in recent years, there are now several businesses that a merchant can approach to be a “one-stop-shop” when it comes to taking payments (credit, debit and even other types). In other words, these businesses will handle all of your merchant needs, including setting up the necessary relationship with both the bank (the acquirer) and the processor (the PSP) and may offer other services also. At a simple level this is likely to be more flexible customer service (a single point of contact with a real person for example) but may include other services (such as e-wallet capability-such as PayPal offers for instance or electronic billing capability-such as PaySwyft offers for instance). In addition these “one-stop-shop” businesses can often lower overall costs and reduce administrative hassle as well as operate on a “pay-as-you-go” basis. This means that even small merchants can accept credit and debit cards quickly and cost effectively and start to reap the benefits that have mainly only been available to the larger organisations in the past.
Useful additional information on this subject can be found on many websites. One of these is www.web-merchant.com (see www.web-merchant.co.uk/howdoesitwork.asp ) from which some of the above material was drawn.
The banks which provide a merchant account are not quite the same as the ones with which we are most familiar as personal current account holders. All major high street banks have what is known as an “acquiring” bank arm or division. For example, in the UK NatWest has 'Streamline', Lloyds-TSB has 'Cardnet', HSBC has 'HSBC Merchant Services' and so on. In addition, some organisations outside the high streets banks (like American Express and PayPal for instance) have a license and do their own acquiring. Subject to a range of pre-conditions, all these “acquiring banks” issue a Merchant ID and allow an organisation of any sort to start taking credit and debit cards. They will then approve or decline each customer transaction made, collect any payments on the merchant’s behalf and pay the money into a merchant’s nominated bank account.
There are clearly costs involved in setting up this merchant account - in most circumstances the acquiring bank will include setup charges, monthly or annual fees, monthly rental of a physical terminal (or PDQ machine) for the merchant to process card details, and they may require a merchant to pay for a dedicated telephone line for the terminal. A merchant will also be charged a percentage of each transaction which they process, may have a minimum monthly volume of business imposed, and in some cases, have to provide a substantial “bond” or deposit as additional security (to cover any potential card “charge-backs” that may occur).
Sadly perhaps, that's the relatively easy part of the process! - before a merchant can even start the process, they will have to convince the acquiring bank that they are worthy of their trust, and a merchant will usually have to provide two years audited accounts and demonstrate a sound business track record in order for the application to proceed (which is why some banks also require a cash bond and an full business plan if a merchant cannot satisfy all that, for whatever reason).
Even if a merchant meets these requirements, they will usually only be able to accept card payments in the “traditional” part of the business only. If a merchant wants to set up a web site to accept card payments they will find that the acquiring banks will not accept any information coming from the merchant directly via the Internet. The banks will only accept information from a web site which has been processed by an approved Payment Service Provider or PSP (who will do this on a bulk basis and in a safe and secure way –and according to PCI or Payment Card Industry compliance rules).
A Payment Service Provider’s function is to integrate a merchant’s e-commerce enabled web site with the major credit card networks so that orders generated by a merchant’s own or chosen 'shopping cart' software can be authorised and payment collected. This payment is then transferred to a merchant’s account for onward remittance to another receiving bank account as necessary.
As you might expect every merchant has to go through quite a formal application process in order to get an agreement in place with a PSP. Their terms and conditions and charges vary enormously from one PSP to another and it is very difficult to make exact comparisons. Merchants also need to be aware that whatever charges any PSP makes will always be added to those charges which are levied by the acquiring bank providing the Merchant Account. This means any merchant may well end up paying two lots of set-up charges, monthly/annual fees, and, worst of all, two lots of percentages (plus fixed fees in some cases) on every transaction.
So, you might be thinking, with all of these hurdles:
1. why would a small organisation in particular bother with all of this? and
2. are there better ways to go about the necessary merchant account sign up steps if the journey to doing so is deemed to be worthwhile?
The answer to the first question is relatively straightforward. For most businesses turning over say more than £100,000 a year, the ability to offer credit and debit cards payments will bring not only extra revenue but will also accelerate cash-flow (to some extent at least). This will usually easily recover the outlay made on setting up a merchant account and make incremental profit into the bargain. Fixed fee payback would be expected to be within the first 6-9 months and thereafter the benefits would typically be significant for most businesses.
The answer to the second question is also a positive one. As the Internet (and web 2.0 technology in particular) has evolved in recent years, there are now several businesses that a merchant can approach to be a “one-stop-shop” when it comes to taking payments (credit, debit and even other types). In other words, these businesses will handle all of your merchant needs, including setting up the necessary relationship with both the bank (the acquirer) and the processor (the PSP) and may offer other services also. At a simple level this is likely to be more flexible customer service (a single point of contact with a real person for example) but may include other services (such as e-wallet capability-such as PayPal offers for instance or electronic billing capability-such as PaySwyft offers for instance). In addition these “one-stop-shop” businesses can often lower overall costs and reduce administrative hassle as well as operate on a “pay-as-you-go” basis. This means that even small merchants can accept credit and debit cards quickly and cost effectively and start to reap the benefits that have mainly only been available to the larger organisations in the past.
Useful additional information on this subject can be found on many websites. One of these is www.web-merchant.com (see www.web-merchant.co.uk/howdoesitwork.asp ) from which some of the above material was drawn.
Friday 3 June 2011
Why and How a Merchant can Accept Credit and Debit cards
Many businesses wonder why they should choose to accept credit and debit cards. After all, it costs money to get a merchant account and to maintain it. In addition, the merchant always bears the fees that are charged not the consumer, so it’s not necessarily the most attractive option, at least on the surface, unless you happen to be a high volume retail business for example. But that’s not the full story, and in this brief article we’ll explore the major reasons why accepting plastic in a good idea for almost all businesses.
There are four primary reasons to accept credit and debit cards in a business:
1. Increase sales or revenue
2. Bring in new customers
3. Lessen trips to the bank (or having to deal with bounced checks)
4. Lower administrative costs
Let’s look at each of these in turn:
Increase sales or revenue
Many studies over recent years have shown that the average size of credit card orders or payments is anywhere from 20% to 50% larger than cash and check orders or payments. In other words, just by adding this choice to existing customers they increase the amount of money that people are prepared to pay for goods and services. Many merchants, small and large attest to this and reap the benefits accordingly.
Bring in New Customers
Many customers want to pay by credit or debit card but need to be given the opportunity to do so. Studies show that credit and debit card payments (in combination) have already overtaken cash and cheque payments. Customers often get benefits for paying with credit or debit cards such as frequent flier miles or other “affinity” type points. Paying with a credit card also gives customers more flexibility to manage their personal cash flow.
Lessen trips to the bank
By making credit cards an additional method of payment, you decrease the time it takes to process orders by waiting for cheques or other slower payment methods. In addition, you also reduce or even eliminate bounced cheques, and the costs of having to deal with this problem administratively.
Lower administration fees/costs
Because credit and debit cards can be accepted on the Internet or at a terminal (by swiping the card) the transaction is an electronic one and can readily create an on-line record that is easy to record and/or transfer to an accounting or other administrative system without further keying. Administration time (and particularly reconciliation effort) is therefore reduced or simplified or both.
By taking credit and debit card payments, merchants will also typically improve their relationships with customers. In addition, the more difficult it is for customers to make purchases, the more likely your business is to lose customers. Meanwhile, your business will be able to increase retention by offering customers with recurring charges or fees the opportunity to pay automatically.
There are four primary reasons to accept credit and debit cards in a business:
1. Increase sales or revenue
2. Bring in new customers
3. Lessen trips to the bank (or having to deal with bounced checks)
4. Lower administrative costs
Let’s look at each of these in turn:
Increase sales or revenue
Many studies over recent years have shown that the average size of credit card orders or payments is anywhere from 20% to 50% larger than cash and check orders or payments. In other words, just by adding this choice to existing customers they increase the amount of money that people are prepared to pay for goods and services. Many merchants, small and large attest to this and reap the benefits accordingly.
Bring in New Customers
Many customers want to pay by credit or debit card but need to be given the opportunity to do so. Studies show that credit and debit card payments (in combination) have already overtaken cash and cheque payments. Customers often get benefits for paying with credit or debit cards such as frequent flier miles or other “affinity” type points. Paying with a credit card also gives customers more flexibility to manage their personal cash flow.
Lessen trips to the bank
By making credit cards an additional method of payment, you decrease the time it takes to process orders by waiting for cheques or other slower payment methods. In addition, you also reduce or even eliminate bounced cheques, and the costs of having to deal with this problem administratively.
Lower administration fees/costs
Because credit and debit cards can be accepted on the Internet or at a terminal (by swiping the card) the transaction is an electronic one and can readily create an on-line record that is easy to record and/or transfer to an accounting or other administrative system without further keying. Administration time (and particularly reconciliation effort) is therefore reduced or simplified or both.
By taking credit and debit card payments, merchants will also typically improve their relationships with customers. In addition, the more difficult it is for customers to make purchases, the more likely your business is to lose customers. Meanwhile, your business will be able to increase retention by offering customers with recurring charges or fees the opportunity to pay automatically.
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