Is online Direct Debit a “Win-Win” for Everyone?

 

Direct Debit or Direct deposit as it is called in some countries has been around for decades now and making steady inroads as a payment method offered these days by many large merchants, often with incentives (such as vouchers or money off a bill) to customers to sign a direct debit mandate. Merchants who are part of the Direct Debit scheme (called Originators) claim that the service not only saves time and hassle for customers in general, but also that it facilitates easier scheduling, easier storage, is more secure, involves less cheques and reduces errors. Of course, both the merchants and the banks also gain these same benefits, not to mention the capacity to reach into a customer’s bank account directly to collect payment for a bill (something that a customer is not always completely happy about).

  

Despite its steady progress, Direct Debit’s growth has slowed until very recently, when on-line billing and/or payment portals have come into being and offered to speed up quite an old-fashioned process, in which a paper-based form still had to be sent in and signed before service could commence (and the whole process repeated when a direct debit amount changed). These new portals (such as the one at www.Payswyft.com as an example) not only offer traditional benefits to consumers (shown in the table below to the right-the top 4) but adds new customer benefits that are only possible online (shown in the 5 blue italics items in the right column below). The online portal therefore gives consumers even more reason to either use direct debit some of the time or use it as their primary payment channel.

  

Banks

• Saves data entry staff time
• Opens up new markets
• Reduces float costs/ Accelerates cash-flow
• Faster settlement
• Better merchant and customer retention
• Low per transaction costs

Originators

• Retains customers for longer
• Reduces float costs/ Accelerates cash-flow
• More payments on time
• Interchange fee savings
• Adds payment type flexibility
• Can tie to credit card

 

Consumers

• Lower chequing account fees
• Less hassle in writing cheques, stuffing envelopes and mailing
• Builds better credit history
• Helps avoid bill late fees
• Simple to use Alerts
• Less paper
• Easy cancellation
• Easy registration/set-up
• Can tie to credit card

Banks and Originators win too

It’s always critical for a customer to gain substantive advantage with a payment service of any kind but it is even better if the service provider can win at the same time. In the two columns to the left above are therefore the advantages gained by both the banks and the originators/merchants by pushing direct debit as a payment option. For the banks the primary advantage is that online direct debit payments reduce data entry time and staff, but not far behind is the new revenue possibility of opening up new markets (e.g. smaller merchants being introduced to the scheme). For the originators the primary advantage is that it helps to retain customers, who typically like all their payment history to be available at the portal. Just as important though is the cash-flow benefit. Direct debit payers almost always pay on time (and many pay early). No more cheques in the mail on the last possible day.

  

Summary

Direct debit is not a new service but online billing and/or payment portals such as PaySwyft offer even more reasons for everyone to gain the benefit of using this payment channel.

 

 

 

 

 

 

Is it "Safe" to View and Pay Bills online?

As Internet technology now allows bills or invoices to be presented electronically and then paid at the presenting web site (whether this is a bank’s site, merchant site or third-party site) in this brief article we investigate whether this carries any significant risk from a payee/consumer or merchant perspective.

 

Perhaps the very first test of  potential “riskiness” when using any electronic presentment and payment (or EBPP for short) web site is whether it is secure. The vast majority of web page addresses, also known as URLs, typically begin with "http." However, to pay bills online, the web page should always start with "https," which signifies a secure socket layer or SSL connection (or one in which data is fully encrypted).  This typically means that you can see a padlock icon, usually in the top or bottom corner of the browser window (or in some cases it may even turn the URL address background green or light blue). Clicking the padlock icon will often reveal the site's security certificate (and allow you to read about the particular protection that this affords).

 

Now that a consumer knows that he or she is on a secure site, the next step is to ensure that the login process is secure. A good site will usually give a consumer two options-to pay instantly or as a guest, and to register on the site to use it again and save time on the next occasion the consumer uses it. As a guest, a web site will typically only ask for an email address and then ask a consumer how he or she would like to pay from the options they make available. This may mean entering debit or credit card details for example, which should then give a consumer the option to confirm the transaction (and then as a further security step run the transaction through 3D secure-a process used by major credit card companies as an added XML layer for online credit and debit card transactions. Visa call this process “Verified by Visa”, MasterCard call it “MasterCard SecureCode”, JCB International call it “J/Secure” and American Express call this “SafeKey”. Overall then, a well-constructed site will offer a safe payment system for consumers (and there are card and bank protections on fraud and low limitations on consumer liability in any case). Even so, consumers should also look for extra safety in specific statements on any given EBPP site about PCI compliance (or payment card industry standard adherence) and/or that credit/debit card data or numbers will not be stored or saved in any way (and if they are, that they will be fully encrypted and tokenised as a further protection against theft or fraud).

 

When registering (either before or after a bill had been viewed and paid) a well-designed and safe web sites will ask a consumer to set up a user name and password that he or she can remember and that identifies the consumer every time he or she uses the site in the future. The site may also ask for additional data such as email address, physical address, date of birth, driving license number or even passport number. In some cases, they may go yet further and ask security questions to help validate a consumer’s identity in the case of a future forgotten login ID or password. Although these may seem personal and even intrusive, these steps are all designed to protect consumer security and ensure that only one person is able to see the bills posted and to effect payment of any kind. In other words, this process allows the web site operator (financial institution or merchant) to know the customer (a process they call KYC) and protect everyone’s security to the best of their ability.                

 

In general, research suggests that consumers worry most about using credit and debit cards on online sites of any kind. However, in the world of bill payment (as opposed to online shopping for example)  these risks are not as great. Even a person with a stolen credit card number is highly unlikely to pay a bill for another person (assuming he or she had the bill details to enter) and even if they did, the risk would be with the merchant and not the consumer. So what about merchant side risk?

 

For a merchant, the greatest risk is charge-backs. This is where the credit or debit card holder disputes the transaction anywhere up to 6 months after the transaction date.  Charge backs can either be because the card holder disputes that they made the transaction at all (i.e. it was a stolen or fraudulent), or because they did receive anything in return for the payment that was made. The second reason for chargebacks in the bill pay space is very rare, but the first reason-theft or fraud is obviously quite common (with total estimated costs of just under £1 billion in the UK in 2010). This is why online bill-pay web sites need to take so much care to ensure that card holders (who are not present as they are in a retail transaction) are who they say they are.

 Summary

In the final analysis, for those EBPP sites that have a clear secure socket payment layer (SSL), have clear statements about security of information and sound compliance and a well-structured registration process, consumers face very low levels of risk (with a very low liability even when a rare problem may arise in any case). The merchant however, faces potentially much more risk arising from both debit and credit card fraud (and therefore possible charge-backs), but risk this can be mitigated with good consumer checking processes that are made easy for every customer to the site to use.

Moving Customers from the Paper-based World of Bills and Checks into the Digital age?

To encourage customer to adopt an online billing solution of any kind takes careful planning and creativity and there are several “angles” a biller can take in the general promotion of the benefits of the change to e-billing. A few of these are:

1.          The Informational Angle – simply communicating that the new system is available and is easy and quick to use and should be tried –the more you can get the pioneer and early adopter types to make the switch the better-some of these may even provide testimonials to be published on a web site to the rest of the customer base.

2.          The Green Angle – The fact that the new bill presentment and payment system can save paper (and even save water, electricity and fuel) is a powerful reason for many customers to “do their bit” and make own small contribution to the sustainability of the planet.

3.          The Benefits Angle – In the early stages, customers will not be interested long communications about features of a new system (and may even resist any proposed change). However, by focusing on the specific benefits of the new system (such as speed and convenience, or the capacity to save them time and money in an increasingly busy world) this is often more than enough to get them thinking about making the change.

4.          The Rewards Angle – Merchants can offer specific rewards and incentives (points, gifts and prizes etc.) to customers to get them to switch to an electronic billing and payment solution.   

In some cases, a merchant will want to adopt just one of these angles to get customers to start thinking about using an online bill view and payment solution, but it may also be useful to adopt more than one angle or even switch from one to another progressively over time and therefore use all four of the above options. Of course, for the bulk of customers you may need to use the rewards angle (and actively or even aggressively) to get them to take action.

Different ways to pay online

Receiving Electronic payments incurs extra costs. When you pay for a good or service in a shop using a credit or debit card the retailer must pay a commission to the financial institution processing the card details; additionally there will be operating costs for the system used to process the cards. This is the same for non-retail merchants who accept credit or debit cards to pay for their products and services.

These systems are often costly, challenging to implement and sometimes technically difficult to understand. These hurdles represent a ‘barrier to entry’, which, if overcome, can give a merchant the competitive edge. 

Electronic business is real and continues to grow as a medium with over 35% of UK adults in 2012 having used the Internet to order tickets, goods or services.

There are several approaches to taking Electronic payments. These are:

•Traditional Card Payments
•Mail-order
•Online Payments
•Acquiring Banks
•Payment bureaus
•Secure order forms
•BACs
•Alternative payment options
•No payment option

Let’s look at each of these:

Accepting credit card payments

Many businesses can take offline Electronic payments through their credit and debit card facilities. All banks can process these transactions and some will also process Internet based transactions.

To take offline Electronic payments you usually need to apply for the appropriate facility from your bank or other payment processor or provider.

Here are some key electronic payment terms to consider:

•Merchant service: this is the generic term for the service provided by banks that allow you to ‘swipe’ credit and debit cards at your place of business.

•PDQ machine: this generic term for the machine that is used to ‘swipe’ a credit or debit card.

•Acquiring bank: once you have ‘swiped’ the card, the customer’s details are passed to an acquiring bank for processing. The acquiring bank checks the details of the card and authorizes the transaction. The acquiring bank is the bank that provides your merchant service.

Ten steps to setting up offline electronic payment:

1.Apply to a bank for a merchant service.

2.Negotiate the costs.
3.On acceptance, pay the set-up costs.
4.Receive and install a PDQ machine.
5.‘Swipe’ the customer’s card to collect their credit or debit card details.
6.Wait while the card details are passed to the acquiring bank for approval.
7.Ask the customer to sign the sales voucher.
8.Verify the signature and process the payment.
9.A transaction charge is automatically paid to the bank.
10.The customer leaves with the goods or service.

For electronic payment in a shop, the customer is present to sign the sales voucher. If the transaction takes place via the phone or the Internet, the customer is not present so there is an increased fraud risk.

Any merchant service (whether offline or online) is provided at the discretion of the financial institution concerned. There are few set rules as to which businesses can and cannot be approved for a merchant service. Be prepared to negotiate the product at a price that suits your needs. There is information in the Costs and Considerations section to help you with this.

Payments by phone, post or fax

Mail order payments involve more risks for banks and financial institutions than transactions where the customer is present at the point of sale. Consequently, acquiring banks usually ask for more commission per transaction (perhaps 3.1% instead of 2.79%) and a more detailed agreement on the fraud checks you use.

With proper planning, your mail order operation should be able to get a customer not present merchant service from your bank without difficulty. If you already have an offline service negotiate with your bank to avoid paying another set up charge.

The bank will approve each application individually but there are other equally valid options available if you cannot get a merchant service.

Taking online payments

All the electronic payment methods we have examined use an Acquiring Bank and Merchant Service to process the transactions. To take online Electronic payments you need to get a specific Internet Merchant Service and also a Payment Service Provider to collect the card details over the Internet. Let’s review these elements.

An acquiring bank: is a high street bank that offers credit and debit card processing services. They acquire the money from the customer, process the transaction and credit your account. You need to apply for a merchant service if you want a bank to handle your Electronic payments (other options are explored later).

Merchant Services fall into three categories:

1.Standard Merchant Service for use in shops when the customer is present;

2.Mail-order Merchant Service for customer not present transactions when the customer orders remotely by phone or post / fax;
3.Internet Merchant Service for transactions generated over the World Wide Web.

Obtaining an Internet Merchant Service from an Acquiring Bank is quicker and easier if you already have “offline” card processing facilities set up with the bank. In this case, just ask your bank for an additional Internet Merchant Service ID for use exclusively with Internet transactions. This process is normally quick, especially if the risk to your business does not change.

If you have no prior card processing the bank will carry out a thorough credit check (lasting anything up to 8 weeks). The delay can make it worthwhile using a Payment Bureau that can be upgraded when the Acquiring Bank application is ready – or when you feel your Internet turnover justifies the slightly higher fixed costs of an Acquiring Bank. Alternatively you could look at Post Paid Account services, some of which remove the need for an Internet Merchant Service ID.

When you obtain multiple merchant numbers for both online and offline, you may need to pay separate set up fees and rent a PDQ swipe machine for customer present transactions. The acquiring bank could charge around £25 per month for this rental. If you are getting a combination of these services negotiate the costs with your provider as they may only charge one set-up fee.

A Payment Service Provider (PSP): is a “virtual” PDQ swipe card machine that collects the card details over the Internet and passes them to the acquiring bank. To take Electronic payments over the web, you will need a PSP at a small cost. Some acquiring banks offer PSPservices as part of their product and there are other less expensive options available.

Your choice of PSP will depend on its cost and compatibility with your chosen e-commerce software solution. A fixed monthly fee starts around £10, but there are some cheaper option available starting as low as £0.05 per transaction. Usually, the higher your transaction volume the cheaper the rate you will be charged.

Acquiring Banks

As previously mentioned, the Acquiring banks are an essential element of taking Electronic payments. If you wish to take card payments directly you will need to apply for a Merchant Service with an Acquiring Bank.

The Electronic payments tool does not advise you directly about which acquiring banks to use as this is a decision that is determined more by your current banking arrangements than individual price or service differences between providers. Acquiring services tend to be offered by the UK banks as an additional service that runs alongside a suite of other services offered by the bank concerned. The banks look on the merchant acquiring service that they sell as one revenue stream of many.

For instance, a low rate for taking card payments may reflect that your bank is generating revenues from you in other respects – a loan interest would be an example. Rates for card processing are for this reason, highly variable and should be considered alongside all your other banking charges. Furthermore, because of complex rules governing the way acquiring banks assess risk (of allowing different businesses to take cards) it is difficult for the online payments tool to model or predict exactly what the costs might be.

Please click the following link to register for the free to use Electronic payments comparison tool. As the tool can’t be used to predict your exact acquiring costs, we have used a set of assumed values that you can change after you have spoken to your business bank about its likely rates. The typical rates we have used, produced in conjunction with the banking industry are:

Typical Rates

Setup Fee: £200
Monthly fee: £10 
Debit: £0.35 per transaction
Amex: 3.0-4.0%
Diners: 3.0%
MasterCard & Visa: 2.5%
Bond: £1000

You may also find that the following list of Acquiring banks useful in progressing your enquiries, either with your own business bank or with a new provider if your bank cannot satisfy a particular need:

UK providers

•Allied Irish Bank Mechant Services
•Alliance & Leicester
•American Express Merchant Services
•Bank of Scotland
•Barclaycard Merchant Services
•DinersClub
•HSBCi /Global Payments
•Lloyds TSB cardnet
•Royal Bank of Scotland & NatWest Bank
•Ulster Bank

Overseas providers

•euroConex – Euro zone transactions
•Paymentech – US and Canadian transactions

Specific card type resources
•STYLE
•Discover
•Maestro
•Switch
•Visa EU
•MasterCard

A Payment Bureau

A Payment Bureau like Worldpay or Netbanx is a one-stop solution collecting and processing the card details on behalf of the business without requiring an Internet Merchant Service with an Acquiring Bank or a separate PSP to be set up. Their simple application process makes bureau services a popular choice for online payments and an ideal solution for a SMEs first step into e-commerce.

A bureau collects funds via credit or debit cards using ITS OWN acquiring service. The bureau collects money for multiple retailers (tens of thousands of retailers for a large bureau service) to achieve the trading volumes necessary to make the service profitable. The bureaus in the UK will generally accept most types of business with a business bank account and an address that confirms the identity of the business.

A bureau reduces the risk of accepting almost any type of business through one principle mechanism - the bureau holds the collected funds for 30 -60 days (settlement period) in the initial period of accepting a business. There is a cost to this in terms of cash flow to your business and possibly interest charges. You can accurately model these costs using the free online payments comparison tool. as factors such as settlement period and overdraft interest are included in the cost calculations.

As most fraud and refunds occur within the first 30 days after a transaction, this is a very effective means of reducing the exposure of the acquiring service that the bureau uses. In so doing the costs of charge-back recovery are minimized as the bureau can simply refund before the retailer banks the money. Additionally, the bureaus normally charge more for card payments, at least 4% for credit cards and 50pence per transaction for debit cards.

Advantages

•These services will accept most types of business
•Trading record or length of trading will not usually be an issue
•Fast turnaround for applications - a few working days compared to weeks - for a new merchant acquiring applications

Disadvantages

•Merchants’ funds are held for 30 - 60 days
•Transaction charges are higher( 4-8% )

Doing business over the Internet can be daunting but if you enable customers to pay for products online, you can generate actual revenues and make a return on the time and money you have spent developing your website. A bureau service is the simplest way to begin taking payments online.

You can also get the same service from a Post Paid Account provider as they use trusted third parties to bring all elements of the service under one roof. This usually includes all elements of payment management from billing the customer to chasing any late payments.

Secure on-line transactions

An order form is a simple page on your site that the customer fills in with details of themselves and the goods they want to buy. There is no automation and the fields in the forms are sent to you as an e-mail and do not use a PSP.

As a very basic method of taking orders through your online catalogue this can be very manual and labour intensive. An automatic ‘buy product’ button can take the user to the order form page where product details are already filled in but customers who want to buy separate products need new forms for each one and it soon becomes clear that a simple shopping cart product is more effective.

A simple form is NOT a secure way of collecting card details. To be secure you, the Merchant, must use a secure order form, which uses a secure server to email the customer’s credit card information.

Like the code machines used in World War Two, a secure server encrypts the message making it hard for criminals to decipher (and steal) credit card information.

An offline PDQ swipe machine, available for a small cost, will enable you to process the credit card details when you receive them.

 A slightly more advanced option is available by using a shopping cart software product as most carts have the ability to either store credit card numbers securely so you can view them over the Internet or send them securely over e-mail. By making use of an existing merchant account, payments can be processed by using a PDQ swipe card machine or by old-fashioned credit card slip.

Advantages:

•Secure forms require a minimal outlay
•Avoid paying for a Payment Service Provider facility.
•Avoid an extra internet merchant number for online transactions
•Merchants can manually screen orders as they come in and reject risky transactions
•Site superficially appears to be fully credit/debit card enabled

Disadvantages:

•Secure forms have limited use for more than one product on your site.
•Some bank acquiring services disapprove of merchants using an offline merchant number for Internet transactions so the merchant may be in breach of their acquiring bank’s terms and conditions.
•There is no “live” authorization of card details so incorrect details will still appear to have been accepted. Contact (by telephone) may then be necessary.
•Transactions are processed manually - time consuming.

BACS

This payment method is ideally suited to business-to -business (b2b) transactions with regular or repeat customers. It is already used to pay over 70 per cent of salaries of the UK workforce. BACS payments are usually processed as batches using dedicated software linked in with the banks system. Currently these payments can be facilitated directly through a business bank via a “file” of transactions or via dedicated software that links to the bank account making the payment.

The advantages of BACS

1.Regular automated payments

2.Reduces time and cost of administering bulk payments
3.Helps manage cash flow and improve financial control
4.Reduces risk of loss, late payment and theft for customers

At the enterprise level, BACS can be integrated with an e-commerce b2b purchasing system to allow automated settlement of accounts between organizations.

Benefits:

As the BACS process is electronic, it removes the need to write cheques, which can be a costly process, subject to human error. Payments can be made much later in a business day, up to 9pm and are cleared within two business days to any bank account. The payment method is suitable for customers who are making more than 150 monthly payments.

Other Alternatives

There are other ways of taking payments online which can allow payments from customers without credit cards. You can directly compare some of these alternative payment methods by clicking here to register to use the e-payment comparison tool.

These payment services can stand alone in certain cases but mostly exist alongside a mature PSP/Acquiring solution to give customers extra choice. Although less well established, they can offer substantial benefits to the customer. They may be worth considering if the other bureaus or PSP are not an option - risk is assessed differently by these services due to their added security or reduced susceptibility to credit card fraud.

Person-to-Person - consumers set up an account using their bank account details and the person-to-person solution will then allow eligible merchants to debit this account directly when you make a purchase. This form of payment is common on auction sites but can be used as a general entry-level payment solution. more detail...

Mobile Commerce - allows a sale that has been conducted over the internet to be confirmed by sending an SMS to the customers mobile phone. The customer will normally need to set-up an account to do this but once they receive the SMS they can then accept or decline the sale that will (on acceptance) be charged to their bank account or mobile phone bill. There is also a growing market in ‘drop-charges’ to mobile phones where the call cost is charged at a premium to recover transaction costs. more detail...

Pre-paid Cash Card - These cards can be ‘charged’ by the consumer using cash, credit / debit cards or direct debit from a bank account and then used at participating websites and high street stores. Commonly used when an e-cash environment is required for children without credit-cards but also useful for small transaction amounts (even down to a few pence) where the minimum credit card transaction charges would disproportionately affect the profit in the sale.

Micro-billing - Many micro-billing type payment solutions offer a premium telephone number billing service that is essentially pay per view internet content hosted in a private area of the web. Customers pay for this content via their Internet Service Provider (ISP) or their phone bill. Charges are typically high for this service and it is really only suitable for niche content areas.

 
No Payment Option
If you have no online payment mechanism, the customers manually contacts the merchant by phone or mail and refers to the online catalogue to place the order. Although less expensive, this method lacks efficiency, especially if customers want to order multiple products.

The expectations of online shoppers have grown in past years and a flawed system may deter customers from putting their trust in your product. They may feel the system lacks security and may be reluctant to proceed with their purchase.

A phone number for the customer to call is better than nothing, but are you missing sales by failing to offer an electronic payment system to your customers?

You may be surprised to know that you can engage with several online and electronic payment systems for very low or zero fixed costs. These providers charge you a fixed or percentage cost of every transaction with no monthly, annual or set-up fees. You can compare these providers with the providers that charge fees by registering to use the free online payments comparison tool. Please remember that even if a provider charges you no fixed fee, you may still wish to pay an e-commerce agency or web designer to implement the payment solution on your website.

The Value of Encouraging Direct Debit Payments

A direct debit is an instruction that a bank account holder (usually a merchant) gives their bank to collect a variable amount directly from another account (usually a given customer). A direct debit is also often called a pre-authorised debit or pre-authorised payment. Direct debits are initiated by the recipient (merchant), as opposed to the Payer (customer), which means that the payer is not in control of the payment. This is quite different to a standing order, which tends to be set up by a customer as a fixed amount payment and can be cancelled by them at any time.

Direct debit payments have become very popular with large merchants in recent years (such as utilities, telecom companies and councils for example) because they allow the merchant to obtain an open mandate from a customer to transfer variable amounts of money out of a bank account on a regular basis.  This make direct debit apparently very good for the merchant (with high levels of control over customer payments). But is this really the case as in reality there are both pros and cons to consider?

 

ADVANTAGES:

DISADVANTAGES:

1. Having a direct debit mandate saves a merchant time as automatic payment is set up to occur regularly by a customer on a given date. The payment is also known and easily reconciled as thee are full records of the transaction.   2. Direct debits tend to avoid late payments by a customer (avoiding chase letters or phone calls or even worse, disconnection notices, and late fees and penalties.   3. Direct debit is cost effective for the merchant as a payment method (at least on the surface-see point 4 in disadvantages). A merchant typically gains the benefit of planned cash-flow at a very low cost (with direct debits costing between a fixed15-25 pence on average).   4. Direct debits provide more security for the merchant and the customer by being made electronically. This is both secure and proof of payment appears on the customer bank statement.

1. A customer needs to trust a given merchant to give bank account access to them or to want to sign a mandate.   2. A customer account has to have adequate funds to cover payments when they’re due. If this is not the case, apart from the loss of payment (and cash-flow) a reversal will occur (see point 4)   3. A bank account may be closed by the bank due to fraud or some other reason.  This will lead to reversal fees (see point 4 below.)   4. Reversals across UK direct debits run at about 4 in one hundred (4%) and cause considerable problems for the merchant. It may cost as much as £30 to set up a new direct debit with a customer. What this means in practice is that these 4 in 100 reversals have to be spread over all 100 (or £120 in total divided by 100 or £1.20 needs to be added to the 20 pence average cost). This means that the real cost of a direct debit is more like £1.40 on average.   5. If a Payer wants to change banks, a merchant will need to set up new direct debit mandates again which is time consuming. Also, merchants need to keep a record of any direct debit mandate from their customers for a 7 year period.

 There is an alternative to direct debit that is available at www.payswyft.com. This is called “dynamic debit” and is set up by the customer rather than the merchant. This payment method is most typically linked with a customer’s debit card (although a credit card can also be used). These recurrent payments can be made indefinitely on a variable basis like a direct debit, but has one major difference. A customer can set a maximum limit (say £50) and have the Payswyft system alert them (by SMS or email) so that they can approve the payment (or query it with the merchant before it is settled). As the cost of this debit-side payment is around 35 pence each time (and has almost no risk of cancellation, reversal or chargeback as transactions are run through the 3D secure system) they are a true win-win for both the merchant and the customer.

Ten ways to accelerate cash flow

In today’s tough economic climate all businesses need to pay even more close attention to ensure that cash due from customers flows in as quickly and smoothly as possible. What follows is ten key ways that cash-flow can be accelerated:

1. Send invoice as soon as possible after a product is supplied or a service is rendered, because every day you are late is at least one more day your customer will wait to pay-terms only start once they receive your bill. If it takes a week to get the bills out, on average, that’s a week’s worth of cash-flow. Also, follow up on major invoices to ensure the client has received the invoice. Invoices can often be delayed by an internal authorisation process, or just going astray.

2. Clear and professional looking invoices get taken more seriously. Make sure that they therefore contain all the information such as the correct entity name, right address etc with clear ways to pay listed.

3. Set fair and appropriate credit terms and communicate these clearly with a ‘due date’ very visible on the invoice. You may even want to set the payment expectations of new customers with a specific welcome letter.

4. Deposit all payments made immediately (especially when these are cheques or cash). The more these can get into a bank account quickly the better.

5. Offer several payment methods not just one or two -customers should never have an excuse for late payment related to your lack of convenient payment options-all customers today (small and large) need to be given choices.

6. Offer early payment discounts so long as it doesn’t swallow up all the profit. If customers are struggling, the sooner you provide the facility to partially pay, the sooner the debt is paid. If a customer exceeds their terms, you can offer cash on delivery terms until the account is back on track.

7. In order to remind customers when to pay, you need a system to let you know when they are due. A series of email/SMS messages, depending upon the time overdue with relevant wording, is often very useful.

8. A great target or key performance indicator for accounts receivables is ‘accounts receivable days’. This is not to be confused with the terms you offer customers. The ‘accounts receivable days’ is the average number of days that all customers are taking to pay you. Of course you want this to be on terms or better.

9. Use you improved cash flow practices to reduce your overdraft or “float” thus saving interest costs or giving you extra cash to spend elsewhere.

10. Aim to do as much of the above as possible online at a flexible and versatile bill presentment and payment web site (such as payswyft.com). Not only will clearly presented electronic bills arrive much quicker but research suggests that customers pay 35% quicker when they receive an online bill and can pay it online on the same web site. Sites like PaySwyft also automatically bundle many of the above steps in the technology or give an organisation a range of options to help accelerate cash-flow.

Ultimately, if you can entrench these steps into your payment strategy and operational practices you will find accounts receivables less of a hassle, resulting in greatly improved cash-flow for your business.

Will Mobile Phones Become the Dominant Channel for Bill Delivery?

There are now a multitude of channels available to customers to pay their bills. These channels include:

1. Print and mail (paper-based)
2. Fax
3. Email with embedded data
4. Data interchange (system-to-system)
5. Email with PDF and/or link to on-line
6. Customer Web Portal
7. Mobile (MMS; HTML; WAP; USSD)
8. Mobile via App
9. Mobile Tablet
10. Emergent technology (via cable TV etc)

Only print and mail on the above list existed as an option until around 30 years ago when fax arrived and 25 years ago when email came along (both of which still have quite a strong following today). Data interchange options were mainly evolved and used in the B2B rather than direct Business to customer or B2C space but again are still around today as a strong channel, supported in the main by large international software companies, who have sufficiently large installed volumes to want to protect their position in the billing market.

Web based technology has driven the greatest change in the billing space in the last 10 years or so and seen the emergence of both consumer and merchant portals (for presentment and payment) and the use of mobile technology as 3G and 4G have made the internet available to mobile phones.

Even though each of these channels presents a new and perhaps better and more convenient choice to a given customer (and are often presented as the channel to replace earlier channel choices) in reality, they are often just additional options. In other words, consumers have shown time and time again that they like the extra choice but do not necessarily want to be driven too quickly to only one channel (however “efficient and effective” it is presented to be).

The implication of customers wanting lots of channel choice to both view and pay their bills is that the same bill may need to be presented and rendered possible to pay in several channels, at least for now.

 
Today’s challenges
Some technology experts are starting to say that customers will be move rapidly away from e-billing to m-billing (m for mobile of course) in the next few years. Modern mobiles can certainly handle very complex tasks today - just look at the hundred of thousands of Apps available for all different platforms. These Apps can do complex tasks, even generating bills “on-the-fly”. A mobile can also handle a simple task such as bill presentment with ease today – in some cases on quite a detailed basis (even though reading it may present quite a challenge!). However, viewing a PDF bill attachment on a mobile (as opposed to a tablet) is often a long scrolling exercise, making it impractical in most cases. There is a solution to this but it needs the biller to solve the problem of displaying their bills in more flexible ways according to the kind of mobile platform to which it is being delivered. In this way, a customer can see a simple version of the way and then “drill into the detail” as they wish when they want to see itemization. 

However, perhaps all of this is a false dilemma. In the final analysis, customers do not care if a bill is delivered to their computer, their tablet or their mobile (or even all three). In fact, many want to see it delivered in as many ways as possible to allow maximum flexibility, including by email or by PDF attachment and even in the physical mail or fax on some occasions. This multi-channel approach is therefore a customer centric approach. The challenge for billers then is how to provide as many of these channels as possible at the lowest cost possible. In the end there is only one solution to this –use a full digital bill presentment and payment portal, such as PaySwyft for example. This not only means that a bill can be sent in all 9 of the current channels above (and can be paid at the same portal) but means that a biller would be well-placed to take advantage of the new emergent technologies that will come along as in the near future.

Embracing E-Invoicing -The Barriers vs. Benefits

Two recent surveys (one in the US and one in Europe) have confirmed that 20% of survey  population respondents (on average) were already using a form of e-invoicing, with a further 50% actively evaluating adopting it in the near future.

These two surveys ultimately conclude that the benefits of embracing e-invoicing outweigh the barriers, for most organizations, but suggest that particular barriers will inhibit the time taken to adopt the technology or the time taken for it to become fully utilized. Let’s therefore look at these barriers and benefits in more detail:

The Barriers

The greatest perceived barriers to adopting e-invoicing is current work processes or existing process design around issuing an invoice and getting paid (and the inability to change these processes quickly or effectively). Close behind is the lack of budget to develop or purchase new e-invoicing software, or pay any incremental, up-front costs, even if this led to significant medium to long-term savings. A lack of executive sponsorship is also cited as a commonplace barrier, with the CEO or CFO most commonly expected to be a major driver of adoption in most cases.

Other commonly cited barriers are having insufficient resources to bring in a new approach (mainly people) and the associated lack of time and resources to integrate e-invoicing with current systems or software (especially on the accounting side of things). In addition, lack of awareness about available forward options and possible supplier resistance were also cited as being significant factors.

The Benefits

The greatest perceived benefits to adopting e-invoicing is its capacity to better control the whole billing process much more effectively (at every level and from bill or invoice issue to ultimate payment). This includes the capacity to ensure that invoices were less frequently lost, missing or duplicated. E-invoicing is also expected to reduce billing and payment processing costs significantly and also to decrease payment cycle times. The capacity to also dramatically reduce errors and exceptions is also seen as a significant benefit.

Another major cited benefit of e-invoicing is the capacity for e-invoicing to increase on-time payments (and even accelerate cash-flow) and to increase choice when it comes to invoice payment options and potentially when an invoice can be paid.

What does this mean to those organizations thinking about e-invoicing?

Any organization interested in saving expenses and accelerating cash-flow would be wise to research the e-invoicing options available to them (of which there are several, including cloud-based and “pay-as-you-go” systems (which avoid capital outlays and long integration effort) such as Payswyft, which immediately solve other barriers such as lack of budget and resources and the need for integration time and effort. In addition, the CEO or CFO of an enterprise should ideally act as a project champion, helping his or her organization to evaluate specific options and how particular barriers need to be overcome. In taking these two steps alone, most organizations would smooth the path to embracing e-invoicing and be able to realize the substantial benefits much more quickly (in terms of lowering their own costs and giving their customers a much better payment experience).

Optimizing the Customer Experience when paying online

Any business, no matter what size or type, needs to pay careful attention to the customer experience when they are asking individuals to visit their web site and pay online (whatever products or services they may be offering).  The focus should therefore be on giving the best possible customer experience and converting first-time visitors in particular to become happy and repeat customers. There are several ways in which businesses can improve things and in this brief article we will be looking at six of the most critical ones.

1. Every site needs to be easy to navigate. Fundamentally, any site structure should be what customer needs, not how the organization wants it to look like for internal purposes. Simple, clear and clean page design (with as little clutter as possible) focused on moving customers toward completion of their goal should be the focus.

2. Make it easy for the customer to pay. Many web sites offering products and/or services seem to be almost embarrassed to mention payment and both hide prices in obscure pages within the site and fail to give site browsers and easy way to check out. And there is no excuse for this approach today. If this is not available as a direct part of the web site design, a redirect or hosted page at which customers can view a bill digitally or make a payment in many ways is available from multiple sources.

3. Communicate product or service offers clearly. Companies need to use clear, concise wording to describe what they are offering. Once again, clear prices are critical, including any extra costs that may be applicable. If this is not the case site browsers are much more likely to abandon the site’s shopping cart (a massive problem for many organizations when they have already done so much work to get a customer so close to buying!).

4. Implement methods to improve your site conversion rate. Conversion rate is the measure how many browsers become buyers.  Conversion rates average 2.5%-3% but rates that reach 8% are not uncommon and some sites report conversion rates of even 20%. The very informative article "How To Sell More on the Web: 30 Tips To Increase Conversion Rates For An Ecommerce Site" will give you several ideas to improve your conversion rate.

5. Manage customers when they are about to abandon their shopping carts. By the time an organization has got a customer into its site shopping cart, they have done the hard work and need to close out with losing them at this last hurdle. Assuming the payment checkout experience has been designed to be a smooth and painless one, one extra step to be taken is to offer direct incentives if a customer still wants to abandon his or her purchase-this may be a further price decrease or more benefits or features (or even additional product or service).

6. Provide incentives to register (and come back). Even the most established web sites are struggling with increasing their goal of building a large pool of repeat customers. On average, it is estimated that 95-97% percent of those who visit sites on average never return, even when they have paid.  To prevent this, provide as much incentive as possible for customers to register so that future emails and alerts can be sent to visit the site again.

Summary

Ultimately, any businesses aiming to succeed online must rise above their resource constraints and strive to provide quality e-service. The above 6 actions sound easy to implement (and they are) but very few organizations bother to spend the time to do so. Any organization that takes the time and makes the above changes to their web site will therefore reap considerable commercial benefits.

Will Mobile Phones Become the Dominant Channel for Bill Delivery?

 
There are now a multitude of channels available to customers to pay their bills. These channels include:

1. Print and mail (paper-based)

2. Fax

3. Email with embedded data

4. Data interchange (system-to-system)

5. Email with PDF and/or link to on-line

6. Online (customer portal)

7. Mobile (MMS; HTML; WAP; USSD)

8. Mobile via App

9. Mobile Tablet

10. Emergent technology (via cable TV etc)

 

Only print and mail on the above list existed as an option until around 30 years ago when fax arrived and 25 years ago when email came along (both of which still have quite a strong following today). Data interchange options were mainly evolved and used in the B2B rather than direct Business to customer or B2C space but again are still around today as a strong channel, supported in the main by large international software companies, who have sufficiently large installed volumes to want to protect their position in the billing market.

Web based technology has driven the greatest change in the billing space in the last 10 years or so and seen the emergence of both consumer and merchant portals (for presentment and payment) and the use of mobile technology as 3G and 4G have made the internet available to mobile phones.

 
Even though each of these channels presents a new and perhaps better and more convenient choice to a given customer (and are often presented as the channel to replace earlier channel choices) in reality, they are often just additional options. In other words, consumers have shown time and time again that they like the extra choice but do not necessarily want to be driven too quickly to only one channel (however “efficient and effective” it is presented to be).
 
The implication of customers wanting lots of channel choice to both view and pay their bills is that the same bill may need to be presented and rendered possible to pay in several channels, at least for now.
 
Today’s challenges
Some technology experts are starting to say that customers will be move rapidly away from e-billing to m-billing (m for mobile of course) in the next few years. Modern mobiles can certainly handle very complex tasks today - just look at the hundred of thousands of Apps available for all different platforms. These Apps can do complex tasks, even generating bills “on-the-fly”. A mobile can also handle a simple task such as bill presentment with ease today – in some cases on quite a detailed basis (even though reading it may present quite a challenge!). However, viewing a PDF bill attachment on a mobile (as opposed to a tablet) is often a long scrolling exercise, making it impractical in most cases. There is a solution to this but it needs the biller to solve the problem of displaying their bills in more flexible ways according to the kind of mobile platform to which it is being delivered. In this way, a customer can see a simple version of the way and then “drill into the detail” as they wish when they want to see itemisation. 

However, perhaps all of this is a false dilemma. In the final analysis, customers do not care if a bill is delivered to their computer, their tablet or their mobile (or even all three). In fact, many want to see it delivered in as many ways as possible to allow maximum flexibility, including by email or by PDF attachment and even in the physical mail or fax on some occasions. This multi-channel approach is therefore a customer centric approach. The challenge for billers then is how to provide as many of these channels as possible at the lowest coat possible. In the end there is only one solution to this –use a full digital bill presentment and payment portal such as PaySwyft for example. This not only means that a bill can be sent in all 9 of the current channels above but means that a biller would be well-placed to take advantage of the new emergent technologies that will come along as in the near future.

Ten Ways to Accelerate Cash flow

In today’s tough economic climate all businesses need to pay even more close attention to ensure that cash due from customers flows in as quickly and smoothly as possible. What follows is ten key ways that cash-flow can be accelerated:

1. Send invoice as soon as possible after a product is supplied or a service is rendered, because every day you are late is at least one more day your customer will wait to pay-terms only start once they receive your bill. If it takes a week to get the bills out, on average, that’s a week’s worth of cash-flow. Also, follow up on major invoices to ensure the client has received the invoice. Invoices can often be delayed by an internal authorisation process, or just going astray.

2. Clear and professional looking invoices get taken more seriously. Make sure that they therefore contain all the information such as the correct entity name, right address etc with clear ways to pay listed.

3. Set fair and appropriate credit terms and communicate these clearly with a ‘due date’ very visible on the invoice. You may even want to set the payment expectations of new customers with a specific welcome letter.

4. Deposit all payments made immediately (especially when these are cheques or cash). The more these can get into a bank account quickly the better.

5. Offer several payment methods not just one or two -customers should never have an excuse for late payment related to your lack of convenient payment options-all customers today (small and large) need to be given choices.

6. Offer early payment discounts so long as it doesn’t swallow up all the profit. If customers are struggling, the sooner you provide the facility to partially pay, the sooner the debt is paid. If a customer exceeds their terms, you can offer cash on delivery terms until the account is back on track.

7. In order to remind customers when to pay, you need a system to let you know when they are due. A series of email/SMS messages, depending upon the time overdue with relevant wording, is often very useful.

8. A great target or key performance indicator for accounts receivables is ‘accounts receivable days’. This is not to be confused with the terms you offer customers. The ‘accounts receivable days’ is the average number of days that all customers are taking to pay you. Of course you want this to be on terms or better.

9. Use you improved cash flow practices to reduce your overdraft or “float” thus saving interest costs or giving you extra cash to spend elsewhere.

10. Aim to do as much of the above as possible online at a flexible and versatile bill presentment and payment web site (such as payswyft.com). Not only will clearly presented electronic bills arrive much quicker but research suggests that customers pay 35% quicker when they receive an online bill and can pay it online on the same web site.

Sites like PaySwyft also automatically bundle many of the above steps in the technology or give an organisation a range of options to help accelerate cash-flow.

Ultimately, if you can entrench these steps into your payment strategy and operational practices you will find accounts receivables less of a hassle, resulting in greatly improved cash-flow for your business.

Finding and Using the Right Invoice Template

If you type “free invoice template” into the Google search engine you get about 40 million returned results. Clearly then there is a lot of interest in trying to find and use an effective invoice process (and ideally a cheap or free one) so in this article we will explore what is available and what options appear to deliver the greatest benefits.

Whether you are a one person business or a giant multi-national, getting an invoice to a customer is the beginning a long process in getting paid. Hence, it is important to get this invoice to a customer quickly (once a product has been supplied or service rendered) but it is equally critical that it is clear and encourages the earliest possible payment.

Fifty years ago, hand-written or simply typed invoices sent through the mail were the norm. Today, we have many other options (although these old-fashioned practices have far from disappeared completely). Perhaps the simplest of these is to use an pre-designed template and popular desk top applications like word for windows and an excel spreadsheet package both have several design alternatives to choose from. In both cases these provide a well-designed looking invoices and provide prompt space for particular customer names, address details, product or services provided and the cost involved. They even allow space for logos to be added if desired. 

Outside the standard templates of desktop applications, there are many relatively cheap and even free software packages which allow invoices to be generated. These work in similar ways to desktop templates but may also generate sequential numbers and allow better storage and retrieval (and avoid the mistake prone process of overtyping the last invoice that was typed).

In both of the above alternatives, the problem is that despite the fact that the invoice can be sent by email as an attachment is still only received as a piece of paper (which the customer can do little with when they receive it and may only print in order to later pay in any case).  As a result, perhaps the best alternative of all is to use a bill presentment service which renders the invoice as a full digital bill. This allows individuals to click on an electronic bill at a web site (ideally rendered in graphical form as they would expect to see it as it appears when posted) and either reveal more bill detail, store it, end it on to someone else to review and most importantly to pay it.

For example, at the PaySwyft web site (www.payswyft.com) sole traders, partnership and companies or all sizes can click on the “free invoice template link” on the home page and use the system to generate an invoice at no cost whatsoever. Like the options described above it provides an clear and clean process for entering invoice details but this is rendered as a full digital bill, meaning that it can be clicked on dynamically to see as much detail as has been entered and perhaps more importantly, it can be paid from within the browser, also electronically. The added bonus here is that the single invoice can then be used (when saved) as a template to generate future invoices much more quickly (because a logo has been added and the design of the overall invoice is relatively set).

What is the difference between “push” versus “pull” on-line billing?

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).