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Improving the number and type of payment options available to your customers is a smart strategic decision to grow your business. While credit/debit card acceptance is an absolute requirement for any merchant, increasing the number of payment options available to your customers has a dramatic effect on sales. The chart below indicates a 12 percent lift in sales conversions, which equates to a 20 percent lift in sales, by offering four or more payment options to your customers. This analysis is based on online sales, but appears applicable in all markets.
Continuing this discussion based on online sales, one must acknowledge that credit/debit cards are the foundation and baseline for all sales. To move beyond the competition, a merchant should implement some, or all, of the options indicated in the chart below. Bear in mind, a Gallup research survey indicated that 20 percent of households do not have credit cards. Certain demographic segments like teenagers do not have easy access to credit cards and 26% of online shoppers are concerned about their credit card information being stolen and therefore will not disclose it.
Gift cards and online gift certificates are the second most commonly accepted payment method. Gift certificates are currently used by less than half (46%) of companies selling online, though among online retailers that number expands to 78%. Offering and accepting gift certificates can increase online sales by 8% or more.
Accepting checks online, E-Checks, can expand sales by reaching out to households and shoppers who do not have credit cards or do not want to provide credit card information online. Electronic checks can include a guaranteed payment option where payment risk is passed to a third party authorizer. Also, unlike credit cards, merchants can wait for payment settlement with electronic checks before shipping goods to customers. In 2004, online electronic check volume grew by 40%, reaching 967 million transactions. Offering electronic checks can increase sales by 3 to 8%.
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Non-Card options are alternative payment types such as Bill Me Later, PayPal and CheckFree. They are an increasingly popular payment choice among customers. Some potential customers are averse to using credit card numbers online or simply find an account with Bill Me Later or PayPal more convenient. Services such as Bill Me Later work like a credit card (except that there is no plastic involved), allowing the shopper to pay in full or in installments over time. One merchant experienced a 35% increase in sales after implementing Bill Me later and average order value increased by 10%. PayPal has 78 million subscribers worldwide, and growing.
Private Label Cards allow merchants to brand their own credit/debit cards. This can be linked to a loyalty program. The merchant gains greater visibility with the customer and the community while garnering additional profitability for the cards usage.
Invoicing and instant credit (extending credit just for the value of the purchase via real-time credit evaluation), can address potential customers who do not have credit cards, are afraid to use credit cards online, or do not have a credit card at hand when making a last minute or impulse buy online.
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All of these options could add to sales and net profitability for the merchant. A merchant, if they are not currently offering these options, should consider there inclusion as a strategic and tactical maneuver to garner and maintain a larger, more satisfied, customer-base.
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©2009 Terminal Velocity Processing, Terminal Velocity International
all rights reserved
Terminal Velocity Processing, Inc is a registered ISO/MSP with Visa and MasterCard
through its Principal Bank Member, First Citizens Bank & Trust (FCB), Agoura Hills, CA (818) 735-9696
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