A Business Necessity

05/04/2012 20:27

As electronic transactions continue to grow, it has become increasingly difficult for businesses to survive as cash-only entities. The local diner, car wash or ice cream store might be able to get away with it, simply because they deal in small amounts and have a high volume of customers.

Shoppers understand this. They understand that when they visit these establishments they must bring cash. But when they are spending more money, especially in retail stores, they expect more options or services. 

Why do Merchants still Eschew Plastic?

The American consumer prefers debit and credit cards to cash and checks. Plastic has been the number one payment option in the U.S. since 2003. Over the last few years, electronic payments have increased their lead. Six out of every ten retail transactions are now completed with a debit or credit card. Only about thirty percent of customers pay in cash. And on the Internet, electronic payments are the only way to stay in business...it is now more or less a cashless society.

We have come to a point where most businesses simply cannot compete if they refuse to process a credit/debit card payment. But it isn't all bad. There are number of proven benefits.

Customer Loyalty

We touched on this a bit earlier. Shoppers expect certain businesses to cater to them when it comes to customer service. They expect that employees will be pleasant and helpful and that extends to the register. The good news is that studies have shown that customers spend more when they use plastic than they do when they use cash or a check-the average credit card purchase is about twenty dollars more.

Merchants also report significant growth in their customer base when they start accepting plastic. There are several reasons for this. For one thing, Americans have a penchant for spending money they don't have. It might be due to instant gratification or conspicuous consumption, but whatever the reason, it is a reality of the marketplace. The increase in customers and larger average purchases is often more than enough to outset merchant service fees and then some.

Merchant Service Fees

Every merchant that accepts plastic must pay every time they swipe a card. However, these fees differ widely from industry to industry. Comparing a company that does business with one that accepts payments in person is a classic error.

Merchant service providers are often bankers, and like all bankers they consider risk. In fact, it is their most pressing concern. A company that accepts payments on the Internet never actually comes in contact with the cardholder, which means the card could be stolen. If the payment is unauthorized, the real cardholder will request something called a chargeback. A chargeback occurs when a customer asks for a refund. Chargebacks are quite common on the Internet, since it is much easier to use a stolen credit/debit card online than it is to use it in person.

The traditional merchant has several ways of ensuring that the person who hands over a card is who they say they are. He can ask for ID; he can check to see if the signature on the receipt and the back of the card match; he can even phone the bank to verify the information. As a result, the chargeback fee is rarely assessed to regular brick and mortar stores. Not surprisingly, their fees are much, much lower than online merchants.

Discount rates of around one percent are fairly common for traditional merchants who have respectable business and credit histories, which is why it makes sense to apply for a merchant service account. The fees are not nearly as high as most applicants assume, especially if they accept payments in person.

Without a doubt, a merchant account is an essential feature of any successful contemporary business. Find the plan and provider that's right for your business now.