Is Business Better with Online Payments?
March 11, 2015
We certainly think so! But it's a question that every business has to answer for itself.
From my experience, business owners in the class based industry are split into three distinct groups. One group of business owners can’t even imagine doing business without the full range of online payment options. Another third sees the benefits, but limits customer options to ensure profitability and avoid fees. And the last group? Well they don’t see the benefit at all- it adds to expenses and customers are going to show up for class anyway, so paying in person is no big deal.
Understanding the Debate
As primarily an online business ourselves, the overwhelming majority of our own business transactions happen online. We love it and we recommend it. It certainly saves us time making deposits and tracking down accounts that are past due. But this is about you and your business, so let's take a look at all sides of the issue. First, we will establish a framework for what we mean by online payments.
Types of Online Payments
Online payments are considered Card Not Present form of payment. Why? Because the card and the person the card is issued to are not directly in front of you. That carries a different level of risk than an in-person transaction where you (the business) can verify ownership of the card by checking for an ID. However, there are also different kinds of Card Not Present transactions.
Shopping Cart Transactions. These are one-time transactions that happen through a checkout style terminal for the full value of a purchase or enrollment where the customer maintains full control over the transaction (they what is being purchased and when). Examples in iClassPro include the enrollment shopping cart and the 'Make a Payment' page in the parent portal.
Partial Payments. These can be considered deposits or down payments on a larger bill that will become due in full on a future date. In this arrangement, the customer maintains only partial control over the transaction because the business usually dictates how much of the transaction must be paid at a time. Examples of this in iClassPro are the deposit amounts for camps and parties as well as the option to allow partial payments from the 'Make a Payment' page in the parent portal.
Automatic Payments. Unlike the previous types of payments, automatic payments put the business in control of the transaction-- typically through a contractual agreement where the customer agrees to provide payment on a scheduled basis and that customer provides a method of payment (usually a credit card or bank account number) which is then stored on file with the business' gateway. In iClassPro, this option is called autopay.
Understanding the Players
When you process online payments, there is a whole string of players to consider. At a minimum, money travels through the hands of multiple entities, some of which come at a price.
First, there is the customer who initiates the transaction from his or her bank or credit card account. From there, the payment must travel through a gateway that verifies whether or not the provided payment information is valid and prevents duplicate transactions from taking place if a customer accidentally double clicks. Next, the money is batched through a merchant account. Merchant services do the heavy lifting- moving money from one institution to another and reporting any problems with transactions back to the gateway. They also ensure that the transaction follows the guidelines set by the governing credit card companies and financial institutions. Then finally, the money is deposited into the business’ bank account, potentially several days after the transaction was initiated.
For some, this system seems overly complicated, but it is all in the interest of security. If there’s one area of business where security is absolutely vital, it’s finance. And that’s why processing online payments can involve so many fees- to pay for an arsenal of security measures that protect your business and your customers from fraud.
For more information on the steps and laws of credit card processing, click here!
Understanding the Decision Makers
Now that we have established a framework, let’s examine the different viewpoints on the issue. From the business' decision to the customer's buying decision, there are five general viewpoints in this debate.
Group One- “Online Fanatics”
This group is 100% on board with providing online payment options. Why? Because that means less hours in the office, fewer office staff needed on the payroll and of course, convenience for busy customers. All of that means fewer operating costs, taxes and late payment excuses for management to handle on top of the every-day hassles of owning a business.
Group Two- “Cautious Adopters”
This group of business owners has come to the conclusion that online payments is a necessary part of doing business, but they are hesitant to take the plunge to full online payment status. Perhaps they are testing the waters because they don’t trust the system, have doubts as to the profitability of online transactions for their business or maybe they have had a bad experience in the past. They want to keep some form of control over the payment system and they do this by limiting customer options- such as only allowing store payment information for automatic payments.
Group Three- “Naysayers”
These business owners just say no and there are a lot of reasons why that could be. They may not think the majority of their customers want online payment options. They may not trust that the system is secure or they aren't sure how it works. They may not think that the rates they have been quoted in the past are affordable or reasonable. They might want the maximum amount of control over any transactions and they do so by asking customers to pay in person.
Group Four- “Joe Customer”
In the technology age, Joe Customer is as close to king as it gets (at least in business). Customers like Joe talk about your business online with friends and families over chats, email, Skype and social networks. They share your site and recommend you on forums and blogs. They see ads in magazines, newspapers or on other websites and then go online to Google the competition, read reviews and shop around. The internet has become a part of the daily life of millions of customers around the globe. From smart phones, tablets, Macs, PC’s and even televisions-- customers like Joe constantly spend time and money online. In fact, a large portion of them expect the convenience of this option when they do business.
Group Five- "Joseph A. Customer"
Joseph A. Customer, unlike Joe Customer, is more traditional. While customers like Joseph A. Customer are not all that common these days, he's not alone. They don't like paying over the internet because they don't trust that a website is secure. They like to deal with people face to face. They are insistent about it and they will go out of their way to do it.
Understanding the Real Question
Were you able to identify with one of the groups above as a business? Do more of your customers sound like Joe than Joseph? That means you’re ready to talk about why you’re really reading this article.
Is your business ready to offer online payments?
At the end of the day, you make the decision or your customers make it for you. Try starting a conversation. Send out a survey. Find out if online payments is make or break issue for your business relationship. If you’re worried about cost, ask them if they would be influenced one way or the other by a small tuition increase across the board to help cover processing fees. If your customers are on board but you're not sure you understand the tech or the system well enough to dive in, it may be time to consult with a professional or another business owner who is already using online payments. Ask them what initial customer reactions were, what problems they may have run into getting it set up and whether or not it has improved their operations.
For many businesses, the technology for online payments is still new territory. Feeling a little fear, nervousness or distrust is only natural. But what do we tell students who are letting fear stand in the way? The only way to deal with fear is to overcome it. Take action. Spend less time worrying and more time doing something about it.
Online payments aren’t going to decrease in popularity any time soon. While you certainly aren't required to jump on board, it may also mean missing an opportunity to achieve a higher level of success for your business.