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The Green Sheet Online Edition

February 08, 2010 • Issue 10:02:01

Going alternative

By Caroline Hometh

There's been a lot of press lately on alternative payments - most generated by companies that focus on this rapidly emerging trend. The reality is that alternative payment transactions account for a very small percentage of transactions, and there are challenges associated with them.

Merchants complain that some alternative payment transactions are difficult to execute because the settlement process affects how they ship products. There is a significant amount of paperwork involved with certain types of payments, and back-end operations can be altered significantly. At times, this translates to delays in shipments and customer dissatisfaction.

Despite these obstacles, merchants are clamoring for alternative payments and are seeking providers to process them.

Nontraditional payments

For the purposes of this discussion, alternative payments are those that are nontraditional to a given merchant's country of origin (see sidebar accompanying this article). Traditional cards, such as Visa Inc.-, MasterCard Worldwide- and American Express Corp.-branded cards, are used worldwide and are not country-specific.

On the other hand, Discover Financial Services-branded cards are heavily used in the United States and are only now being offered in a couple of other countries through Discover's relationship with JCB International Co. Ltd. That makes Discover card transactions an alternative payment type outside of the United States.

A popular type of transaction is the bank transfer. It occurs in real time so merchants get paid faster and can ship products quicker. Most European countries offer bank transfers, and many countries also have their own credit cards. For example, France has Carte Bleue, Germany has Giropay, Italy uses CartaSí and Sweden has Nordea.

Alternative benefits

Alternative payments are important in the e-commerce sphere for many reasons. Because of worldwide acceptance and ease of online shipping, the Internet has opened an entire new channel of service with alternative payment processing.

Furthermore, marketers are looking for every possible way to not lose sales. If an online consumer shops in his or her chosen currency, clicks over to checkout and doesn't have the option of using a specific card or bank transfer, the consumer will likely abandon the sale.

Additionally, alternative payments also represent savings in fees. Fees normally associated with traditional credit cards are not applied to alternative payment methods.

Merchant level salespeople (MLSs) are always searching for ways to retain merchants and expand portfolios. By being able to offer more types of payments to merchants whose customers prefer country-specific payment types, MLSs will increase their competitive edge and broaden their selling footprint.

Picking the right provider

But which alternative payments should you offer? The answer is determined by the provider you partner with and how well your partner can meet your merch-ants' needs.

Your provider must offer a comprehensive list of country-specific payment methods and a single technical interface to all relevant forms of payment, with a single set of reporting on the back-end. Whether your merchant has customers in Italy, Great Britain or Japan, your provider must be able to advise you on exactly which payment type matches your merchants' needs.

Internet Protocol address location tools are very important so you can recognize where your merchants' customers are coming from and default to the payment type normally offered in that country. Your back-end systems may have to be altered for these payment types.

For digital merchants, it won't matter. But, for physical-goods merchants, the back-end operations will be affected. For this reason, it is imperative that you have an experienced and capable alternative payment provider to efficiently facilitate processing.

Equally important is technical functionality. For example, there are industry-specific features that your provider must possess, such as auto top-up, billing-on-demand and recurring billing.

Auto top-up provides a safe and secure way to automatically top-up credit whenever the balance falls below a certain level. Billing-on-demand enables merchants to automatically debit transactions from the customer's account without requiring the customer to authorize each transaction separately. Recurring billing allows merchants to automatically bill customers' bank accounts, credit and debit cards, or electronic wallets on a regular basis.

All merchants welcome

All types of retailers work well with and could benefit from alternative payment types; the challenge lies in selling them. Country-specific alternative payments can be confusing, can require a substantial amount of work to set up and can delay the merchant account set up. I do not recommend selling alternative payments cold. You will make more money and sell faster with traditional payment types.

Alternative methods are complex solutions - and the right provider comes into play. It is critical to have an experienced and knowledgeable provider helm your alternative payment vehicle.

For your existing merchant customers, selling alternative payments can be tricky. You have to know your merchants well, evaluate their needs and keep in mind that if you don't give them the alternative option, you could lose them to someone who does.

Offering alternative payment methods establishes capability and credibility. Merchants are delighted to hear you have it, but they may never use it. To offer or not to offer - that is the question. But remember that checking the alternative payment box can mean the difference between a handshake and a wave goodbye. end of article

Carrie (Bardeen) Hometh is a respected industry professional in the international marketplace with over two decades of global experience and expertise. She currently serves as Senior Vice President of Sales and Marketing for Payvision, a leading international payment solutions provider that offers a comprehensive suite of products and services that include global acquiring, multicurrency processing and alternative payment solutions. She can be contacted at c.hometh@payvision.com.

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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