Some Background

A paradigm shift is occurring in the financial services marketplace that may well be as lucrative as the bankcard sales opportunities created by Visa and MasterCard in the 1980s, when structured pricing discounts for electronic settlement created the ISO industry. This sales opportunity is the Design, Sale, and Support of Web pages, and it will provide ISOs with the benefit of selling bankcard services to the physical and virtual retail worlds, and beyond.

In this story we will provide background and history, an explanation of the evolution in the marketplace, and a hands-on, how-to explanation of how to get going. We will also include contact information and pricing, so you can take advantage of this paradigm shift in your business.

I know you are thinking that this story has already been told and this opportunity, if you considered it before, was very difficult to execute. Well you are partially correct. The Green Sheet first suggested this new direction for ISOs in our September 18, 1995 issue, (95:09:02) "ISOs Can Become ISPs" (if you want to re-read that story, it is the first issue on our Web page, http://the.greensheet.com). In addition, our recent readership survey noted that in spite of the previous technical difficulties, 13.2% of ISOs nationally are involved in Web page sales, with many of them doing business with companies such as Multiplex, whom we suggested as a source back in late 1995. But that was then and this is now, and everything has changed in the last few months.

Changes in payment options on-line, changes in software design and browsers, changes in secure internet payment options, changes in the design of Web pages from simple on-line brochures to powerful E-commerce database engines, and more consumer confidence in the use of on-line services are fueling this paradigm shift. All these changes are less than a year old, and some of the software solutions are just months old.

Current Market

While the demographics of Internet users are changing every day, at the moment there are about 45 million U.S. adult users and the average age is 32. Currently 64% have a college degree and 68% are male. The median household income for an Internet user is $60,000.¹ For those ISOs who have focused any effort on Web design, it is in support of the current demographics and the businesses that are currently focused on this market, which up until very recently has been PCís, Porn, and CDs. This has been the market but it is rapidly changing due to SET (MasterCard/Visa Secure Electronic Transaction) protocol and emerging low cost Net tools.

Change is Shaping Up

The Green Sheet Survey is not the only survey to discover that ISOs are beginning to expand their Web efforts based on customer demand. Diamond Technology Partners Inc., has also recently completed a survey which finds that Senior Executives may be underestimating the power of the Internet and Web-based commerce.

In the Digital Strategies Survey of 400 executives of mid- to large-sized companies, it was found that most executives are enthusiastic about the possibility of electronic commerce but few are willing (or able) to venture into that arena anytime soon, due to a lack of knowledge of the Internet and lack of qualified resources to provide quality affordable sites.

According to Diamond Technologyís CEO, "Unfortunately, too many executives are further away from exploiting the very real business opportunities of electronic commerce than they realize. In fact, a startling number of companies in our survey didnít even have a Web site."

Even though they may be dragging their feet, executives do believe in the power of the Internet:

 
1. Forty-one percent of Diamondís Digital Strategies Survey respondents expect to be earning a significant amount of money through Internet-based initiatives by the end of 1998.

    

2. Forty percent feel strongly that the Internet will be important to their competitive position by the end of 1999.

    

3. Sixty percent expect Internet-based businesses to produce significant earnings by the end of 2000.

But, while many respondents were "talking the talk" few were "walking the walk." For example:

 
1. Due primarily to costs, 11% do not expect to have a Web site by mid-1998.

    

2. Fifty-three percent strongly agree that having strong brand identity is more critical than ever but only 25% feel they should use their Web site or Internet advertising to enhance their corporate or product image.

    

3. Twenty-six percent plan to begin direct sales on the Internet by mid 1998 but 31% of them donít have a Web site yet.²

The Old Paradigm

Since the late ë80s, ISOs have earned the majority of their income from the sale of equipment. While rebates from bankcard, debit, T&E cards, and check services have been nice, that didnít pay the bills. As more and more of the traditional retail world has become wired, point-of-sale terminal sales have become more difficult. ISOs have moved further and further away from the traditional business approach of door knocking, venturing into more risky business segments at the fringe of retail and new varieties of businesses.

While it is true that today ISOs have many more things in their bag to sell, the high income that was once available from equipment has declined significantly due to the smaller number of potential customers, competitive pressure from Mega-ISOs who are not strapped for cash, and continuing market changes such as PriceCostco. The once powerful formula of purchasing equipment in the $300-$400 range and selling it in the $1,200-$1,500 range has been dramatically changed.

The New Paradigm

Increasingly, ISOs are developing on their own or are partnering with other organizations to sell, design and provide ongoing support for Web pages. This movement is fueled by a number of marketing ideas, which are evolving due to the recent technology changes noted earlier.

The shift is first based on the idea that every business needs a Web page in the future. Next, if the Web page is delivered in an economical, simplistic and straightforward way, every business is a potential customer. In fact, even the 12% of the current business world that have a Web page can be re-sold a commerce-enabled Web site, since most early sites were simply brochures on-line.

Commerce enabled sites can be built at a cost between $300 and $400, depending on the complexity of the businessís needs, and can easily be sold in the $1,200 to $1,500 range, since do-it yourself payment wallets such as those offered by VeriFone or Microsoft, plus site server software, will cost this much or more.

Finally, although a commerce enabled site may well be a long way from a brochure site, it still doesnít get the merchant/business connected for payment settlement, in the same sense that buying or owning a point-of-sale terminal doesnít get you approved for Visa, MasterCard, American Express, or check services. The business must already have these relationships, in which case the ISO can program access to these existing relationships, or provide new ones.

The opportunity to go back and sell a Web page to an existing customer, and sell an Internet bankcard access account when you or someone else had previously sold the "physical" bankcard relationship, becomes icing on the cake.

While initially the jargon and information gathering elements of Web page sales can be a bit daunting, you just have to remember back to when programming a terminal or setting up a bankcard relationship was equally daunting, and realize that it gets easier once you know the ropes.

How To Get Started

To find out how to get started you first need to decide how much work you want to do. Some ISOs have the knowledge and resources to do much of the work themselves; however, our sense is this is much akin to building your own point-of-sale terminals.

Why not sell equipment manufactured by someone else, and concentrate on what the manufacturer canít do...SELL! The next question is, should you have more than one source for Web page sales? To this our answer is, if you sell equipment for more than one manufacturer today, then you should look to contract with more than one Web organization as well.

To get you started, we have found an organization that we believe is likely to be the VeriFone of Web Page companies, and we have negotiated what we think is a very attractive price for ISOs. This pricing structure takes advantage of the unique strengths of this organization, while also pushing them into a more "full service" role than they had first contemplated in the sale of their services. The company is CommerceWAVE Inc. http://www.commercewave.com. You will find that you have no cost to get started selling these services, provided you are willing to attend training. (Alternative training solution is available, please ask).

CommerceWAVE has developed MerchantWAVE™ (this is their product name) to squarely address retailersí needs. The product fully integrates electronic payments, Web page generation, storefront setups, and point-of-sale payment management capabilities so that they are completely seamless to users. With MerchantWAVE™, merchants have a comprehensive, easy-to-use, cost-effective solution that can have them transacting commerce on the Internet within a single day, at a most affordable price. MerchantWAVE™ gives businesses a complete, single-source Internet solution for conducting electronic commerce that is easy-to-use and maintain.

Using MerchantWAVE™, the merchant only needs access to a PC and modem to establish a commerce-enabled Web storefront. Merchants can activate their sites easily, doing some of the work themselves or having it completed for them by CommerceWAVE design staff. The productís interface is simple and straightforward. It comes with ready-to-use templates for creating electronic storefronts, and MerchantWAVE™ services are easily accessible from the administration screen, all of which already exist on the Internet, requiring no software for the merchant or you to figure out.

MerchantWAVE™ also gives users the option to easily commerce-enable their existing Web sites or create entirely new electronic storefronts on the World Wide Web.

MerchantWAVEís Key Features and Benefits

With MerchantWAVE™, setup is quick and easy using StoreFronts, CommerceWAVEís patent-pending technology. The StoreForm™ feature allows merchants to select from a variety of store templates that offer different sizes and looks. Once the StoreForm™ is chosen, the user interface guides the merchant through the process of setting up their store with products, prices, promotions, marketing assistance, and other options. Its user-controlled, forms-based management empowers merchants to manage their Web pages in lieu of having to wait for a response from a third party just to make simple changes. For example, MerchantWAVEís administrative management features are easy-to-use and very robust.

In addition to this design approach, for slightly more money CommerceWAVE custom content division will set up sites based on information provided by you from your customer.

In either sale, the merchant will be able to change and update product or site information himself or herself, and have access to other powerful CommerceWAVE capabilities, such as the on-line product supports promotion pricing that automatically activates and deactivates special promotions. Merchants also have access to accurate profiles of sales data on a daily basis so they can adjust pricing, and add or delete products at any time. Automatic payment transaction management and support for document vending are also included.

Marketing features include automatic listings with 20 leading Internet directories and search engines such as Yahoo, AltaVista, and Excite. Any merchant purchasing the product is automatically showcased in CommerceWAVEís MALLennium Internet Mall.

Web Page Pricing

Overall pricing is buy rate based, since so many ISOs prefer this approach. Each site is based on information about the business and its products or services. Products can have pictures associated with each item, which are added to the site by CommerceWAVE after initial setup.

Five product and image site in which setup is completed by CommerceWAVE. Buy rate $450.00, plus monthly hosting fee of $59.95.

This allows for the product information for up to five products and images as well as overall business information and images. The site is commerce enabled, programming is completed for the Visa/MasterCard account the merchant already has, and access to CyberCash and ChecksByNet accounts are included.

Ten product and image site in which setup is completed by CommerceWAVE.

Buy rate $650.00, plus monthly hosting fee of $59.95.

This allows for the product information for up to 10 products and images as well as overall business information and images. The site is commerce enabled, programming is completed for the Visa/MasterCard account the merchant already has, and access to CyberCash and ChecksByNet accounts are included.

Of course there is also pricing for merchants who are happy to do all the information entry for their sites themselves, and donít want to be commerce enabled. This buy rate price is $300, plus a monthly hosting fee of $59.95. There is also an option for the merchant who wants CommerceWAVE to do the site data entry and doesnít want to be commerce enabled. This buy rate price is $350, plus a monthly hosting fee of $59.95. In short, pricing is determined by who inputs the merchantís store and product information, how many products are added to the site, and if the site is commerce enabled.

Overall, you can see that the pricing has been built to address the needs of the majority of small- to medium-sized businesses, but can accommodate very large businesses, for hundreds of thousands of dollars less than complex site charges by many Web design ISPs (Internet Service Providers).

As an example of this scalability, the table above shows pricing and storage availability which is offered. It should be noted that beyond 10 products, full service (meaning CommerceWAVE personnel entering the product information for the merchant) is available. Your merchant (or you on their behalf) will enter the product information into the system. Customers who wish to have more than 10 products or services offered on-line will also be pleased that they are able to maintain their inventory information themselves, changing pricing or taking markdowns as a matter of course.

Customers wishing to add additional products to their initial package offering will fall under the MerchantWAVE™ Standard Pricing Schedule as to product costs. Note: These prices are reflective of merchant creating additional product information and digital pictures and do not reflect "full-service" pricing. Full service pricing will be available and quoted on an individual basis, dependent upon the estimated time factors, department, and product combinations.

Since the CommerceWAVE package is scalable from your smallest merchant to the largest on-line business, POS terminal level income is available for the smallest merchants and many thousands of dollars are available for very large accounts. Can you image a site capable of supporting 500 products costing less than $30K? We have seen sites over the last two years that do far less and cost the customer $200 to $300K.

Bankcard Pricing

The final pricing element is that of bankcard services (this is not part of the CommerceWAVE package). While many of you may already have the ability to offer Internet bankcard services through your current bank, we recognize that some would not. In addition, even if the banking organization you represent or the one that the merchant already has will allow the merchant to do Internet transactions, they will most certainly require another account number.

For this reason we talked to some of the banks we know and found First Bank of Beverly Hills willing to offer a 2.25% + $0.30 buy rate for Internet businesses, with a $100.00 set-up fee and no Monthly Minimum. According to First Bank of Beverly Hills this pricing is intended for accounts that do less than $25K per month and account approval will occur within 48 hours. Of course, the bank would love to have businesses above $25K but they canít guarantee 48-hour approval on larger accounts.

While you may well already have a better deal, or can put one together, this knowledge may be helpful or a fall back position for you.

While each ISO should be able to more than double these buy rates for Web page design and access, the monthly host fees can provide a residual income as well. Design, hosting and possibly new bankcard or alternative payment income all bring the potential to open new doors and revisit old ones.

Conclusion

Although 53% of consumers have used the Net to reach a decision to purchase, only 15% carried out the transaction on the Web. Less than 1% of U.S. sites are secure, and less than 3% of business Web sites are designed for actually selling products or services (commerce enabled). Web sites continue to cost too much for the average business and no one has integrated financial services into the equation, but every business still wants a site.

While today only 28% of Internet users will buy from home, it is estimated that 67% will by the year 2000. Today only 19% of business users will buy on-line, however it is estimated that 45% will by the year 2000. Global internet commerce will generate $600 billion by the year 2000 and $1.25 trillion by the year 2005, because commerce tools are NOW financially within the reach of the average retailer and the ISOs who WILL populate the business world with Web pages, the way they have point-of-sale terminals.

For more information on this story or the research data, contact The Green Sheet at (800)757-4441 or the company web pages noted throughout this article.

MerchantWAVE™ is a trademark of commerceWAVE (registration pending).

1 CyberAtlas.com, International Data Corporation, Killen & Associates, IDC Research.

2 For more information on the Digital Strategies Survey, call (312)255-5800 or http://www.diamtech.com.

Some very successful talent, from POS, credit card, and banking operate CommerceWAVE. They include sales and engineering and high-end design development such as this yearís San Diego Super Bowl Host committee site where official NFL merchandise is sold via e-commerce (www.superhost.org).

Key personnel were responsible for security and design work of the CyberCash Internet transactional product so well known today. CommerceWAVE currently participates in SET 1.0 development and is a tech partner and strategic development partner with such companies as VeriFone and ChecksByNet from CrossCheck, Inc.