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Evaluate Alternative Online Payment Methods

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Credit cards still reign as the leading method of payment for online purchases, but other payment options are available. Your product and your customers' buying preferences will influence which payment methods you accept. In other countries, credit cards are not as pervasive, so you may want to consider offering alternatives for your international customers. Offering multiple payment options on your Web site, if you can afford it and maintain your profit margin, is a means to increase sales by increasing customer convenience and confidence. Many alternative methods are better suited to micropayments, charges less than $1, because the processing costs are often lower and credit card merchant account fees don't apply.

Providers that offer alternative payment methods, such as charging directly to a phone bill, electronic funds transfers (EFTs), and electronic checks, handle these transactions through a secure server or a payment gateway that encrypts the information, making these methods a safe means for consumers to purchase goods. With an EFT, phone bill charges, and debit cards, funds are verified before the purchase is complete, reducing the risk of fraud and insufficient funds returns.

Offer Your Customers the Option of Charging Purchases to a Phone Bill
eCharge offers an alternative payment method by allowing Internet users to "charge" purchases to their local phone bill. With eCharge, items priced low as $1 can be processed. Low charges make this method suitable for purchasing services such as memberships, subscriptions, and digital goods.

To enable this payment method, the merchant must subscribe to the billing service and provide a link to eCharge on the merchant Web site. Consumers must download free software to their computers to use the service. Then eCharge connects directly from the customer's modem to a secure server that automatically captures billing information. eCharge provides the customer with a billing service that is familiar, in the form of a local phone bill, and uses the same dial-up process as the Internet connection.

There are no monthly fees, but a $50 setup fee is required, and eCharge imposes a per-transaction fee of 8.25%. Consumers pay a fee of $0.50 for transactions less than $10; $1 for transactions from $10 to $35; and $2 for transactions of $35 or more. Merchants may elect to absorb the consumer fee.

Accept Payment with EFTs and Electronic Checks
There is a fine distinction between EFTs and electronic checks. An EFT deducts payment from a personal or business bank account, and funds are verified before an EFT is approved. A merchant account is not required, but in most cases you'll need an EFT vendor.

An e-check generates a type of paper check that is then deposited into the merchant's checking account and goes through the process a standard check would. Like a paper check, an e-check may be returned for insufficient funds, whereas an EFT is verified before the sale is completed. E-checks don't usually require anything more than a standard checking account to be processed. This is an excellent option for business-to-business transactions.

An EFT is generally a faster, more reliable method of payment than an e-check. Funds for an EFT are automatically verified and immediately transferred to your account. Using an e-check still produces a type of bank draft, whether paper or electronic, that follows the same process a standard check would. If funds are not available in the checking account to cover the e-check, the merchant will need to go through the same collection steps required to recover payment on a standard check. Bank overdraft fees and penalties for insufficient funds may be charged to the consumer.

iTransact.com has two products that allow payment through a checking account. To accept e-check and EFT payments using this system, neither you nor your customers require special software or hardware. Coding is integrated into your Web site that effectively links your customers to a secure server. There they provide the necessary bank account information, and the EFT or e-check is initiated. The merchant and customer receive immediate verification of the order, and the merchant receives the customer's name, address, phone number, e-mail address, items ordered, and the order total. Once the service is in place, EFTs may also be completed by phone or fax. You, the merchant, simply gather all the information that is on your customer's check and then enter this information into your EFT software, whether it operates on your PC, POS terminal, or automatically via a Web-based application.

Many MAPs, which process credit card payments, offer some form of EFT or e-check payment also. Charge.com is one such MAP, offering e-check acceptance setup free when you acquire a merchant account through them.

Offer a Monthly Payment Option
Qpass.com provides consumers with a monthly bill for digital products purchased online. Qpass works with merchants in two ways. A merchant vending digital content, such as software, subscriptions, music, etc., joins the Qpass network. Registered shoppers can then visit a member merchant and make purchases, which are stored on their Qpass account. Each month, Qpass bills the customer's credit card, and the merchant receives payment. This system is ideal for micropayments or pay-per-use products.

InterCoin is a similar service, currently in beta testing, enabling registered account holders to accumulate small charges from participating merchants. On a monthly basis, InterCoin will bill these charges to the account holder's credit card or deduct them electronically from a checking account or digital wallet. One big drawback of this payment method is that the merchant won't receive payment from InterCoin until the consumer pays for the transactions.

Offer One-Click Shopping
Qpass can provide members with one-click shopping on merchant sites outside the Qpass network. When a member visits a merchant who is not part of the network, Qpass provides PowerWallet technology, which allows customers to instantly fill out the forms required to make purchases. PowerWallet then stores the information, and the next time a customer purchases from that online merchant, he or she need only click one button. The merchant does not need to add anything to his or her site in order for Qpass customers to use this feature.

The digital wallet is a new e-commerce service that facilitates one-click shopping. Microsoft Passport helps users reduce the number of steps necessary to purchase items online by allowing customers to create a single sign-in name and password to use at participating Web sites. Microsoft claims easy integration of the Passport wallet service with merchant Web sites through a link on the purchase pages that automatically retrieves the customer purchasing data from the Passport server. Merchants may extensively customize Passport so that customers purchase goods and services directly from the merchant site. Passport is currently available on selected Microsoft sites, and Microsoft expects to make this service available to third parties in early 2000.

Offer Prepaid Shopping
RocketCash is an online shopping service that allows parents to create an account that their children can access to purchase goods from RocketCash-affiliated merchants. Parents may fund an account using a credit card number with a spending cap imposed or by check or money order. Parents can also place other restrictions on the account, such as the time of day a child can access it and the sites the child may visit.

RocketCash.com lets customers shop directly at the merchants' actual Web sites, which enables access to complete product offerings, photos, reviews, merchandising, special promotions, and sales. And there's virtually no difference between a RocketCash customer and a customer who visits your site and pays with his or her own credit card. RocketCash uses proprietary technology; merchants need only register as a RocketCash member in order to offer this service to their customers.

Accept Smart Cards
In Europe, smart cards are quite common. One such card, popular in the Netherlands, is Chipper, although it is complex to use. Another, popular in Belgium, is Proton. Bull features smart cards for international markets.

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Last updated: Apr 20, 2000




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