Posts Tagged ‘digital payments’

The Future Really IS Now!

Monday, September 26th, 2011

I’m literally sitting on a beach in Southern Greece and the reality of the new order hit me!

For context, I’ve been truly blessed to come to this slice of heaven on earth for 35+ years.  The first time I came here, the people of this tiny village of Kyparissi – my ancestral home – had running water and electricity installed in their homes just two months before my arrival. TWO MONTHS!!  There were 3 phones in the entire village, no newspapers and not a scent of TV.  It was another world, completely disconnected from civilization, which had its benefits in hindsight.

Fast forward to today.  As I sit on the beach with my MacBook Pro, iPad and iPhone, easily connected to the world around me, it fully dawns on me.   The entire world has converged and it’s ALL about the relationships I have with my providers.   Everyone here now has a cell phone, there is Wi-Fi, and I found myself not only able to work productively more than 7,000 miles from home but still have access to the entire world, effortlessly….a far cry from my first visit.

Through the digital merchants with whom I have relationships — SF Chronicle, The Economist, Symantec, HBO, DirectTV (both directly and through SlingBox), YouSendIt, Vimeo, WordsHD, Facebook, Sports Ilustrated, Netflix (dang, not quite, as they don’t have global coverage as yet), IM and Yammer — it’s as though I’ve been teleported here and haven’t skipped a beat.  The only differences are the language spoken and the fantastic food.

I’m a captive audience of one; open to cross-marketing, campaigns and promotions, if these merchants only knew I was a customer across them all.  Could there be an offer from SI that may keep me from canceling my HBO subscription, now that Entourage is over forever?

It is all, candidly, refreshing but also a bit saddening, as there is truly ‘no escape’ any longer.  But with the media always clamoring about ‘the future’, I realized the future is NOW!  The Internet and technology, leveraging our digital merchant friends, have transformed the world into a village…thankfully, with running water and electricity.

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Posted by Andy Eliopoulos in Industry News, Just for Fun, Marketing, Marketing Fury | No Comments »

Payment Ecosystem Myths – Part 1

Monday, November 29th, 2010

Running a digital business is incredibly complicated. In addition to figuring out how to get people to pay for your product, you have to deal with the complexity of accepting their payments.

When a company starts out and is testing its market viability, it doesn’t make sense to build unnecessary infrastructure. Many companies choose the easiest solution to get started, such as PayPal or Authorize.net, and worry about scale issues once they encounter them.

The downside of this approach is that companies are in the unfortunate situation of having to learn the ins-and-outs of the online payments ecosystem while experiencing the pain associated with scale issues. The wrong payments choices can put a company in jeopardy once it starts to gain traction.  We regularly encounter companies at just this point. While we’re happy to help, our goal is to get as much information around best practices to the online community as possible.

To that end, we hear several common misconceptions around accepting payments online and thought we could devote 2-3 blog posts to this issue.

“It’s too difficult to be the Merchant of Record” Being the merchant of record is more difficult than passing that responsibility on to another party. However, companies also give up many of the levers that will drive their future success, such as:

  • Customer Data – it is much harder to know who is actually purchasing your product, making it more difficult to understand what your customers want in the product or service offering. Also, depending on the agreement, companies may not be able to take their customer data with them when changing payment providers.
  • Metrics – without key data about purchases and billing, it is hard to determine when the customer purchasing experience is not working as smoothly as it could.
  • Billing Descriptor – this allows your customers to see your company and product on their credit card statement, limiting chargebacks and keeping your brand in front of good customers.
  • Marketing – companies may be limited in their ability to reach out to their good customers, both for promotions and for billing events.
  • Recourse – companies that are not merchant of record can be shut down at any time and for any reason by their payment provider. This is a dangerous way to run a business.

So what does it take to be merchant of record? Not as much as companies think… The biggest differences are the relationship with a payment processor and managing chargebacks to keep below the 1% (of transactions) limit imposed by the card networks.

“You can’t fight chargebacks on digital goods” This myth has persisted for quite a while, despite the best attempts to eradicate it.  This used to be the case, but many companies and groups (besides Vindicia), have fought this misconception with the card networks, payment processors and issuing banks. The truth of the matter is that chargebacks for digital goods face the same regulations as those on tangible goods. The biggest reason for this myth is showing proof of delivery. For digital goods merchants this takes the form of showing logins, engagement with the product, and purchase history – all are easily captured during the course of business and can be used as proof.

The exception to this rule is chargebacks on PayPal transactions. They are making progress and we are all working towards this goal, but they still don’t allow merchants to challenge chargebacks for digital goods.

Read about more payment myths in part 2 of this series.

Sanjay SarathyTags: , , ,
Posted by Sanjay Sarathy in Best Practices, Marketing Fury, Payments 101.201.301 | 2 Comments »

Customer Retention – the little stuff matters

Wednesday, September 8th, 2010

The three tenets of our CashBox solution are 1) to increase customer acquisition, 2) maximize customer retention, and 3) enable operational excellence for online merchants that sell digital goods & services to consumers and small business (SMB).

Acquisition is straightforward – allow consumers to choose the right product / plan at the right price in the correct language and currency, and to pay in their payment method of choice.

Operational excellence around billing and customer information is also obvious – securely store all sensitive data while managing and nurturing the overall customer relationship (PCI DSS & SOX are methods of enforcing parts of this).

Where the waters get a bit murky for some folks is customer retention…

The concept is simple. If a transaction fails, try it again, and again, and again. However, retention involves multiple moving parts, so every little detail matters and the compound effect of many small tweaks can be quite large. Some factors that make an impact on retention include:

  • Failure type
  • System availability
  • Transaction type (one-time, subscription, etc)
  • Time since last billing
  • Time between retries
  • Number of retries
  • Payment processor used
  • Transaction routing (# of stops along the way)

Many of these factors are specific to the business model used (Time between billings, transaction type) and some are the result of merchant preference (time between retries, number of retries). Yet others are system related (payment processor, transaction routing, system availability). While the first two areas can experience continual improvement with testing and optimization, the system related issues are *somewhat*out of control of the merchant. The *somewhat* refers to the fact that merchants have a choice of business partners.

Let’s take a closer look at the three system-related factors listed and how we address them.

  • System availability
    • The uptime of connections to the payment processor from the gateway, and the connection from the payment processor to the Interchange.
    • Vindicia: Part of our solution to this problem is a built-in gateway in order to eliminate uptime issues between the billing system and the payment processor. We also have hardware directly in the datacenters of certain partners with direct connections to further reduce any connectivity issues. As a final step, if the payment processor’s connection is down, we automatically queue the transactions for retry.
  • Transaction Routing
    • The number of systems involved in submitting a transaction makes a big difference. The typical flow would involve:
      • Creating a transaction in the billing system
      • Passing the transaction to a gateway
      • Submitting the transaction to a payment processor
      • Receiving information from the card network interchange
      • Capturing the transaction (or other actions, depending on processor response)
    • Vindicia: As mentioned above, we have combined the billing system and gateway (first three steps above) for more control over the transaction flow and greater payment success rates. This also gives more control over the retry logic by directly interpreting error codes from the payment processors into different retry flows. Billing companies & in-house systems that have not directly integrated to payment processors cannot compete with our results.

I’ll save descriptions of the other factors for another post. Optimizing customer retention is goal with constantly moving goalposts. When embarking down the path, merchants have a choice of either becoming experts at payment networks and card retry logic or choosing a partner that is already an established leader in the space.

Jeremy NusserTags: , , , , , , , ,
Posted by Jeremy Nusser in Best Practices, Data Geek, Marketing Fury, Payments 101.201.301 | 1 Comment »

Now Announcing … “Refunds”??

Friday, June 11th, 2010

Building business-critical software is an interesting process. We must understand the core requirements of our prospects and clients, find which additional features will serve the largest number of clients, and predict future requirements. However, no matter how good you are at this process, no software package will meet 100% of every client’s needs. A good sales team must make certain that prospective clients understand where any gaps may lie, and an effective services team must be creative in proposing workable solutions to close those gaps. At the end of the day, however, you must have a product that services the vast majority of feature/function requirements as defined by your market.

I recently saw this announcement from one of our competitors:

http://blog.zuora.com/zblog/2010/06/zuoras-june-10-release-major-new-functionality-allows-zcustomers-to-accurately-track-payment-operati.html

I’m not sure how the services team at Zuora has been working around this for so long.  Refunds are a basic part of being able to accept credit card payments.  But I have to congratulate them on working around such a gap.

It does beg the question: what else are they working around?

Doug SmithTags: , ,
Posted by Doug Smith in Client Services | No Comments »

Payment Method Breakdown for Digital Commerce

Tuesday, May 18th, 2010

Many of the questions we get asked about online billing are focused on how prevalent certain payment methods are and which ones our merchants should offer for their customers.

As our CEO discussed in his last webinar (Innovation in Business Models), the overall breakdown for payments by type across all ecommerce is summarized in the chart below with information from Javelin Research.

The 29% labeled “other” consists of everything from bank transfers (ACH / ECP), PayPal, mobile SMS billing and additional alternative payment methods such as BillMeLater. As this breakdown is measured across all ecommerce, the results are skewed towards internet retailers such as Amazon.com, Ticketmaster and airlines. For digital commerce (merchants only offering digital goods and services and driving revenue with subscriptions, virtual goods or virtual currencies), the results are even more biased towards payment cards. Also, the mix of alternative payments will be different with the most common ones being prepaid cards, PayPal, and SMS billing.

However, not all payment card brands are created equal – while we were digging through the mountains of data handled by CashBox recently, we found a nice high-level summary for the breakdown of the payment cards brands (credit & debit) that passed through our systems last year.

  • Visa: 63%
  • MasterCard: 26%
  • American Express: 9%
  • Discover: 2%

Or, to put it graphically:

As you can see, the overwhelming majority belongs to Visa, with Mastercard making up just over a quarter of card-based transactions. The other card brands (Carte Bleu, JCB, Diner’s) make up a negligible percent of transactions. Admittedly, this is skewed towards the US, as over 2/3 of our merchant’s customers pay in US Dollars. Combining this with the ecommerce statistic, this means that Visa is responsible for almost 45% of all transactions on the internet.

As always, your mileage may vary with customer demographic and product uniqueness, but the key takeaway for merchants should be to focus on the big 2 or 3 brands and think about reducing the number of payment card choices on your buy page.

Jeremy NusserTags: , , , , ,
Posted by Jeremy Nusser in Data Geek, Marketing Fury, Payments 101.201.301 | 2 Comments »
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