Credit card alternatives
In my not-so-humble opinion, every internet retailer should allow customers to purchase merchandise by using a credit card despite the fact that the retailer will ultimately pick up the tab for fraud. The most compelling argument for accepting credit card payments is that virtually every internet shopper has a credit card and because of the protection offered by their issuing bank (courtesy of the retailers), most shoppers feel comfortable using their credit card online.
PayPal
This should not, however, discourage internet retailers from offering alternatives. Many people prefer to use PayPal and integration is so easy that there is no reason not to offer it as an option.
Bill Me Later
Another increasingly more popular alternative is Bill Me Later. This allows your customers to choose to be billed for their purchases by Bill Me Later who would then handle collection of the payment. I’m not sure logistically how this all works.
Before contacting these guys be aware that they won’t even talk to a retailer with less than $5M in revenues and would prefer that you are much larger to be a good candidate for their service. Their arrogance when we were smaller has resulted in me not wanting to contact them now that we can, but it is an innovative and cool idea. Hopefully another company will incorporate this model and be more “small-business friendly.”
Secure E-Bill
Secure E-Bill (from Moda Solutions) is a really cool alternative to credit card payment for people who are worried about security on the internet. When your customers choose this as their payment option and complete their order they will receive an email with instructions for paying you through their own personal online banking terminal (using Bill Pay). This is similar to them sending a check, but it clears much faster (2-3 days) and you don’t have to worry about the transit time for a paper check to arrive.
They do have a minimum volume of $5M/year, but they acted like it was a general guideline rather than a hard-and-fast rule. My impression from talking to their reps was that they are very small-business friendly. You will also probably shave about 1% off of a normal credit card transaction fee and they don’t have fixed costs associated with each order.
Purchase Orders
For your best customers that you have a business relationship with you should consider offering terms. Sending merchandise out to a company on nothing but their word might be a bit scary, but as long as you do your due diligence and determine that they are credit-worthy you will find that the savings on large purchases will in the long-run offset the cost of fraudulent PO’s if any do slip through the cracks. Offering terms creates loyalty with your customers and makes it more difficult for them to go to another supplier. Also, many government and education buyers require terms to do business.
Paper Checks/Money Orders
Similar to PO’s but payment is required in advance. In general this goes against everything that I believe the internet stands for, but some people still prefer this method of payment. The largest drawback is that between shipping time and the time the check clears it can take up to two weeks to get a customer’s order shipped out - the advantage of doing business on the internet is the convenience and this is simply not convenient.
Wire Transfer
I would only recommend this option for companies selling products internationally. When you setup an account for international wire transfers (or any transfers) make sure that it is an inbound-only account meaning that people can put money in the account but can’t take it out.
Adding additional payment options will potentially have two positive effects - first of all, and most importantly, you will pick up some additional sales that you would not have received otherwise because of your willingness to offer a particular payment method. Second, some people who would have purchased with a credit card (which requires a high per-transaction fee) will opt for a less expensive option and improve your bottom-line. These benefits should more than compensate for the additional hassle of managing multiple payment options.
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