Alternative Payments Drive Profits

For years providers of merchant account services have fixated only on credit card payment processing. But, organizations that offer only credit card processing are missing the boat by not offering alternative payment processing to their merchants. Within the next three years, 30% of all Americans will turn to alternative payments when making purchases online rather than relying on credit card payments. Internationally, alternative payments already far surpass credit cards for online purchases.

The rapid rise of alternative payment solutions for online merchants is easy to understand. It is common sense to realize that the more payment options a merchant offers, the more sales will result. Providing consumers way to purchase regardless of the way they want to pay is simply good business. A merchant should accommodate any payment method that a customer wants to use.

Of course, alternative payments are also good for increasing bottom-line profits. Credit card transactions incur higher payment processing costs than alternative payments.

For example, it is much less expensive for an online merchant to accept payment for direct debit from a checking account than it is to accept a credit card payment. And alternative payment options have shorter contingent liability time frames. For instance, a consumer paying by electronic check can dispute the transaction only for 60 days whereas one paying with credit card can dispute the transaction 180 days.

For those organizations providing merchant processing, not offering alternative payment options limits the number of new merchants that are interested in their services. Credit card processing alone is almost completely a commodity play.

Merchants no longer see differences between merchant account providers. No matter what a merchant account provider says in terms of having better service, it simply no longer a convincing argument. Rather, merchants understand the dog-eat-dog mentality of most credit card processing providers. It's common for merchants to play one payment processing company against the other in order to obtain the lowest possible processing rates. That leaves little on the table in for profits.

Adding alternative payment processing solutions is an important way to differentiate between merchant service providers. Offering merchants multiple ways to make money through various alternative payment processing products is a good way to capture more customers. And, at the same time, alternative payments are an excellent way to increase income and maintain long-term portfolio profitability.