Payments for Merchants

Your business needs to get paid.  Whether your business sells a product or a service chances are that you need a way for your customer to pay you.  The ways that businesses transact with customers is changing rapidly in today’s business environment. From cash to crypto, money transfers from one party to another party for something of value in return.  This sounds elementary because it is, but the unfortunate reality is that we have made this process very complex over the years.  Businesses need help navigating this complex world that we call payments.

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Methods of Payment

Cash is a very effective method of payment, but it requires strict controls to avoid theft and counterfeit bills.  Furthermore, cash payments are limited to the amount of cash that your customer is willing to carry around with them at any given time.  Checks and money orders follow a similar protocol, but they allow the customer to pay a large sum of money without physically carrying the cash.   Enter credit cards a safe way to carry around more cash than your wallet can hold with guaranteed payment for a fee to the business (merchant). The credit card that we know of today has gone through many iterations of change starting with Diner’s Club. The credit card types that are available to the consumer are nearly endless. There are also bank payments, such as, wires and ACH.  These payments take time, and wires can be expensive. Recently, there has been a rise in the usage of peer to peer payments in apps, such as, Facebook Messenger and Venmo.  I see these types of payments gaining even more popularity in years to come.  P2P payments use the existing payment infrastructure in a user-friendly interface.  In addition, some companies like Starbucks are creating their own mobile payment products to streamline the process of transacting. New to the industry are disruptors such as Affirm.  Affirm is financing transactions for consumers at the point of sale.  There are many methods of payment and it can be difficult to manage how your business gets paid.  DJR Jeeves Consulting can help you navigate this arena.

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Cost of Payment

There is a cost associated with every type of payment.  For cash and checks, the cost is the controls needed to avoid theft and fraud.  This can be expensive.  For credit cards, there are processing fees.  These fees are complex and depending on how your business is set up to take credit card payments your fees can range from roughly 1% to 5% of the total transaction amount.  As mentioned earlier, wires are costly for your business and potentially the recipient of the wire.  ACH payments are cheap, but it takes a long time for the money to move from one party in the transaction to the other party in the transaction.  Time costs money because if you have the money now you can invest it.  Peer to Peer payments are free to the consumer and easy to use.  In house payment solutions such as the Starbucks app require a large upfront investment, but they allow your business to have more control over the transaction.  Lastly, micro-financing provided by companies like Affirm ensure that you get paid, but change the experience that your customer has with your business.

Reporting & Analytics

This is the fun part.  So, if you take payments, how are they performing?  Which payment type is the cheapest for your company to use?  Can you steer your customers to use a certain type of payment? What happens if you choose to take a new form of payment?  Are you losing customers because there is friction in your payment process? Are you losing customers because you are not offering a form of payment that your customer desires?  What is your payment mix? Do you have room for improvement in your contractual agreements with payment providers? Are you using 3rd party solutions, or are you using in house solutions? Are you taking advantage of the Durbin Amendment? Do you have fraud? Are you using fraud detection software? How about your chargebacks? Do you know why you are getting chargebacks? Can you reduce your chargebacks? DJR Jeeves Consulting can help you answer these questions.

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