Expand your markets Featured

8:00pm EDT July 26, 2008

Consumers like the convenience of buying online, buying over the phone or purchasing gift cards, so offering these options exposes your company’s products and services to new customer segments and often expands your selling hours without adding brick and mortar or additional staff. Expanding your business through the use of merchant services can increase revenue without increasing fixed costs.

“Some customers prefer the convenience of consolidated credit card statements or receiving frequent flier miles or cash rebates for their purchases; still others can’t qualify for credit cards, so they use debit cards to complete their transactions,” says Mark Hayes, vice president and commercial merchant sales manager for Fifth Third Bank. “Strategic use of merchant services can expand your markets and customer base and, perhaps best of all, they level the playing field between small and midsize businesses and the big guys.”

Smart Business spoke with Hayes about how CEOs can win new customers by expanding their use of merchant services.

What are some merchant services available to businesses?

Merchant services provide businesses with a set of comprehensive solutions for accepting credit cards, debit cards and online payments from customers. The solutions are often provided on a turnkey basis, including point-of-sale (POS) equipment, shopping carts and merchant accounts or through referrals to qualified vendors, making it convenient for small business owners. Merchants can track their transactions online in real time and download sales data into software programs like Quicken. Greater data capabilities allow owners to view their average sale transaction amount, and then experiment with ways to increase it and discover growth opportunities by analyzing customer buying trends and habits, and then add new customer segments.

Also, POS equipment is now available that uses wireless technology to transmit transactions, so merchants can accept credit cards from customers at flea markets, trade shows or in their homes.

How can merchant services improve the customer experience?

Giving customers every possible way to do business with your company improves their experience and makes it more likely they’ll buy from you again. Statistics indicate that it costs more to get new customers than to retain old ones and that customers will spend more when they use a credit card to pay for transactions. Gift cards are becoming increasingly popular with consumers. Buyers don’t have to worry about selecting the right size or color, and the recipient gets exactly what they want, so offering gift cards provides customers with a fast and less-stressful shopping experience. Also, it’s unlikely a consumer would pay for high-ticket items with anything but a credit card, and busy people and younger consumers want to purchase online, so unless you give them what they want, they’ll go somewhere else.

What are the cost implications?

The fees for credit card processing average 2 to 3 percent of the total transaction amount and a POS terminal and software can average $300 to $500, while wireless terminals average $800 to $1,000; set-up fees are fairly nominal. The cost of taking payments over the Internet is sometimes less expensive for the upfront costs but can be more expensive for each transaction because of the higher V/MC interchange fees. Also, while some consumers still pay with checks, it can take a few days to receive notice of returned items, while credit card and debit transactions are verified on the spot.

What security is best for these types of transactions?

Make sure your equipment and third-party processor is PCI compliant, which stands for Payment Card Industry Data Security Standard. Any organization that accepts payment card transactions must be in compliance with the standards. Your merchant banker can refer you to vendors that meet the security standards.

How can a merchant banker help?

Merchant services bankers can provide you with turnkey solutions and equipment financing to help you expand your business through enhanced payment options. They should be able to either lease or sell you a POS terminal. Some business owners opt to lease first, then purchase later, so they can try the equipment before committing. A merchant services banker can also help your company expand into e-commerce by recommending a shopping cart vendor for Internet purchases. If you select the same bank for your merchant account and merchant services, the money from transactions normally transfers into your account in 24 hours instead of 48, which improves cash flow. Your banker should also be able to give you advice and ideas about the best ways to expand your business through the strategic use of merchant services, so owners should see them as a complete resource to build revenue.

MARK HAYES is vice president and commercial merchant sales manager for Fifth Third Bank. Reach him at (813) 306-2407 or mark.hayes@53.com.