7/02/2004: Growing online payment option

Now 12 years later, 47 percent of all transactions at the cash register in Canada are debit. Interac processed more than 2.5 billion transactions last year alone.

According to the Canadian Bankers Association and a 2003 survey by the Bank for International Settlements (BIS), Canadians are the world’s top debit card users, making 76.4 transactions per person in 2002 compared to 54.0 in the U.S. Today, online shopping is easy with a credit card. But the fact is ecommerce remains off limits for 30-40 percent of North Americans who do not have or want to use credit cards. This circumstance is supported by many studies published by Forrester research, IDC, and others.

So what other choice is there for people who want to use debit online?

Internet debit potential
A Canadian company, UseMyBank Services, Inc., Toronto, has recognized the potential for debit on the Internet. Online shoppers want to use debit online and UseMyBank has a way for them to do so. UseMyBank was founded in July 2002 based on the concept that the existing online bank systems provide the necessary interfaces to facilitate instant online debit payments.

UseMyBank says it is the first online payment provider to let consumers purchase items on the Web using their existing bank so that online merchants have a way to instantly access their dollars. “We are here to help ecommerce grow by joining all of the world’s online banks so all online businesses and consumers can transact with each other,” says Brian Crozier, vice-president of business development for UseMyBank.

“It’s all about giving consumers choices-the more choices you offer, the better you are in the market,” says UseMyBank CEO Joseph Iuso. “Internet-based companies that do not offer a payment alternative to credit cards are missing out on millions of consumers who either don’t own or resist using credit cards online.”

A study by CyberSource Corp. (www.cybersource.com) indicates online merchants who offer a number of payment options enjoy greater sales. Sites providing four or more payment methods apart from credit cards experience a sales conversion rate of 72 percent. For those offering three methods, the rate is just slightly lower at 71 percent, and for sites with two methods it is 66 percent. Even those offering just one additional payment method to credit cards show a 60 percent conversion rate.

According to the study, the evidence for offering payment alternatives to credit cards is even stronger when shopping card abandonment rates are taken into account. The abandonment rate is 28 percent for sites with four or more payment options, compared to 40 percent for those with only one choice. Payment alternatives recommended by CyberSource include gift certificates, recurring billing, electronic cheques, PayPal or other non-card processes. Iuso argues that debit should be high on that list, especially in Canada. He says debit accounts for 47 percent of all retail transactions while credit cards now stand at just 25 percent. Furthermore, checkout abandonment occurs in nearly 50 percent of all cases at the time credit information is requested.

Online sales rise 10-20 percent
“The net effect for sellers who add our instant debit solution to their credit card payment option is an overall 10-20 percent increase in online sales,” says Crozier. He adds UseMyBank sellers benefit from direct payments with no chargebacks, no holdbacks, no merchant account, quick direct transfer of funds and the ability to serve more customers.

In nine months since signing up with UseMyBank’s online debit payment service, The Ashley Madison Agency has increased sales by 10 percent and attributes the up-tick in revenue to customer’s being able to pay using their online bank. More options mean more revenue.

The agency operates one of Canada’s busiest online dating services. It saw adding the option of debit cards to its stable of payment options as necessary. Ashley Madison spokesman Darren Morgenstern says “fickle customers want choice…and we are in the people pleasing business”. Morgenstern says he knew it would work because the agency wasn’t locked into a contract or asked to ante-up funds. He says that spoke volumes.

Debit online is the online fundraising vehicle of the future, contends Richard Cadieux, manager, Information Systems, for the Princess Margaret Hospital Foundation, Toronto. It’s partly because of people’s fear of revealing their credit card information online and partly because of concerns about personal debt. “When you know you’ve got $50 in your account you can afford to give to charity this week, you can do it instantaneously. If you put it on a credit card, the bill comes in later; you may have spent the money.”

Online donors are “pleasantly surprised” to find the option is available, he says. The foundation is getting some very significant debit donations.

Reasonable costs Costs are reasonable, says Cadieux, at a lower rate than the foundation is paying its credit card providers, and a capped special non-profit rate. UseMyBank’s fees range from 1 to 3.5 percent with a $1.50 minimum per transaction.

He is also pleased with service levels, describing UseMyBank as very responsive. He cites the case where a correction was applied immediately when a donor accidentally hit “submit” twice.

UseMyBank can also be used over the telephone for mail order/telephone order (MOTO) merchants, infomercial and direct response marketers. The company is expanding this year with major U.S. and European banks to offer more worldwide service.

In the end, it’s all about competition and choices, says Crozier. He maintains UseMyBank from its inception has successfully capitalized on consumers’ relationship with their financial institution by providing the option for online debit.

For further information;
Website: http://www.usemybank.com/
Email: info@usemybank.com
Phone: 416-727-3806