Fees: Options to Minimize Revenue Impact
Today’s consumers demand flexibility and convenience when it comes to making payments and donations. Keeping up with the technology, options, and financial considerations presents a challenge for organizations of all kinds. With respect to the ability of management to minimize the impact of ePayment acceptance, there are several alternatives available when it comes to the fees associated with online payments:
- Absorption: The typical business model employed by most organizations today is to simply absorb the costs associated with ePayment acceptance. Simply put, the business receives all ePayment proceeds into their bank account and pays all resulting fees. As with any other expense, organizations commonly adjust prices to cover the additional cost. This is a favorite with consumers since there are no fees associated with their payment. Consequently, public participation is best with this model.
- Site Fee: As an alternative to the traditional absorb model, third party ePayment service providers may charge a fee to website visitors. The fee is added to the payment and deposited along with the payment proceeds. The payment service provider then bills the merchant for a portion of the fee, leaving the remainder behind as a commission, which is then applied to mitigate the merchant’s expenses.
- Dual Deposit: If an organization is in a regulated industry, like local government, insurance, and utilities, they are required to incorporate a solution that provides for exactly 100% of the payment proceeds to be deposited in their account. Deposits may not be comingled with payment fees, nor may any resulting charges be deducted from the primary deposit account. In such cases, the payment fee is processed as a separate transaction and directed to the merchant service provider, and resulting charges are deducted from the provider’s account. This method completely insulates the organization from the costs and accounting considerations previously associated with ePayment acceptance.
Consumers have come to expect the convenience of ePayments and, as with any other delivery method, they have also accepted that there is a cost associated with every payment method, whether it be FedEx, the U.S.P.S., or the pizza shop across town. Convenience has value, and security is also a consideration to astute consumers. Regardless of how your organization decides to accept online payments or donations, choosing a flexible and secure platform with multiple payment configurations will benefit you and your customers.
Listen to last week’s podcast, “Fees: Why am I being charged a fee? “, here.
Take a sneak peek at our next blog article, “Payment Processing: What is PII?”, here.
Explore The Knowledge Center library here.