Same Old E-Commerce? Not Even Close.

When did payment processing become all about rates?

• Was it a few years back when a recession hit the U.S. economy?
• Was it always about rates?

Are times changing?

• Are merchants finding increased value in third-party payment processing providers?
• What impacts are the new and different ways consumers are buying having on how merchants are incorporating payments into their business either empowering or limiting the growth of the industry?

Where is the billing/processing industry headed?


What do you think?

I'll go first :)

I disagree that processing is all about rates, but I know a large portion of site owners actually put focus on it... so here are my thoughts:

IMO, rates became a primary focus when businesses began to shrink and margins started eroding. 15 years ago, you could make tons of sales just by putting a site up and having a rudimentary affiliate program. Nowadays, not only are sales harder to get but margins are lower so a percentage point here and there can make a big different on a business.

You rarely see a thriving business worry primarily about rates - they understand the math of throughput & rates. It's much better to make 5% more sales and pay 2% more overall on your processing than saving 2% on your processing and missing out on 5% of your sales. While this is a simple concept to grasp, you'd be surprised how many people cannot understand it and will stick with a merchant account that offers less payment methods (and therefore converts less surfers into actual customers**) in the pursuit of lower rates. The same can be said of IPSPs, as they are not all created equal. You may like one over the other, but at the end of the day only a true spit test will show you who makes you the most money, regardless of rates.

On the other hand, in my experience many of the struggling programs out there will sacrifice throughput and features because they think it will save them some $$.


There is value in third party payment processing. They allow you to do cross-sales to other merchants, they take care of the infrastructure and they generally have a much stronger relationship with their merchant bank than you do with yours. Therefore, it's always a smart idea to direct at least some volume to IPSPs as an hedge.




(** you must do split tests and figure what works best for your traffic, as geographical differences can skew one way or another)