Signature based e-commerce sales. How can we do THAT?

Typically, in an e-commerce sale, the buyer pays for the purchase with their Visa, MasterCard, Discover or American Express card.  Increasingly, merchants offer the consumer the option to fund and transfer payment through the Paypal. In fact, according to Mercator Advisory Group in Maynard, Mass, PayPal may process up to 14 percent of e-commerce payments by next year.

However, if your buyer just doesn’t want to pay through the PayPal funds transfer program, your sale can still be lost because credit card payment may not be an option.

How can that be?  To start, there are millions of buyers who do not carry a Visa MasterCard credit or debit card, and there are millions more with the card but with very little available funds -  “maxxed out.”

And last, offering credit card payment may not be an option for many US merchants. Why?  I have encountered countless cases where a new entrepreneur invests in inventory, the web site, shopping cart, SEO and hosting only to have the launch delayed due to his inability to obtain a merchant credit card account.  Yes, it happens daily;  the bank processor is unwilling to open a merchant account due to your time in business, the nature of your product being sold or your credit history.  (An e-commerce merchant account is more difficult to obtain than, say, a storefront merchant account where you obtain the buyer’s signature and card swipe. )

So what’s a merchant to do?

Many e-commerce sites start by offering “pay by check” as a payment option.  You should know that not all “pay by check” programs are the same service.  In this post, we cover the three ways by which your buyer can pay from their checking account and what the differences mean to you, the selling merchant.

1 – Automated Clearing House (ACH)

This is a traditional and well known payment solution for recurring transactions like a monthly membership or installment payment plan.  ACH e-commerce transactions, however, require authentication and third party verification.  This can be cumbersome for low volume e-commerce sales.  And, as with Visa, MasterCard sales, consumers can dispute the sales and demand a return of the funds. Many merchant are surprised to learn that when consumer returns exceed 1% of all transactions, the merchant account is subject to termination. Ouch!

2 – Pre-Authorized Check Drafts

This is an alternative to ACH.  Your customer, by phone, fax or web form verification, authorizes payment(s) from their checking account.  As check drafts are not subject to the ACH 1% return rules, this has been a very viable payment alternative.  Today, however, more and banks refuse to accept check drafts for deposit and the consumer’s bank, after scanners notice an empty signature line, will return the draft to the merchant bank – even without contacting the consumer who would validate the draft as legitimate.

3 – E-Commerce Check 21 with signature

Chances are you have noticed, at the supermarket or department store, how checks are scanned and presented back to the consumer. That is the Check 21 system introduced in 2004 and designed convert paper checks into substitute images of the original.  In this post, I want to tell you how a Los Angeles based payment processor, Willow Systems,  has embraced that Check 21 technology for e-commerce merchants.

It’s impressive and here’s s how it works:  The buyer has added your products to his web shopping cart and is ready to “check out.”  When the “pay by check” option is selected, up pops an image of a check where the buyer enters the bank and checking account numbers, address and purchase amount.  There’s nothing unusual with that.  But, and this is unique with the Willow System program, the buyer then uses the computer mouse to complete the signature panel. Voila, a signed check that can be processed within the Check 21 system!

Willow then verifies that the bank and account numbers are valid and even confirms there was a positive balance in the checking account last night. Willow can then deposit the check into your checking account, just as if you had received the check by mail and were bringing it to your branch.  Willow calls it “bring your own bank.”  If your bank doesn’t have a branch office in the greater LA area, Willow can clear the check through their bank, just like with other payment processing accounts, and release net funds to you after the clearing period.

This e-commerce Check 21 product solves the no signature challenge with check drafts.  This alternative and unique payment solution is designed to service the “buyer with no-card” segment and help merchants looking for a payment processing edge.

For an online demonstration of this program, inquire online or call Tammi at (888) 310-7312 x111; please let her know that “Dan Alcorn recommends the demo.”