Since the beginning of E-Commerce, credit cards have ruled! Overwhelmingly, online, Visa and MasterCard are the most accepted forms of payment by web based businesses. Unfortunately - outside of the US - most cultures are not credit card (Visa/MasterCard) centric. Research shows that if you are a web-based merchant accepting Visa & Mastercard as your primary payment mechanism - you are losing potential revenues of 30% to 60%! Further, based on studies in both the US and Internationally, offline spending trends show that debit transactions are rapidly becoming the preferred payment method around the world: For the US in 2003, there were 15.
6 billion debit transactions compared to 8.3 billion in 2000. The number of debit card transactions grew at an annual rate of 23.5 percent. (Federal Reserve Payments Study, December 2004) Visa Europe's 282 million cardholders increased their total card numbers by 20.2 per cent in 2004, with card sales rising by 17.
1 per cent to exceed USD 1 trillion for the first time. (The Independent, Nov 08 2005) Of Visa's three card types (credit, debit and prepaid), debit has grown most strongly in the past two years, at about 15 per cent annually, or almost three times as fast as credit. (The Independent, Nov 08 2005) Globally, the trend by consumers is to pay for purchases with direct debit over credit cards, because a direct debit transaction gives the consumer better control over their spending, and in the long run - costs the consumer less since there are no finance charges to pay. Direct Debit transactions are pulled out of the customer's account in real time, meaning that unlike a check - there is virtually no chance of insufficient funds. Online Direct Debit is very new but rapidly growing in popularity with both merchants and consumers alike. For merchants, it is much safer than ACH or EChecks as the funds are transferred from the buyer's bank account immediately - there is virtually no risk of reversal once the transaction is approved.
For the customer, it is fast and easy, taking no longer than a credit card transaction. It is also very safe as no sensitive details are stored by the merchant or the processor. From the Merchant's perspective - online direct debit is as close as you can get to a cash transaction! Look for Online Direct Debit to become the preferred payment method by both merchants and customers in the near future as this payment solution becomes more available!.
Melody Wigdahl is an E-Commerce Consultant specializing in unique payment solutions for web based and/or high risk businesses. Visit beyondACH.com for the free whitepaper - Direct Debit: Offline Trends + Online Trust = A Payment Solution for Web 2.0