Some Internet businesses may want to widen their appeal by offering offline payment options to their customers. This is less important for those who deliver digital products online but it can make a difference for more traditional types of merchandise or delivery.
What you want to add is known in the financial services world as MOTO – a Mail Order / Telephone Order facility. You may want to give your customers the opportunity to print out an order form and mail or fax it to you or give you their details by telephone. To be able to take their money offline you need a “virtual terminal,” a facility made available by your service provider where you enter your customer’s payment and address details online to have their money transferred from their credit card to your merchant account.
You’ll find that not all merchant service providers offer this facility. For instance, Nochex and Google Checkout don’t do it while Paypal offers it. So does Worldpay, at a hefty price. But once you ask your favourite search engine to look for “virtual terminal” you’ll soon find Worldpay resellers offering WorldAccess. It’s the same service but at a much reduced price. It won’t take you long to find all you require – by the time I had arrived at page 5 on Google I had all the information I needed.
You have to carry out the same checks for MOTO as for online payment facilities:
- Set-up costs for opening the service
- Monthly fees
- Commission per transaction (usually somewhere between 2% and 4.5%) plus a fixed transaction fee (in the UK generally 20p)
- Remittance charges (which can vary a lot)
- Remittance period (the delay between money into your merchant account and transfer to your bank account)
- Percentage of funds retained in your merchant account to allow for refunds.
Beware of a couple of pitfalls. Some providers offer a very cheap virtual terminal service. The catch here is usually that you have to have your own merchant ID and merchant account before you can use their service. Being able to take money online via financial intermediaries such as Paypal does not count because with Paypal you are using Paypal’s Merchant ID, not your own.
A particular killer can be remittance charges. You need to look carefully at both, the charges and the turnover you expect your business to generate offline. When I started offering an offline payment option to my customers, I found a service provider offering daily remittance seven days in arrears. This sounded fantastic especially as others transfer your money fortnightly or monthly with four weeks delay. But when I looked at their remittance charges, £15 ($23) a pop, their great service started to lose its attraction at Warp Speed. The main reason was that I didn’t expect huge offline turnover. An additional £15 ($23) cost for each transfer simply wasn’t worth it.
In the end, I went with the provider whom I had originally classified as expensive. Here is why:
- They charge a monthly fee but without tying you to an annual contract. This would allow me to stop the service at a moment’s notice should the offline payment option not generate enough revenue.
- They have a sliding commission structure for their virtual terminal service depending on turnover.
The scale starts at 4.4%, which is very high compared to some of the competition. The charges then reduce in stages to 1.9% (or even 1.4% for monthly turnover in excess of £55,000). This is very competitive. They also offer the option to switch to their more advantageous merchant rates.
By contrast, other providers have a fixed rate of between 3.5% and 2% that are tied to annual contracts. - Finally, the one I went for didn’t charge any set-up fees.
Given that I was already familiar with their service as a customer, my initial assessment as ‘expensive’ turned after investigation of the competition into ‘most suitable package for my purposes.’
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