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Are Online Payments Giving You Growing Pains?

 |  December 08, 2016

When you’re running a startup, “Will it scale?” is probably one of your most-asked questions. Sooner or later, you’ll confront this issue with how you take online payments. As your card sales grow, settlement and funding, processing fees, advanced capabilities, reporting and analytics will all become more critical.

Are online payments giving you growing pains?

If you want to be sure you’re running on a payment platform that fuels your growth, look closely to see that it delivers in these five key areas:

1. Cash that Flows  

It’s not uncommon for an increase in demand to fuel a rise in business expenses ahead of the corresponding increase in sales revenue. Payment processors create a cash flow crunch when they make you wait several days — or in some cases more than a week — until funds from your online customer payments are deposited into your bank account. Look for a processing solution that offers next-day funding so you have quick access to liquid capital.

2. Processing Price Models 

As your sales take off, card processing fees can grow with them. Demand the right pricing model from the beginning. Traditional pricing models are complex and don’t always offer economies of scale that correspond to growth. Ask for a tiered pricing model so that your company’s growth will drive price reductions.

Some processors do not disclose the cost breakdown between Interchange fees imposed by card brands like Visa and MasterCard and their own processing fees. For transparency, ask to see the both the Interchange fees and the rates for card-present as well as card-not-present transactions. The more you know, the more you’ll be able to negotiate your processing fee, but more importantly, better control your ongoing costs.

3. Services that Please Customers and Protect You  

As your business expands, you’ll need access to more advanced services than the basic ability to accept one-time online payments. For example, you may want options for managing subscriptions or recurring billing, and also the ability to securely store customers’ cards on file, making it easier for them to transact with you. Your processor should allow you to update card data so recurring payments aren’t suspended when a card number or expiration date changes. Your processer should also offer guidance and solutions for managing fraud and risk associated with e-commerce—things like PCI compliance and transaction screening tools.

4. Expertise Outside the U.S. 

Is your online business driving sales outside the U.S.? If so, your payment processor should give you the ability to:

  • Identify specifically where international demand is coming from
  • Accept payment in foreign currency that is converted to U.S. dollars when funded.

By allowing your customers to pay in their own local currency, you will increase sales while reducing cart abandonment, returns, and chargebacks.

If you are planning to expand your e-commerce operation to markets outside the U.S., or you are already there, consider using a solution that offers one contract and technology interface to serve every country in which you operate. This will save you from having to negotiate separate contracts with banks in each country, and doing extra development work to link to their unique interfaces. Look for one provider that can handle all multinational payments and has local market expertise in areas like domicile requirements, interchange, tax provisions and compliance.

5. Rich Data and Analysis Tools 

With more transactions flowing through your gateway, having access to detailed data and reports becomes increasingly critical for managing payment acceptance. Make sure you have granular visibility into key indicators such as Interchange fees, chargebacks and return rates. Mining those for insights and trends can help you fine-tune your online customer experience and reduce the cost of card acceptance.

Rapid growth is one of the better problems to have, but it requires astute decision-making to manage the additional complexities it brings. Plan for it by choosing a method to handle payments that scales as you do.

Contact your SVB Global Treasury and Payments Advisor or read more about SVB Global Merchant Services and how we can help you plan for growth.

Related Content

Read more in our series about how to optimize your company's payments tools and processes on SVB's Payments Trends & Insights page.

 

The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates. This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. You should obtain relevant and specific professional advice before making any investment or other decision. Silicon Valley Bank is not responsible for any cost, claim or loss associated with your use of this material.

About the Author

Brad Winslow is a Senior Global Treasury and Product Advisor with SVB’s Global Merchant Services team in Palo Alto. In his advisor role, he helps lead the sales and business development efforts for the merchant services team. What brought him to Silicon Valley Bank was the opportunity to work with clients and solve their often-complex payment challenges with a truly innovative approach and best-in-class technology. If he had to narrow down what excites him the most about SVB, it’s the chance to work with young technology companies and make a direct contribution to their growth and success.

As part of his career in e-commerce and payments, he has served as director with First Data and chief solutions architect with VeriSign before joining SVB in 2016. Among his colleagues, Brad is especially known for his experience in creating strategic partnerships. He also brings core principles of sportsmanship to his work — competition, discipline, teamwork, communication, integrity and loyalty — that he developed as part of a long athletic and coaching history, and growing up in a family of successful athletes and coaches. Brad holds a bachelor’s degree from University of Southern California.

When he’s not working, you’ll find Brad spending time with his family and their two dogs, or focused on his next woodworking project. He continues to stay active through athletics, including basketball and cycling. Brad is also a volunteer with Operation Freedom Paws, a non-profit that rescues dogs from shelters, pairs them with U.S. military veterans and other disabled adults and children, then trains them together to become certified service dog teams.
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