This is the latest installment in The Official Merchant Services Blog’sKnowledge Base effort. Well we want to make the payment processing industry’s terms and buzzwords clear. We want to remove any and all confusion merchants might have about how the industry works. Host Merchant Services promises: the company delivers personal service and clarity. So we’re going to take some time to explain how everything works. This ongoing series is where we define industry related terms and slowly build up a knowledge base and as we get more and more of these completed, we’ll collect them in our resource archive for quick and easy access. Today’s term is Network Access and Brand Usage (NABU) Fee. We chose this today because of all of the recent changes to Interchange fees released by the major credit card companies.
Network Access and Brand Usage Fee
The Network Access and Brand Usage (NABU) fee was created by MasterCard in 2009, and is fee imposed by MasterCard for all U.S. issued card transactions settled with MasterCard by a U.S. merchant. Effective January 8, 2012 MasterCard’s NABU fee was applied to authorization transactions instead of settlement transactions. MasterCard charges $0.0185 on all settle or refunded credit and signature debit card transactions for its Network Access Brand Usage fee. Revenue generated from the NABU fee goes directly to MasterCard. It is not collected by credit card processors or issuing banks.
MasterCard began charging the NABU fee is April of 2009. Prior to the $0.0185 charge, MasterCard assessed a $0.005 Acquirer Access Fee to transactions run through its network.
Since revenue from the NABU fee goes directly to MasterCard, most processors assess the fee to businesses at cost. However, in the case of tiered pricing the NABU fee is bundled with a business’s general qualified, mid-qualified and non-qualified rates. Although uncommon, it is possible for processors to markup the NABU fee even for businesses that are billed via more transparent interchange plus pricing.
To avoid confusion, the NABU fee is NOT related to:
Breaking News from The Official Merchant Services Blog: MasterCard and Discover have announced interchange increases and modifications to take effect October 2012. Specific association modifications such as these are beyond the control of payment processors like Host Merchant Services. They come directly from the big card associations themselves. These changes affect all merchant card processors and their customers, meaning these changes in fees and rates travel in a straight line from Visa, MasterCard and Discover to the merchants.
The Meat and Potatoes
MasterCard will be reducing the Consumer Debit rate from 1.64% + $0.16 to 1.60% + $0.15. MasterCard will increase the Small Ticket Debit rate from 1.30 + $0.02 to 1.30 + $0.03.
Discover Card will be enacting several changes to their PSL Public Services interchange fee programs. Rates will increase from 1.50% +$0.10 to 1.55% + $0.10. Discover PSL Card-Not-Present/E-Commerce Premium Plus will increase from 2.30% + $0.10 to 2.35% + $0.10. Discover will also increase Key Enter Premium Plus from 2.10% + $0.10 to 2.15% + $0.10.
Add These Fees to the Pile
These changes come on the heels of a series of changes we reported back in February. Visa’s new Fixed Acquirer Network Fee and Transaction Integrity Fee made all of the headlines back then, but MasterCard also implemented its new annual Acquirer License Fee. This fee took effect in July 2012. MasterCard also implemented a new annual Type III Third Party Processor (TPP) Registration Fee in July 2012.
MasterCard based these fees on a full year of 2011 volume for each merchant, and for 2012 only the fees are 50% of the total fee calculated — since they cover only half of the year. MasterCard passed these fees through on a pro-rata basis and all acquired MasterCard credit and signature debit volume was utilized to determine the annual volume for both programs. PIN debit volume was excluded.
The changes to Discover Card’s PSL Public Services interchange fee programs are also in addition to a series of changes Discover announced back in February. Discover introduced a US Commercial Large Ticket Interchange program, increasing its assessment fee by .005%. Discover also changed existing card present Interchange rates for transactions less than $15 for Express Service merchants (Local Commuter, Bus Lines, Toll & Bridge Fees, Restaurants, Fast Food Restaurants, News/Dealer Stands, Laundries, Dry Cleaners, Quick Copy & Reproductions, Parking Lots/Garages, Car Washes, Motion Picture Theaters and Video Entertainment Rentals) and less than $25 for Taxi/Limo merchants.
Pay Attention to Your Statement
As stated above, these changes are made directly to Interchange rates from the Card Associations. Unlike Visa’s much ballyhooed FANF, which is a completely new fee and not subject to regulation from the Durbin Amendment, these fees fall under the scope and purview of Interchange, and thus Durbin.
Merchants will begin to see the following text on their August Statements to explain the changing fees:
Visa, MasterCard, Discover Card Services have announced category introductions and modifications to their current interchange structures. These changes may affect your current pricing effective October 2012. Further detail specific to these changes and impacts to your merchant account will be detailed on your September merchant statement. As previously disclosed on your February and March merchant statements, MasterCard introduced the new MC licensing fee. Beginning in August 2012, the new licensing fee of $.005 will be included with the MasterCard NABU billing and appear as “MC assoc NABU/license fee”. Thank you for your continued business.
The Official Merchant Services Blog continues to shine its spotlight of educational information directly on the Mobile Payments Industry. This bristling business sector keeps creating buzz among payment processing persons as well as overall economic assortments. One minute people are predicting hundreds of billions of dollars in revenue will get generated by consumers embracing the cashless society model and conveniently swiping their phones to pay for every little thing that catches their eye. The next minute people are predicting U.S. consumers are too wary and cautious and not ready to expose their information to the cloud and the criminals trying to crack their way into that cloud.
This titanic tug-of-war between “the next big thing” that economic analysts desperately desire M-Payments to become and the “hold your horses hombre” caution that those same analysts caveat the slow acceptance in U.S. markets has been defining the media coverage of the Mobile Wallet Madness for more than a year. But the potential for prodigious profits has pushed the possibilities of mobile payment processing through the morass of misgivings.
Merchants United!
As we purposely pointed out to our peerless readers just mere days ago, the Merchant Customer Exchange was formed. This epic assemblage of retail industry giants teams Wal-Mart Stores Inc., Best Buy Co. and Target Corp, 7-Eleven Inc., Alon Brands Inc., CVS Caremark Corp., Darden Restaurants Inc., Lowes Co., Sunoco Inc., Sears Holding Corp. and the Publix Supermarket chains into a mega-group of retail merchant might on a mobile wallet mission.
Coming on the heels of Visa’s saturation of the 2012 London Olympics with all things Mobile and all things Visa, the mighty mingling of the MCX merchants applied unforeseen amounts of pressure on the mobile payment marketplace.
Mobile Payment Paring: Discover and PayPal
On August 22 PayPal, owned by eBay, announced a deal with Discover Financial Services to bring PayPal access to the 7 million merchants in Discover’s network. This deal will begin in the second quarter of 2013 and the announcement was made a mere two weeks after Square partnered up with Starbucks to let customers pay with Square’s app at the 7,000 U.S. Starbucks locations.
Excelsior! Retail titans are teaming up with mobile gadgeteers in one mass scramble to make it to market before the U.S. consumer becomes firmly affixed on the easiest and most widespread brand — as is wont to happen with U.S. shopper market behavior.
The PayPal deal is a particular point of note because PayPal itself is pushing from the online marketplace back into the physical realm of brick and mortar. This may indeed help bridge the gap from e-commerce to old fashioned commerce, and that bifrost of payment processing could very well buttress mobile payment processing in a brave new world of cashles-sness and contactless transactions.
The super-powered pairing of Discover and PayPal drove stock prices for each company, with Discover gaining 3.9% and eBay gaining 2.5% on the market the day the announcement was made. This arrangement will greatly accelerate PayPal’s in-store payment efforts. By riding on Discover’s network, PayPal can get into more locations and get there quickly. Best of all this movement doesn’t requiring any significant integration work by merchants. That potentially puts PayPal at a big advantage against rival mobile payment systems such as Google Wallet, Isis, and Square.
Discover is integrating PayPal’s payment system into its software, which will be uploaded to millions of point-of-sale terminals that support Discover Card payments. PayPal’s branding and rules will be presented to consumers who choose to pay in store with PayPal. PayPal currently has more than 50 million U.S. customers who will be able to take advantage of in-store payments.
This is the latest installment in The Official Merchant Services Blog’sKnowledge Base effort. Well we want to make the payment processing industry’s terms and buzzwords clear. We want to remove any and all confusion merchants might have about how the industry works. Host Merchant Services promises: the company delivers personal service and clarity. So we’re going to take some time to explain how everything works. This ongoing series is where we define industry related terms and slowly build up a knowledge base and as we get more and more of these completed, we’ll collect them in our resource archive for quick and easy access. Today’s term is Merchant Cash Advance.
Merchant Cash Advance
A Merchant Cash Advance is a lump sum payment to a business in exchange for an agreed upon percentage of future credit card and/or debit card profits. The way this works is Merchant Cash Advance companies provide funds to businesses in exchange for a percentage of the businesses daily credit card income. This percentage is taken directly from the processor that clears and settles the credit card payment. A company’s remittances are drawn from customers’ debit- and credit-card purchases on a daily basis until the obligation has been met. Most providers form partnerships with credit card payment processors and take payments directly from a business owner’s card-swipe terminal.
A Merchant Cash Advance companies is most often used by retail businesses that do not qualify for regular bank loans. A business cash advance can be expensive compared with interest on a bank loan, ranging from 10% to 100% effective interest. Merchant cash advances are not loans – they are a sale of a portion of future credit and/or debit card sales. Therefore merchant cash advance companies claim that they are not bound by specific laws that would limit interest rates.
Despite the cost of merchant cash advances, the structure has many advantages over the structure of a conventional loan. Most importantly, payments to the merchant cash advance company fluctuate directly with the merchant’s sales volumes, giving the merchant greater flexibility with which to manage their cash flow, particularly during a slow season. Additionally, the ease, simplicity and speed of the application process, as well as the lower security position (i.e. behind that of the bank and landlord) associated with merchant cash advances are significant advantages.
There are generally three different repayment methods for the business:
Split Withholding, or Split Funding: When the credit card processing company automatically splits the credit card sales between the business and the finance company per the agreed portion (generally 10% to 22%). This is generally the most common and preferred method of collecting funds for both the clients and finance companies since it is seamless.
Lock Box or Trust Bank Account Withholding: All of the business’s credit card sales are deposited into bank account controlled by the finance company and then the agreed upon portion is forwarded onto the business via ACH, EFT or wire. This is the least preferred method since it results in a one-day delay in the business receiving the proceeds of their credit card sales.
ACH Withholding: When the finance company receives the credit card processing information and deducts its portion directly from the business’s checking account via ACH.
Today the Official Merchant Services Blog will continue with our Mobile Commerce theme. A group of 14 Major U.S. Retailers recently announced that they have decided to join forces and create their own mobile wallet application. The group, which includes Wal-Mart Stores Inc., Best Buy Co. and Target Corp., will call itself Merchant Customer Exchange, or MCX.
MCX has no official launch date as of today, but the merchants are determined to jump head first into the expanding mobile payments market. The network of merchants also includes 7-Eleven Inc., Alon Brands Inc., CVS Caremark Corp., Darden Restaurants Inc., Lowes Co., Sunoco Inc., Sears Holding Corp. and the Publix Supermarket chains.
Merchant Customer Exchange
MCX seeks to corner a piece of the mobile payments market, expected to balloon from $172 billion this year to $600 billion by 2016. The new merchant super group plans on offering a mobile-commerce solution capable of seamlessly integrating a wide range of consumer offers, promotions and retail programs. The application will be available through virtually any smart phone.
This move comes about a week after Starbucks announced partnering with Square, a mobile processing start-up that uses smart phone attachments to accept credit cards. Now MCX will not only compete with Square, it has taken away 14 potential partners from the processor. MCX is also bad news for Google, which has been expanding its own mobile wallet platform, called Google Wallet over the past year. Google Wallet uses NFC, or near field communication to transmit payment data from a customers smart phone to an NFC-enabled payment terminal.
Mega-Merchants
With these mega retailers coming together, a new perspective can be used to develop mobile wallet apps. The retailers want to focus on ease of use and security for the consumer.
“As merchants, no one understands our customers’ shopping and payment experience better than we do, and we’re confident that together we can develop a technology solution that makes that experience more engaging, convenient and efficient,” said Mark Williams, president of financial services at Best Buy.
Mike Cook, corporate vice president and assistant treasurer of Wal-Mart said, “the MCX platform will employ secure technology to deliver an efficiency-enhancing mobile solution available to all merchant categories, including retail stores, casual dining, petroleum and e-commerce.”
Now with many more contenders in the mobile commerce arena, the only thing consumers can do is wait for the dust to settle. The great race to mobile wallet supremacy has begun!Host Merchant Services will keep you up to date on all new technology developments and potential partnerships relating to the mobile payments world.
Today The Official Merchant Services Blog keeps examining the rapidly growing payment processing sector of Mobile Payments. With an never ending stream of deals being made by startups and established companies developing the latest gimmicks and technology to bring mobile payments and mobile wallets to the average everyday U.S. consumer driving the marketplace, it’s easy to get lost in a sea of mobile payment processing media hype.
In our blog yesterday we were able to see how some of that disconnect works. Visa pushed mobile payment technology aggressively at the London games. Their plans were almost scuttled by a malfunction with the processing terminals during a men’s soccer match between Great Britain and United Arab Emirates. The crowd was cranky as they were unable to pay for concessions using a mobile phone or a credit card. They had to resort to cash, and many patrons were unprepared for the anachronism.
This wrinkle in Visa’s mobile plans underscores how fragile mobile payment technology still is; and it also highlights how close we’ve come to a cashless society — the kind of society where mobile payments promise to be a thriving and convenient way to pay for goods and services.
The Knock on Mobile Wallets
The continued skepticism U.S. consumers have with mobile payments can be found summarized well in this L.A. Times article by David Lazarus. The main theme is something we’ve covered extensively in the past year: Mobile Payments are the future, but people are worried that the payment processing is not secure. It seems that for almost every story published about how mobile wallets are going to revolutionize e-commerce and make billions and billions of dollars in profit, there’s a story like this one that says consumers are worried about security, fraud and identity theft.
These are valid concerns. Much like regular old online shopping — which has become ingratiated into the average U.S. consumer’s shopping habits — the threat of tech savvy criminals stealing pertinent payment information is an ongoing issue. Everything from phising scams to data breaches affect e-commerce. But none of it has stopped the juggernaut from steam rolling consumer buying habits. Everyone shops online because of the ease and convenience. This is powered by how easy it is for people to be online, click some buttons and buy something. The power of convenience trumps security concerns.
This will happen for mobile wallets as well. Once the technology gets out in front of people they will flock to it because it is easy to use and available where they shop.
Convenience is the Key
So what I believe is the current obstacle holding Mobile Payments back from making a huge splash with U.S. consumers is the fractured marketplace. They’re not readily available at the store when you go there. There’s too many variations on the theme. And too many different companies trying to inject a new technological advance into the sector before it gets traction with consumers. We covered the top types of Mobile Payment technologies recently, and even keeping our analysis to just a few contenders we’re stuck noticing a competition between Near Field Communication driven “Swipe Phone” technology and QR-Code driven “Scan” technology.
iPhone 4S Drives Mobile Commerce
Recent reports by Monetate show it gets even simpler than that — Smartphones themselves. Gone will be the advertising slogan of Captial One, “What’s in your wallet?” that questions what plastic card you use. Instead it will be “What brand is your wallet?” Or rather, which smartphone are you using to pay for things with — iPhone or Android?
According to the data from Monetate, the answer used to be in doubt as late as Q4 2011; and is now a resounding iPhone by Q2 2012. Monetate released its E-Commerce Quarterly Report for the second quarter of 2012, and the figures showed some dramatic changes in smartphone usage driving e-commerce traffic.
According to the report, “Leading e-commerce websites receive 3.31% of their total visits from smartphones running Android, up from 1.76% last year and an increase of 85% in total shopping sessions. These same websites receive 5.41% of their traffic from iPhones compared to 2.45% a year earlier, an increase of 117% in total shopping sessions over the same time period.”
The data showed that in Q4 of 2011 websites received 1.99% of their total visits from Androids and just 2.25% of their visits from iPhones, suggesting the two competing smartphone systems were about dead even. The iPhone 4S was released that quarter however, and iPhones spiked way ahead of the Android.
Despite that spike in iPhone usage, the report indicated that shoppers on Android-powered smartphones converted better than iPhone users — Android converting at a 1.26% clip and iPhone at a 1.00% clip.
What Does This All Mean?
Well even with iPhone getting a bigger spike than Android, both phones grew their e-commerce usage in 2012. That means the goal of realizing those heady revenue predictions from companies like Juniper and Gartner Research are on course. The security concerns may make good copy for the media, but the real obstacle remains saturation in the actual physical marketplace. Give people more opportunities to pay with their phones and they will readily begin to pay with their phone. It will start off as some new gimmick people want to try. And then it will become second nature.
Today the Official Merchant Services Blog will take a look at the role Mobile Payments played in the 2012 London Olympic Games.
Visa, the official Payment Payment provider of the Olympics pushed for Mobile Payment Technology as a safe and convenient payment option for consumers throughout the London games. Jim McCarthy, Head of Products at Visa Inc., said “This summer we will be demonstrating the future of payments in London – a future where most consumers will rely on mobile devices, tablets and PCs to manage their daily financial lives.”
As a part of Visa’s Olympics marketing push for the future of Mobile, a limited edition Samsung Galaxy S III was provided to some Visa sponsored athletes and trialists. The device featured an Olympic-branded version of Visa’s mobile payment application, Visa payWave which uses Near Field Communication technology, or NFC. To make purchases, consumers simply needed to select the Visa icon on the Samsung device and hold the phone to a contactless payment terminal to pay.
It seemed as though Visa had all the pieces in place to make this Olympics a Mobile Payments success; a dominant payment network, including Visa only ATMs positioned throughout the games, NFC-enabled vendors able to take the mobile payments, and spectators with smart phones who could pay via mobile. The only problem was competing against an Olympic veteran of every games, cash.
During Great Britain’s Men’s Soccer match versus the United Arab Emirates, spectators were unable to pay for food and drinks at Wembley Stadium by credit card or mobile payment after terminals went down. Many ticket holders described the lines that subsequently built up as ridiculous and said a lack of cash machines at the west London ground added to the problem.
A spokesman for Visa was quick to point the finger at Wembley officials, placing the blame firmly on the stadium’s network infrastructure saying, “We understand that Wembley’s systems failed and therefore they were only accepting cash at the food and beverage kiosks.”
Twitter was bombarded with thousands of angry posts from people who found it completely unacceptable that they couldn’t feed themselves. This was due to the fact that the only available way to pay was with old-fashioned cash and coins, a means of payments Visa wanted to push away from with its mobile payment implementation.
In these games, mobile payments did not expand as much as Visa had anticipated. Add that to the complete network failure at Wembley Stadium and it would seem that mobile payments were a flop at this year’s Olympic Games. The silver lining however, is that mobile payments did have a huge presence at the games. And the uproar caused by the network failure seems to prove that we are moving away from cash as a society. Just a few years ago, credit card terminals going down at the Olympics might not have been such a big story, let alone a trending topic on Twitter. It seems for the London Olympic Games, cash took the gold medal yet again in payments, but with the doubling of Mobile users here in the U.S. and the increase globally; cash may soon be unseated by mobile payments.
This is the latest installment in The Official Merchant Services Blog’sKnowledge Base effort. Well we want to make the payment processing industry’s terms and buzzwords clear. We want to remove any and all confusion merchants might have about how the industry works. Host Merchant Services promises: the company delivers personal service and clarity. So we’re going to take some time to explain how everything works. This ongoing series is where we define industry related terms and slowly build up a knowledge base and as we get more and more of these completed, we’ll collect them in our resource archive for quick and easy access. Today’s term is Discount Rate.
Discount Rate
The simple definition of the term Discount Rate as it applies to merchant accounts — it is a combination of the fees charged by the card acquirer to the merchant for processing payment card transactions. So what that’s really saying is the Discount Rate is what the payment processor charges the merchant so that they can make profit off of the transaction — it’s not really a discount in any sense of the word when defined like that.
So let’s break this down a little more to understand this buzzword beyond just the obvious. A Merchant Account has a variety of fees. Some of these fees are charged periodically, such as a monthly service fee. Others can be charged on a per-item or percentage basis, such as a Chargeback Fee. Some fees are set by the merchant account provider.
The majority of the per-item and percentage fees, however, are passed through the merchant account provider to the credit card issuing bank according to a schedule of rates called interchange fees, which are set by Visa, Discover, and Mastercard.
Each merchant services provider has real costs in addition to the wholesale interchange fees, and creates profit by adding a mark-up to all the fees they have to take on to provide their services in the first place. The discount rate comprises the combination of dues, fees, assessments, network charges and that additional mark-up merchants are required to pay for accepting credit and debit cards. The largest of these fees by far is the Interchange fee.
There are a number of pricing models that merchant services providers utilize, but Host Merchant Services uses the Interchange Plus pricing plan.
Interchange Plus pricing means that the acquirer charges you a variable MSC consisting of the cost price plus a fixed markup. Interchange Plus Pricing is exclusively how we quote at Host Merchant Services. Interchange Plus, also known as Cost Plus, pricing gives the customer a fixed rate over published Interchange Fees. This pricing format is normally quoted as a discount rate (percentage fee) along with a per item or authorization fee. The great thing about Interchange Plus pricing is that you always know exactly what you are paying to your processor to services your account. Think of Interchange, and all the associated fees, as an unavoidable cost. No matter who you process with, you have to pay these fees. They may be labeled differently, or wrapped up in a confusing pricing tier, but one way or the other, you are paying Interchange fees. By understanding the markup you pay over Interchange, you know exactly what you pay to your processor and exactly what is going to the card associations. That allows you to make a decision on whether or not the markup seems reasonable for the service you get and choose your processing partner accordingly.
Here’s a small graphic explaining the basics of how Interchange Plus works.
This is the latest installment in The Official Merchant Services Blog’s Knowledge Base effort. We want to make the payment processing industry’s terms and buzzwords clear. We will eliminate any and all confusion merchants might have about how the industry works. At Host Merchant Services, we promise to deliver personal service and clarity. So we’re going to take some time to explain how everything works. This ongoing series is where we define industry related terms and slowly build up a knowledge base and as we get more and more of these completed, we’ll collect them in the resource archive for quick and easy access.
Payment Gateway
Today we will focus on Payment Gateways and how they work, in order to wrap up our week of E-commerce driven content. A payment gateway allows E-commerce merchants to accept credit cards on their websites. Sensitive payment information is encrypted by the gateway to ensure that it passes securely between the customer and the merchant. We have defined a POS, or point of sale system already for the Knowledge Base. A payment gateway can be considered a virtual point of sale system. The gateway acts as a “middle man,” allowing communication between online shopping carts or virtual terminals and the banks processing the transaction.
The process can be broken down like this, it starts when a customer places an order on a website by pressing the “Submit Order” button in an online shopping cart. The payment gateway then forwards the transaction information to the payment processor used by the merchant’s acquiring bank. From there the payment processor forwards that information to the appropriate card association (ex Visa, MasterCard). The credit card issuing bank receives the request, or the Authorization and does the necessary credit or debit check and then sends a response back to the processor in the form of an approval code (ex approved, denied). Next the processor forwards the authorization response back to the payment gateway. After receiving the response, the gateway forwards it on to the website, which then evaluates it as a relevant response and relays the outcome to the merchant and cardholder. Finally, the merchant then fulfills the customers order, then after a batch the acquiring bank receives the funds, and deposits them into the merchants bank account.
Payment gateways can be stand-alone systems designed for integration with other 3rd party systems, or they can be bundled with their own shopping carts and virtual terminals. It’s worth noting that most merchants will not need to install additional software on their own servers to run a basic payment gateway. Some payment gateway providers are simple to implement, but do not offer much customization. Others are more complex but can be customized to your needs.
Host Merchant Services offers a variety of E-commerce solutions to fit your business, including Transaction Central, our own cutting edge in house payment gateway. HMS is able to interface with most of the major Payment Gateways out there, including Authorize.net. We also offer unparalleled protection for all of our merchants in the form of our PCI Compliance Initiative.
Today The Official Merchant Services Blog keeps on rolling along with the topic of E-Commerce. We’ve recently been looking at some of the interesting individual aspects of the sector, such as our blog about E-Commerce and Video Games the other day and our blog about Social Media Commerce yesterday. We’ve consistently reported how pervasive and commonplace online shopping has become over the past decade. Gone is the shiny newness of using a mouse to do all of your Christmas shopping. It’s now something mundane that we see most consumers in U.S. households doing when they need either the convenience of going online, or the power they have to find exactly what they want when local brick and mortar venues may not have the service or product desired.
A huge fuss has been made repeatedly over the past two years that Mobile Payment Processing, or M-Payments, are going to reap billions of dollars of profit worldwide and online shopping will shift and embrace shopping anywhere with one’s smartphone.
The King is Dead
This article from Jasper Bell at Econsultancygoes so far as to suggest that E-Commerce is dead and that a new hybrid concept, called Distributed Commerce. Bell calls it a “shift from this direct model, to an indirect, more agile way of selling.”
Bell cites the growth of social media and mobile phone usage. Bell discusses the power of what he calls “peer-influenced content” — essentially word of mouth advertising on social networks, or more simply put, you get turned on to a good or service because your Facebook friends tell you it’s cool or your twitter feed blows up — as a key factor in the paradigm shift.
He also demonstrates that the fluid ability to move from the virtual space on your mobile device to the physical realm of the area you are in and then back into the virtual realm of another device or a channel makes marketing and eventually commerce much more flexible and agile, keeping up with the consumer no matter where they go or how they get there. The International Data Corporation backs up that assertion with its findings that indicated 45% to 60% of smartphone users conducted due diligence on store prices and inventory from their devices. IDC also falls into line with companies like Garnter and Juniper about the healthy future of m-payments, predicting that by 2014 more than $50 billon will be spent on merchandise globally by consumers using their smartphones.
This agility for consumers to shop wherever using their phones as both assistants and payment option is something we have delved into with our look at the variety of Mobile Payments options. And Bell makes a really compelling point that people flip quickly between a product search on their phone’s internet access to a purchase ready state in mere clicks. Distributed Commerce is what Bell calls the evolution of E-Commerce. And it is probably the strongest reason why all of our coverage of mobile payments is still listed under the category flag of E-Commerce. We at The Official Merchant Services Blog already acknowledged this natural connection and kept them together in the larger picture of E-Commerce.
As Bell says in his article, “Commerce today is less about ‘selling in’ a channel but selling ‘through’ a channel, reaching out to consumers wherever they are and selling in that context.”
The Other Shoe
Bell’s compelling evidence for the rise of M-Payments sets his article on a course to then predict a downfall in E-Commerce. We think this is mainly due to his definition of E-Commerce referring primarily to shopping online through a PC or Mac desktop computer — ye old visit to amazon.com from your home computer. We of course lump M-Payments into the overall umbrella of E-Commerce. We also don’t feel the juggernaut that is E-Commerce is so easily deconstructed by the baby steps of M-Payments just yet.
Twenty Five Percenters
Juggernaut is too timid a term to describe E-Commerce. This infographic from Big Commerce asks the question “Will M-Commerce Overtake E-Commerce?” If you skip right down to the bottom of the graphic, the sub section titled “Brace Yourself” you find this stunning and overpowering fact: E-Commerce is expected to generate $1 trillion in revenue by 2014. The graphic also states that 54% of all retail purchases will be made online by 2014. Comparatively, M-Commerce is predicted to hit $119 billion worldwide by 2015. Mobile Payments are not going to be the death of E-Commerce just yet.
And this article by Media Post News says pretty much just that — estimating that even by 2017 m-commerce will match about 24.4% of the overall e-commerce pie. All of these projections point to staggering growth for mobile payments, but moving right along with that is the firmly established e-commerce sector that will continue to take more and more of the standard retail pie as it nom-nom-noms its way to massive revenue generation.
Big Time Processing Opportunities
What this means in terms of the payment processing industry and all the companies like Host Merchant Services that facilitate credit card transactions for merchants is simple: Our economy is going cashless. We are driving full steam ahead into a realm where we buy things with phones that will function like credit cards, or we just hop on a device/tablet/computer and click-touch-click our way to purchases. This means more and more of the purchases people make will carry the processing fees that credit card processors make their margin of profit from. As the economy becomes completely tied in to credit transactions through E-Commerce, payment processing becomes a standard. It’s something Merchants need to know about and that’s why The Official Merchant Services Blog exists.
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Used to distinguish new sessions and visits. This cookie is set when the GA.js javascript library is loaded and there is no existing __utmb cookie. The cookie is updated every time data is sent to the Google Analytics server.
30 minutes after last activity
__utmc
Used only with old Urchin versions of Google Analytics and not with GA.js. Was used to distinguish between new sessions and visits at the end of a session.
End of session (browser)
__utmz
Contains information about the traffic source or campaign that directed user to the website. The cookie is set when the GA.js javascript is loaded and updated when data is sent to the Google Anaytics server
6 months after last activity
__utmv
Contains custom information set by the web developer via the _setCustomVar method in Google Analytics. This cookie is updated every time new data is sent to the Google Analytics server.
2 years after last activity
__utmx
Used to determine whether a user is included in an A / B or Multivariate test.
18 months
_ga
ID used to identify users
2 years
_gali
Used by Google Analytics to determine which links on a page are being clicked
30 seconds
_ga_
ID used to identify users
2 years
_gid
ID used to identify users for 24 hours after last activity
24 hours
_gat
Used to monitor number of Google Analytics server requests when using Google Tag Manager
1 minute
Marketing cookies are used to follow visitors to websites. The intention is to show ads that are relevant and engaging to the individual user.
Facebook Pixel is a web analytics service that tracks and reports website traffic.