Let Customers Pay With Plastic
   By Terry M. Blair

One simple decision can help your startup business leap to life: Deciding to accept customers’ credit and debit cards for payment.

How important is that decision to boosting your sales? Just look at the American Bankers Association (ABA) 2003/2004 Study of Consumer Payment Preferences.

The study found that electronic payments have surpassed cash and checks as consumers’ preferred payment method for in-store purchases. Cash and checks now account for only 47 percent of consumers’ in-store purchases, compared to 57 percent in 1999 and 51 percent in 2001.

The trend toward plastic payment continues to be driven by the increasing popularity of debit cards. Four years ago, debit represented only 21 percent of in-store transactions. Today consumers report that nearly one out of three (31 percent) in-store purchases are made with a debit card.

“While in-store payment habits develop early for most consumers, they are by no means static,” says Jane Yao, ABA’s managing director of surveys and statistics. “Consumers will continue to look for—and migrate toward—new payment methods that satisfy their payment needs.”

According to the ABA study, the growth in debit card use has come at the expense of cash and checks. Although cash remains the single most frequently used payment method in stores, its share of the transaction mix fell from 39 percent in 1999 to 32 percent in 2003. Checks also play a diminishing role at the point-of-sale, accounting for just 15 percent of purchases.

Convenience, security and ease-of-use are significant factors behind consumers’ choice to use debit cards, according to a 2004 Harris Interactive survey sponsored by MasterCard International.

The survey found that:

• 82 percent of adults using debit cards note convenience and safety to be extremely/very important attributes, as opposed to carrying cash

• 77 percent considered debit’s transaction speed and ability to save time at the checkout counter extremely/very important

• 84 percent of debit cardholders who go online feel it is extremely/very important that their debit cards can be used at merchant locations

• It is important to 79 percent of debit cardholders that debit cards are easier to use than writing checks

“Consumers feel very strongly about having the debit payment option available to them when making purchases,” says Fred P. Gore, senior vice president of North America Acceptance for MasterCard. “If consumers are denied the opportunity to use their debit cards … merchants might very well lose sales or see consumers use an alternate, more expensive, form of payment, such as checks.”

The trend makes it clear that if your startup doesn’t accept plastic as a means of payment, you risk losing sales. Just as bad, you risk alienating customers.

The 2004 Harris Interactive survey found that 63 percent of debit card users say that their perception of a merchant would be negatively affected if it no longer accepted their debit cards for payment. More than half (52 percent) indicate they would “consider walking out of a store without making a purchase” if their debit cards were not accepted.

A new business can’t afford to miss out on those sales. Yet many startups dismiss plastic payments. They consider the fees and transaction costs too expensive for their fledgling businesses. But that conclusion is shortsighted. To succeed long term, businesses must give consumers what they want. And many clearly want to pay with debit cards.

“Signature and PIN-based debit offers incomparable payment flexibility to consumers wherever they make purchases—in stores, online or over the phone,” says Gore. “As more consumers report using cash and checks less often, offering them the broadest selection of payment choices will only enhance their satisfaction with the shopping experience.”

Convinced you need to accept plastic? Here are some tips to help you get the best processing deal:

• Evaluate different merchant accounts by talking to several vendors, such as banks, credit unions and processing companies

• Compare the costs of application fees, terminal systems and monthly minimums

• Evaluate customer service and assistance programs when investigating a vendor

• Ask business associates which vendors they use—and like

Here’s a final tip: Check out National Process Company (NPC), one of your AFS benefits. NPC offers AFS Members debit and credit card processing at low rates, with no application fee or monthly minimum.

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