Why we stopped accepting credit cards.2015-09-15 21:59:44
Fifteen years ago when Directory Wizards was starting out, it was practically business law that you need to accept credit cards. The process was daunting: First, we needed to setup a special merchant account at the bank (comes with fees). Next, we had to setup accounts with credit a card processor/reader (another fee). Finally, we were able to accept credit cards (more fees/transaction). This is the way it was and we accepted it.
A few years later as internet transactions matured, we partnered with 2checkout, an online credit card processor who didn't require a merchant account or a credit card reader! It was as if we were cheating at handling credit cards. The site was so useful we never had to modify our web site and payments were processed via a custom URL we sent with our invoices. The customer would click on the URL and immediately 2checkout took care of the rest. They even have fraud protection to ensure everything was on the level. They have their own customer service department (with a phone!) and we never had to touch a credit card number.
Another law of business is to make sure your expenses do not exceed your income. A corollary to this should be: If you don't want to raise prices, you need to cut costs. With all the advantages of 2checkout, they did still take a comparatively large percentage of the sale and would only send payments every 15 days. What we needed to find was a new way to process credit cards at a better percentage. After a month or so of research we did manage to find some processors that were a few percentage points cheaper. There were some inherent issues:
- Development Effort
- The processors require your web site to receive the credit card information and send it on to their API's for validation/payment. This is a pretty daunting task from a web site point of view. A whole internal cart application would need to be integrated into our web site.
- We would have to store credit card numbers! I've seen first hand how this has gone with larger companies. It's a risk we are not willing to take for the company or for our customers. We have learned over time, there is no such thing as perfect security.
- Service fees
- Between checks, wire transfers & credit cards, the service fees for credit cards are orders of magnitude higher than the others. It baffles us why a larger sale should cost more than a smaller sale. The storage and transfer of an digit or two on a computer is negligible.
For companies who's primary focus is consumers, we understand the need to support credit cards. Directory Wizards is strictly a business to business company. Most (if not all) of our transactions follow the Quote/Purchase Order/Invoice process of completing a sale. We have had cases where if the typical sales cycle is broken, say a purchase via credit card was made at the quote stage, the purchasing company tends to forget they purchased the licenses.
Slowly but surely we are moving away from 20th century business technology, fax lines, credit cards etc and moving towards payment systems with less friction and overhead.
There is a glimmer of hope for new processing systems such as Dwolla which offers flat rate transfers (was $0.25/now ZERO!) and near real time (as fast as the banks can transfer) transfer of funds. If you are a customer based in the U.S.A. you should look into this as a future option!
To wrap this up on a positive note, our prices will remain the same as they have for the past six years!