Can Group Coupons Help Ecommerce Merchants?
Group-coupon features from firms like Groupon and LivingSocial have become very common. However, is it a marketing approach that's ideal for every small business, particularly the ones that lack a brick-and-mortar existence?
Quite a few pure-play ecommerce businesses have started to tap into the trend. By way of instance, OfficeArrow, an internet community for office managers, has an ecommerce platform that contains a"deal-of-the-day" offer for the members.
Moreover, Facebook application suppliers North Social and Wildfire have group-coupon-buying apps that merchants can use on Facebook Fan pages. Even some ecommerce platform suppliers -- ShopIgniter is 1 example -- are starting to bring a daily deals component in their platforms.
Our products:
Attend the Webinar for Group-Coupon Insights
On Thursday, March 10, at 3:00 p.m. Eastern U.S. time (12:00 Noon Pacific time), Practical eCommerce's social media manager, Paul Chaney, will sponsor a 30-minute webinar on the subject of group coupon purchasing for ecommerce merchants. The webinar is titled "Using Deal-of-the-Day Coupons to Attract New Clients"
In the free webinar, Chaney will discuss:
- Three examples of ecommerce businesses which use group coupon offers;
- Four ways ecommerce merchants can use group coupon purchasing;
- Five classes for using group coupon purchasing;
- Pitfalls to avoid when utilizing group coupons.
The webinar will benefit merchants that are new to group coupons, or attempt to increase their use of group coupons to obtain new clients.
There'll be lots of time for questions after Chaney's presentation.
Charge card processing rates will be dramatically lower for all U.S. merchants. That's due to the"Durbin Amendment" to the enormous Dodd-Frank monetary reform legislation, enacted last year. The Amendment's goal is to inject competition, and reduce processing rates, in the debit card processing company.
The Amendment, named after the Illinois senator -- Richard Durbin -- who introduced it, goes into effect on July 21. It mandates the U.S. Federal Reserve to establish rates that credit card issuers -- Visa, MasterCard, American Express, Discover -- credit to process debit cards. Those charges -- known as"interchange" fees -- are exactly what the banks and merchant account providers pay the issuers. They aren't always what merchants pay.
The Amendment addresses the two types of debit cards:"trademark" and"PIN". A PIN debit card is usually considered more secure because it requires another amount -- a PIN -- by the user to process. However, a PIN number has generally required a physical keypad and has, therefore, been available just for physical, brick-and-mortar retailers.
1 company, however, is now offering the ability to process PIN debit cards online. The organization, Acculynk, uses a graphical PIN-pad for the entrance of a customer's PIN right into the checkout page of a shopping cart. Acculynk calls for this service PaySecure.
We corresponded with Acculynk's CEO, Ashish Bahl, about the Durbin Amendment, debit cards, and how ecommerce merchants can benefit from the speed changes. Bahl has 25 years of experience in the payments industry. Before founding Acculynk, he founded Harbor Payments, which was later acquired by American Express.
Ashish Bahl
What's the Durbin amendment?
"The Durbin Interchange Amendment is an addition to a sizable bill passed by the Senate known as the Restoring American Financial Compensation Act of 2010. It became law as section Sec 1075 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
"The amendment is quite complex, but the key provisions are intended to reduce approval costs for merchants and also to provide greater competition among networks which will ultimately benefit merchants also. As a consequence of this legislation, the Federal Reserve Board has been requested to draft certain rules. Initial rules were published in December 2010 and final rules are expected to be published by July 21, 2011, which is when the law goes into effect.
"Based on the first judgment, here are the key changes:
- A cap of 7 to 12 cents on debit card interchange, a decrease of approximately 80 percent from current levels. This ruling only applies to banks with over $10 billion in assets.
- The introduction of competition, by forcing issuers to offer at least two separate payment options on their debit cards. Now, a VISA signature card will usually be using the Interlink system for PIN routing. But, Interlink can be owned by VISA. So going forward those banks will have to bring an unaffiliated network.
Merchants will have a choice about which debit system they process transactions over and can steer transactions to the lowest cost supplier."
How does this affect ecommerce merchants?
"Merchants will have the ability to direct customers to the low cost option on the checkout page.
"Merchants should also be ready for the actions issuers will be taking to mitigate the effect of the reduction in earnings. After Durbin, the issuer will no longer like a signature-debit earnings advantage. We believe issuers will start steering online payment transactions to PIN debit over signature debit cards. This is because the issuer can, and does, charge back fraudulent and disputed transactions to the merchant, but the issuer still has very substantial costs merely to process the high degree of chargeback and possibly fraudulent transactions under signature debit. To date Acculynk has seen a 77 percent reduction in chargebacks on Internet PIN debit compared to signature debit. Therefore, with earnings compression in the lowering of interchange rates, costs will be high on signature debit for those issuers to keep on supporting signature debit use, and there'll be increased issuance of PIN-debit-only cards. Merchants will need to empower their checkout pages today to take Internet PIN Debit to capture this market."
Which are the new debit card charges under Durbin?
"The Federal Reserve hasn't published what the final rates will be. In December, the Fed released preliminary rates 'for discussion' and invited comment on a proposed interchange rate of $0.07-$.12 per transaction."
Under the new Durbin rules, which entity assumes the fraud risk for all (a) signature debit cards, and (b) PIN debit cards?
"It wasn't the mandate of the law to re-define those principles and we expect the payment systems will continue to set chargeback rules as they have previously. If issuers react to Durbin by encouraging PIN debit, as we anticipate, that is great news for online merchants. If a customer makes an online purchase with PIN debit and then contacts the issuer and disputes the charge, the issuer may attempt to charge back to the merchant. But since the consumer has entered their PIN, the merchant's case the charge was valid is considerably stronger and the accountability generally reverts back to the issuer."
What can merchants do to promote the use of PIN debit cards?
"Online merchants have hardly any choices for accepting online PIN debit. Different hardware and software solutions have been tried but they finally ended up being too awkward for the consumer or complex for the merchant. Acculynk's PaySecure is easy to implement through your current acquirer [merchant account] relationship. It simply recognizes the card number entered is to get a debit card and embeds a PIN pad on the checkout page branded from the customer's own bank."
What is the rough overall quantity, as a proportion of overall card transaction, from debit cards at the U.S.?
"Based on a 2010 Javelin Research and Strategy study, 26 percent of ecommerce transactions are conducted with debit cards. Thirty-seven percentage of point-of-sale transactions are conducted with debit cards, according to some 2009 analysis by First Data."
How does your company fit into all this?
"Acculynk supplies PaySecure, a simple and safe way for merchants to enable online PIN debit to their ecommerce transactions. Our PIN pad has a similar look and feel to the ATM or point-of-sale PIN pad and places consumers at ease. They don't need to enroll at a third site or remember another password. They simply enter their PIN from their bank-issued debit card by click on the graphic PIN pad. The patented process was assessed by the important EFT networks and acquirers, and the item is currently live on over 3,000 merchant sites."
The Durbin amendment applies to Interchange rates, but not the actual rates that merchants are billed by their account providers (also known as ISOs and acquirers). What can a merchant do to guarantee that the Interchange cost savings are passed to their company?
"Interchange represents the largest component of merchant cost and merchants should have an expectation that in a competitive marketplace this cost saving will be passed ."
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