It’s virtually impossible for digital companies to handle every aspect of billing and payment in-house, so finding the right solutions provider is crucial to growing your revenue while lowering total costs to your business. You have some choices to make as far as this is concerned: You can use point solutions that address each piece of the puzzle individually or find more robust solutions that provide a cohesive ecosystem of tools that help you reach your goals.

To give you some context for some of the costs you might not expect in the area of billing and payments, we wanted to focus on the payment processing capabilities required to grow online revenue and the development resources needed to make sure everything is functioning smoothly.

Payment Processing: Important Considerations

Merchant of Record (MoR)

Managing relationships with payment processors, submitting associated credit card fees, and handling other administrative tasks around processing online transactions all have legal implications that, by default, fall on your business’s plate. Not all vendors will assume responsibility on your behalf as your merchant of record (MoR). To avoid significant fines, you would need to comply with PCI DSS standards and calculate, collect and remit taxes to relevant authorities.

Currencies and Payment Methods

To sell effectively in any market, you need to support your customers’ preferred currencies and payment methods. It’s just as important to not display any type of payment method that is irrelevant to that customer. It makes for a poor customer experience, and our data proves that offering only relevant payment methods raises conversion rates, even when those payments aren’t ultimately chosen by customers.

Relationships With Merchant Banks and Payment Service Providers (PSPs)

Negotiating and maintaining relationships with multiple entities can get complicated and expensive. And unlike a billing provider that has already has these relationships in place, you’ll need to build yours from scratch.

Country-Specific Payment Legislation

Some countries have passed laws that prevent money from leaving their borders. For example, in Brazil, your business can’t accept Brazilian real unless you have a processor and entity located within the country. If your legal business address is located anywhere governed by EU legislation, you are required to display an order confirmation page for your customers before they complete checkout. Because this is yet another opportunity for your European customers to abandon their cart, being aware of this page and optimizing it is critical for maximizing revenue.

Takeaway

A billing provider that acts as your merchant of record will manage your relationships with multiple merchant banks and PSPs as well as record and reconcile all of your transaction data. And because that provider has multiple clients, their transaction volume is much higher than yours. This means your business benefits from lower fees from PSPs. They’ll also support a plethora of regional payment methods and currencies, which you’ll require in order to optimize pricing for new markets.

Development and Integration: Important Considerations

Developer Resource Management

Will developers who are always busy with billing tasks have time to work on advancing your core service? It’s not likely, and your business could end up in the unfortunate position of having to delay improvements to your offering because billing takes up too much bandwidth. Or vice versa, you miss out on a lot of revenue opportunities because you don’t have the developer resources to implement or maintain your current billing solution.

Integration With Existing Business Systems

Consolidating customer data from your CRM, ERP, email platform and web analytics with your billing solution is necessary for a holistic look at your business performance — but it’s a complex development effort. As you research options for providers, make sure you understand how easily those providers integrate with your existing systems and what level of support they provide.

Transmitting Customer Data

There are serious risks with transmitting customer data between platforms, and your development team needs to know how to comply with ever-changing global privacy regulations. For example, do you support social sharing? If so, you should know that in August 2011, the European Data Protection Supervisor (EDPS) mandated the removal of post-purchase social sharing for online purchases in the EU. The very thing that increases customer acquisition in the U.S. can actually cost your business €50,000 in Europe!

Expansion Into New Markets

In order to grow your business, you need development resources focused not only on your current ecommerce efforts but also on global expansion. Each new market has its own set of regional specifications that require custom development.

Takeaway

In addition to freeing up developers to work on your core offering, a billing provider should be able to achieve full integration with your systems in a matter of weeks, rapidly accelerating your time-to-market. They will also process orders quickly (providing a positive customer experience) and securely transmit data in accordance with global privacy regulations.

To learn more about the hidden costs of global billing, check out our interactive microsite.

The post What Are Some of the Hidden Costs of Billing and Payments? appeared first on cleverbridge.

There are cases where it’s to your advantage to act as your own merchant of record. But there are also cases where accepting the responsibility of being the merchant of record has many disadvantages.

Going It Alone

Myth: It’s relatively easy to open a merchant account with an acquiring bank and install a payment gateway. Fact: The process for acquiring the ability to process even simple credit card transactions in just your local currency involves a lot of time and effort and maintenance. Banks must conduct financial audits, risk analyses, and investigations into what products you sell and what your chargeback rate will likely be. All these aspects influence the price and rate you receive on your gateway fee.

On top of the time, money and effort of getting up and running with simple credit cards in your domestic currency, there is also maintenance work to worry about. You need to make sure your customer and payment data is secure, that you’re collecting and remitting sales tax where it’s necessary to do so, that you’re handling customer questions about billing, managing refund requests and dealing with chargebacks. All of these things involve huge costs in the form of overhead and operational inefficiencies to your business.

The Difficulty of Going Global as Your Own Merchant of Record

If your business is growing beyond your domestic borders, being your own MoR in those cross-border regions gets even more difficult. To build a truly global payment infrastructure you have to deal with acquirers, not just once, but all over the globe with different rates for different currencies. And you need backups in place in case one goes down. I mean, how would you feel if you lost even just a few hours of orders?

From a MoR perspective, you’d have to set up all your international merchant accounts if you want to grow your global customer base. You need to handle payment contracts, not just for payment methods, but for currencies too. In fact, you need to sign contracts for each currency you want to offer your international customers. And because the typical software vendor does not process even close to the transaction volume that ecommerce providers do, the payment rates and fees for software companies will be much greater than if they found a reseller to act as MoR on their behalf.

Taxes

Your work doesn’t end once you sign all the contracts for offering payment methods and currencies to your global customers. So even if you are the MoR, you still have a lot of work to do before you can succeed globally. This is the part that many businesses don’t think about. The sales tax laws have been changing very rapidly around the world, and this is one the biggest challenges for digital goods companies. In the U.S., each state makes its own tax laws. Then each county. Then each city. Knowing what sales tax to apply to each transaction is very challenging.

That’s just the challenge of collection. Once you calculate and collect, how do you remit? You need to file for each jurisdiction and there are lots of opportunities to make mistakes. Now multiply that for different states where you have a tax nexus, economic or otherwise. And what do you do when you’re selling to German and Japanese customers? Or Aussies? Now what about Brexit? Gotta keep up!

Reconciliation

Acting as your own merchant of record also places a huge burden on your Finance department. For example, if you’re a software company and you get your gateway and merchant account for U.S. dollar transactions with VISA and MasterCard with one acquirer, you’ll need to reconcile your receivables at one rate with that acquirer and at a different rate with the acquirer you use to process Discover transactions.

What happens is that along with receiving your money into your merchant account, you get a long list of transactions. Then you have to reconcile the payments with the transactions. This presents an opportunity to really mess up your ledger, because you have to reconcile your payment from the acquirer according to every rate based on the type of credit card your customers use.

Ecommerce providers who act as resellers on your behalf will do all the reconciling for you as a MoR. All you have to do is wait for the cash in your accounts. Without that expertise, you have to spend lots of time and resources trying to see what you pay per transaction.

MoR is Key to Customer Experience

So why does any of this matter? Well, if you want to expand your business globally, and you want to provide those global customers with superior customer experiences (these are both excellent goals, btw), executing on MoR is key. The challenge is that most businesses simply don’t have the expertise to do that. And even if they had that expertise, they don’t necessarily have the development, business operations or financial resources to bring that expertise to life.

That’s where ecommerce providers and resellers come in. Resellers assume the entire burden of opening up merchant accounts, installing payment gateways, signing contracts for all the payment methods and currencies you need to accommodate global customers. They also assume responsibility for managing tax collection and remittance, maintaining data security, and reconciling your financials, leaving you to develop better products and a better business.

Without this infrastructure in place (and it takes a long time to get it in place when you’re on your own), your chances of growing global revenues are slim. More likely, you’ll be offering the wrong customer experience, many valid transactions will be declined by the card issuers, your conversion rates will go down, and your transaction fees will go up.

Keystone

What’s important to you? Is it to have cost certainty? To expand globally quickly in a compliant way? Or is it important for you to devote resources to doing it yourself?

If your goal is to expand into other markets, doing it as your own merchant of record means diverting resources from your product innovation and customer acquisition efforts.

Looking to acquire global customers and grow you global revenue streams? Reach out to cleverbridge today!

The post The Difficulty of Being a Merchant of Record appeared first on cleverbridge.

It’s virtually impossible for digital companies to handle every aspect of billing and payment in-house, so finding the right solutions provider is crucial to growing your revenue while lowering total costs to your business. You have some choices to make as far as this is concerned: You can use point solutions that address each piece of the puzzle individually or find more robust solutions that provide a cohesive ecosystem of tools that help you reach your goals.

To give you some context for some of the costs you might not expect in the area of billing and payments, we wanted to focus on the payment processing capabilities required to grow online revenue and the development resources needed to make sure everything is functioning smoothly.

Payment Processing: Important Considerations

Merchant of Record (MoR)

Managing relationships with payment processors, submitting associated credit card fees, and handling other administrative tasks around processing online transactions all have legal implications that, by default, fall on your business’s plate. Not all vendors will assume responsibility on your behalf as your merchant of record (MoR). To avoid significant fines, you would need to comply with PCI DSS standards and calculate, collect and remit taxes to relevant authorities.

Currencies and Payment Methods

To sell effectively in any market, you need to support your customers’ preferred currencies and payment methods. It’s just as important to not display any type of payment method that is irrelevant to that customer. It makes for a poor customer experience, and our data proves that offering only relevant payment methods raises conversion rates, even when those payments aren’t ultimately chosen by customers.

Relationships With Merchant Banks and Payment Service Providers (PSPs)

Negotiating and maintaining relationships with multiple entities can get complicated and expensive. And unlike a billing provider that has already has these relationships in place, you’ll need to build yours from scratch.

Country-Specific Payment Legislation

Some countries have passed laws that prevent money from leaving their borders. For example, in Brazil, your business can’t accept Brazilian real unless you have a processor and entity located within the country. If your legal business address is located anywhere governed by EU legislation, you are required to display an order confirmation page for your customers before they complete checkout. Because this is yet another opportunity for your European customers to abandon their cart, being aware of this page and optimizing it is critical for maximizing revenue.

Takeaway

A billing provider that acts as your merchant of record will manage your relationships with multiple merchant banks and PSPs as well as record and reconcile all of your transaction data. And because that provider has multiple clients, their transaction volume is much higher than yours. This means your business benefits from lower fees from PSPs. They’ll also support a plethora of regional payment methods and currencies, which you’ll require in order to optimize pricing for new markets.

Development and Integration: Important Considerations

Developer Resource Management

Will developers who are always busy with billing tasks have time to work on advancing your core service? It’s not likely, and your business could end up in the unfortunate position of having to delay improvements to your offering because billing takes up too much bandwidth. Or vice versa, you miss out on a lot of revenue opportunities because you don’t have the developer resources to implement or maintain your current billing solution.

Integration With Existing Business Systems

Consolidating customer data from your CRM, ERP, email platform and web analytics with your billing solution is necessary for a holistic look at your business performance — but it’s a complex development effort. As you research options for providers, make sure you understand how easily those providers integrate with your existing systems and what level of support they provide.

Transmitting Customer Data

There are serious risks with transmitting customer data between platforms, and your development team needs to know how to comply with ever-changing global privacy regulations. For example, do you support social sharing? If so, you should know that in August 2011, the European Data Protection Supervisor (EDPS) mandated the removal of post-purchase social sharing for online purchases in the EU. The very thing that increases customer acquisition in the U.S. can actually cost your business €50,000 in Europe!

Expansion Into New Markets

In order to grow your business, you need development resources focused not only on your current ecommerce efforts but also on global expansion. Each new market has its own set of regional specifications that require custom development.

Takeaway

In addition to freeing up developers to work on your core offering, a billing provider should be able to achieve full integration with your systems in a matter of weeks, rapidly accelerating your time-to-market. They will also process orders quickly (providing a positive customer experience) and securely transmit data in accordance with global privacy regulations.

To learn more about the hidden costs of global billing, check out our interactive microsite.

The post What Are Some of the Hidden Costs of Billing and Payments? appeared first on cleverbridge.