Cover Story

  Why Wait F

or The
 To Turn?

How To Improve
Piece of the

Your Own
E-Commerce Pie

by Robert A. Silverman

   Everyone complains about the economy and depressed sales, yet most sit and do nothing. Why wait until the economy completes its turn? Merchants have the power to change their own economies, yet most choose to complain instead. I have no sympathy for any of them and neither should you.
   See if this makes sense to you, because it still doesn't to me: In the bricks and mortar world, between 18 and 20 billion checks are written at point-of-purchase locations every year in this country. On the Internet, however, most merchants don't even accept online check payments. That's like opening a store at the local mall, but closing your doors to more than a third of potential shoppers.
   Put simply: it's bad business.
   There are no excuses anymore, as such merchant-targeted online check payment services as Western Union MoneyZap and the independently owned iBill have burst onto the scene � ready and waiting to make it easy for large merchants to accept online check payments. For smaller vendors who do business on the likes of ebay and Yahoo! Auctions, online payment systems like PayPal, Western Union BidPay and the ebay-owned BillPoint can also do the trick. Others, like Citibank's c2it system, fall somewhere between these two categories.
   Even, the mother of all online shopping malls, doesn't currently accept online check payments. Yes, they accept checks, but users have to send them in via snail mail, the old-fashioned way and wait for authorization and verification of the very paper upon which they are written. And this just doesn't cut it for most buyers who are eager to rip open the packaging and begin listening to that new Paul McCartney album or tear into the latest Stephen King tome.
   As Amazon puts it on its Web site, as of this writing: "Paying by check does slow down your order somewhat, as we don't order your items until your check is received and we don't ship the items to you until your funds clear. If you are in the United States, paying by personal check typically delays your order two to three weeks."
   Integrated well into an online merchant's existing e-commerce infrastructure, an online check payment service works just like credit card purchases � fast and easy. Merchants can integrate online check payment software solutions directly into their Internet checkout processes � fully integrated with their existing sales systems and software.
   As such, online check payment relies on a process similar to credit card processing. Just like with credit card transactions, the process is a two-step one. In the first step, a merchant-initiated authorization request is presented for real-time authorization of the transaction by the purchaser. In the second step, files are transferred during a clearing and settlement process in order to initiate the movement of funds.
   "Online check payment services should be a must-have for merchants as e-commerce is mainstreamed into the way Americans shop. If you want to do business on the Internet with Middle America, you have to be able to transact the way people choose to shop in the real world� and that means accepting online check payments in a manner that is as effective and as efficient as online credit card payment options," said Elaine Bolle, President and CEO of First Data Corp.'s Achex division, the unit which operates the Western Union MoneyZap service.
   For Internet non-perishables retailer,, online check payment capabilities are helping put it in the fast lane of the Electronic Infobahn. Remember the bricks and mortar analogy: Could you envision the neighborhood grocery emporium turning away check writers? There go most of the sales from Middle America and the middle class!
   "We realized a lot of people use checks in the brick and mortar supermarket environment� and we received email requests from customers who wanted to pay by check online. It was more than just an intuitive feeling that we needed to have an online check payment solution," said NetGrocer's Chief Financial Officer, Yoram Evan.
   The advantages of online check payment services are clear � online merchants no longer have to leave money on the table. Not only do such systems open up e-commerce to the millions of Americans who prefer to shop by check, they are a necessity to reach the more than 80 million Americans who don't even have credit cards but do have checking accounts.
   "We needed additional payment options in order not to turn away any potential additional customers,'" NetGrocer's Evan stresses. "Five to ten percent of our business is now coming from online check payment. I would assume that this money � and it's a significant amount � wouldn't be coming to us if we didn't have the [Western Union MoneyZap] solution."
   Interestingly, large merchants have fallen behind the mom and pop vendors who populate online auction sites like eBay and Yahoo! Auctions. These tech-savvy folks have long since realized that online payment systems were a must-have to reach the masses with itchy mouse fingers. For many of them it was the only way to get paid by individuals who didn't want to entrust their credit card information to anyone with an online auction account.
   PayPal, ebay's own BillPoint and Western Union BidPay are three person-to-person payment upstarts who quickly rushed in to fill the void for auctioneers and small vendors.
   "We think the age of e-commerce is only just beginning, particularly for the small business market," said Vince Sollitto, PayPal's Vice President of Corporate Commun- ications. "Government data shows that approximately 22.6 million small businesses in the U.S. generate a total of $1.6 trillion in annual sales. But only 3.1 million merchants currently accept credit cards, leaving a large number of sellers unable to accept traditional electronic payments. By enhancing the existing payment infrastructure, PayPal serves the need of these sellers for a secure, convenient and cost-effective online payment system."
   Other online payment processors that allow for online check "writing" include Citibank's c2it, which the bank launched in a similar vein as PayPal and BillPoint. Like those solutions, c2it has been positioned as a "person-to-person" payments system, with plans to ramp up into what it is calling "person-to-anywhere" payments � to encompass merchant-buyer relationships, as well. c2it currently is available to any U.S.-based individual with an e-mail address and was launched with a focus on one-to-one money transfers.
   Of course, what most merchants need to ask themselves when looking to open up their e-commerce offerings to a true mass market, is, "what type of online check payment service will best fit with their existing automated ordering and fulfillments systems?"
   Merchants should look to select online check payment services that plug neatly into existing merchant order and fulfillment systems, meshing perfectly with the way they already accept orders, fill them and ship and track them. For its part, online retailer NetGrocer, couldn't agree more that integration into legacy merchant systems is crucial.
   "We investigated at least three or four online check solutions. With our online check software the whole transaction is seamless and the integration was seamless with our service. Our checkout process is very detailed because we strive to ensure exceptional security, so making changes to it is very difficult," said NetGrocer's Evan. "We can interface easily with Western Union MoneyZap from our service."
   And we're talking about more than just products that users can ingest or imbibe. Virtually all retailers, wholesalers and service companies that do business online should sit up and take notice of online check payment services that can help ensure they no longer leave extra cash on the proverbial table.
   Online check payment services should also help merchants complete more transactions with one of the Internet's bread-and-butter market segments � small business owners. Countless small business owners opt to make virtually all of their purchases using small business checking accounts, so that they can keep their finances straight and avoid paying for supplies with personal credit cards. For online merchants to ignore their needs and desires is to set aside one of the fastest growing segments of our economy.
   So, which merchants shouldn't rush out and adopt an online check payment service for their Internet storefronts? Those who prefer to sit and complain while others begin to turn their own economies.
   And again, have no sympathy for them.