How the rise of e- and m-payments affects you...

2015 will be year of the eCommerce and mobile payments

Unless you’ve been living under a rock (and, yes, withhold your judgment because I lived under a rock for many years), you’re aware at this point that payment processing has changed considerably since the first physical credit card terminal in the 1970s.  We still use those old terminals, yes, but now there are other ways of accepting credit card payments that revolve entirely around the internet, where the cards being used don’t even have to be there.  Nowadays, in fact, you can log onto someone’s website and buy something from their online store with just a couple of clicks; you can walk into a retail store and hold your phone to a scanner and complete a purchase.  Your credit card numbers are scrambled and stored in an electronic vault, and, if anyone touches your information, your bank usually lets you know seconds after the occurrence.  The way payment security and convenience has advanced in the past decade or so has been simply astounding.

Today I want to focus on eCommerce payments and mobile payments because these two payment methods in particular represent the zenith of payment technology (at least for the moment), and as the years stack up, mobile payments will likely gain a great deal of traction, and eCommerce payments will become even more popular than they are now.

Do you wonder why that is, though?  It’s not that people embrace whatever new thing is thrust in front of them—just look at New Coke or minidiscs.  Something else is drawing people to these new technologies.  I think it’s pretty intuitive, actually.

 

eCommerce and mobile payments are EASY

I can’t prove this, but I would wager that both e- and m-payments were conceived of with the intent to make life easier, both for consumers and the shop owners who cater to them.

 

Of course, keying in credit card numbers over the phone has always been possible, and, with the advent of the online payment gateway, embedding that technology in a company’s website so consumers could purchase products directly from the site probably wasn’t much of a stretch—in hindsight, of course.  The idea is instead of looking on a company’s website and calling that company to order a product, you can now save a step and simply click, type a few things, and…you’re done.  And, you don’t have to call, wait for a human to pick up the phone, and deal with bad phone connections—none of that.  (The same goes for third party mobile wallets like PayPal.)

Likewise, pulling out a credit card and swiping has always been possible, but, having everything stored on a smart device makes for a world of new possibilities, like the “smart” choosing of the most beneficial rewards program for a particular purchase, and, not having to worry about losing credit cards because they’re all stored on your phone.  Furthermore, the possibility of integrating digital wallets with other smart apps (and hell, just being able to access everything on the same device!) has the potential to make life easier in ways we haven’t even considered yet.

Bottom line: e- and m-payments make life quite a bit easier.

eCommerce and mobile payments are substantially more secure than you might think

I can’t prove this either, but I would wager that both e- and m-payments wouldn’t be anywhere near as successful as they are (even with mobile wallets in such a nascent stage) if their extra security features weren’t working very effectively.  I’m talking about tokenization, of course.

Tokenization breaks credit card information into disconnected bunches of random numbers that can only be unscrambled with a special formula.  If a hacker ever breaks into a server that utilizes tokenization, the credit card numbers he comes across would be completely unusable.  Ironically, it’s the e- and m-payments’ perceived lack of security that prevents them from advancing even more quickly—at least in today’s age.  Tokenization makes credit card data virtually indecipherable to wrongdoers, but older generations who are used to things done a certain way might not choose to believe it.  (And, I’m not bagging on older or more stubborn folks here.  Point in case: I refuse to buy one of those newer TVs with the higher frame (refresh) rates because I’m not used to how the picture looks, and I don’t particularly like it!  I don’t give a damn if the quality’s better.  It just doesn’t seem like a TV anymore with that kind of picture.  And, by the way, I just learned you can turn that feature on and off.  Still don’t trust it…yet.)  I don’t doubt at all that as new generations are indoctrinated into the e- and m-payments mentality, they will embrace it easily, without a second thought—unlike folks who have experienced something different in their lives.

The net effect of these new technologies

We’re living in some pretty pivotal times right now, and, barring the world ending unexpectedly, these payment technologies will soon become the norm—or, even more the norm than they are now.  PayPal, which is already the standard on so many websites, will be even more prevalent, as well as other, similar services like Amazon Payments.  And, as more companies begin to utilize tokenization—on its own or as a byproduct of adopting Apple Pay or something similar for in-store purchases—transactions will get even easier for consumers to perform on their own, without the help of a salesperson.  And, they’ll be safer than ever before.  So, essentially, everything is going to be easier and safer.  That's how technology tends to work.  Eventually.

I know this is a bit of a departure from my normal doom and gloom stance on most aspects of credit card processing, but developers really nailed these e- and m- ideas.  The potential for safer transactions for all merchants is simply enormous, as is the potential for integrating payments into other apps and aspects of life with digital wallets.  This is truly an exciting time…and, I’m really curious to see what happens next on the payments front.

COST Versus PRICE in Payment Processing: They're Not Interchangeable

(or, a brief sojourn through time is the only way I can make this point)

Why, yes, I did borrow this image from 1995.

Today I want to talk about the differences between costs and price and how those two factors stack up against each other in credit card processing.  What does that even mean?  It’s quite simple, really, but I can explain it better with an analogy than I can with algebra.  Let’s pretend we’re at a furniture store for a minute…

At IKEA

I can feel you cringing.  Hey, I’m on a budget here!  We’ll let you shop at Restoration Hardware in a minute.  Anyway, we’re here at IKEA and I’m looking at a chest of drawers.  I see something that looks pretty decent, does everything I want it to do, and it’s only $200.  Before you ask, yes, I’ve shopped around a little bit and this is the best deal I’ve found, so I’m pretty proud of myself.  I think I’m going to have to put it together myself, but I’ll survive.  After doing a little work, I’ll throw this in my room where it will proudly store all of my clothes.

Now, let’s turn the clock ahead five years.  I know I didn’t tell you we were getting into a time machine, but just ride it out; I swear it’ll be a good experience.

Five years later…

Don't worry, these are stunt doubles, not even from IKEA.

Here we are, back at my house, and my dresser from IKEA has moved around town a few times.  I’ve used it endlessly, and it’s operated tirelessly for me—well, as tirelessly as it could.  It’s quite banged up, and the cheap black finish is scratching off.  Also, I didn’t tell you this, but two of the drawers have never quite closed correctly, so the paint is really coming off around those edges because of all the excess friction.  If we take a step back, this thing looks beaten.  It’s a little embarrassing, actually, and if I have company over I might have to cover it up just to save face.  I guess it’s just the way things are, though.

Now, let’s go back to the present moment and, instead of going to IKEA, let’s go across the parking lot to Restoration Hardware like you wanted in the first place.

At Restoration Hardware

Now, we’re looking at some nice pieces of furniture, and we happen upon a new wooden dresser, and…wow, it looks classy as hell.  Really nice veneer on the wood, really straight, and of course all the drawers are perfectly flush with the body—and, I can tell this because the thing’s already put together!  I hold my breath and glance at the price placard and my eyes bulge—it’s $600.  You assure me it’s a good deal, though, because—well, look at the quality!  You’ll have this thing forever, you assure me.  I fret for a minute but ultimately succumb to peer pressure, and you warmly reassure me I made a really smart purchase.  I feel a little better as I watch the complimentary shipping service guys wrap the chest up and load it into their truck.  The thing’s going to make my room look awesome…

Now, back to the time machine, obviously.

Five years later…

Yes, it is.

Well, when I first got the dresser into my room, it was pretty fantastic, and I guess it shouldn’t surprise you that, for the price, it’s held up incredibly well.  I’ve had to move it a couple of times, but it doesn’t have anything but superficial scratches on it.  All the hinges still work well, and none of the finish is flaking off, due in part to the fact that there isn’t any excess friction from shoddy workmanship (my own in an alternate scenario!).  I haven’t even thought about replacing it—and, why would I?  It’s an awesome piece of furniture, and it perfectly complements my room.

Okay, one more trip back to the present.  This is where we heroically apply what we’ve learned to the present moment to change the future for the better.  God, I should be a screenwriter.  Anyway, I’ve learned that buying furniture isn’t something to sneeze at—it’s more of an investment for the future.  My RH dresser hasn’t crapped out on me once, and I don’t expect it to unless my house burns down.  I’m in pretty good shape.

I haven’t mentioned credit card processing ONCE yet

And here you thought you were going to fall asleep at your desk.  Not so this time!  But, like all good things, this one must come to an end too.  The reason I told such a flowery story is because I like doing stuff like that, but, the story’s meaning really can be applied to picking a suitable payment processor.  So many times—in fact, the vast majority of times—merchants in need of payment processing go shopping at IKEA.  It’s the only place they ever shop, and, if the folks over there or any other big bin store come out with a better-priced chest of drawers or a lamp, merchants are sure to at least give it a once-over and probably even take it home because, gosh, it’s just so cheap.  Processors might cold-call you and remind you you can come to Restoration Hardware and you’ll have an attentive salesman there who isn’t bogged down with putting inventory away, who can tell you exactly how their special couches are stitched, the thread count of the sheets on their display beds, and the kinds of wood that go into their armoires.  “But,” a merchant might counter, “What are your rates?”  The sales guy on the phone answers, and the number he quotes makes the merchant a little flip.  “Don’t even bother me with that nonsense,” the merchant might say, and hang up the phone immediately.  “Serves him right for trying to swindle me out of my money,” the merchant says to himself.

The thing the merchant does not realize, and what you now do realize by now, is that choosing the choosing the right vendor for your company, much like buying furniture, is a solution for now and an investment for the future.  Not next year, not something to tide you over till you’re out of college, but…the future.  When you shop for payment processing, you’re not just shopping for the lowest price or lowest rates: You’re shopping for low costs, a solid company behind the services offered, a good pricing plan for those costs, technology that fits your business goals, a more-than-adequate support team: a solution that can grow with your business.  You may very well end up paying a little more than you would have, but your choice will pay back your business in spades.  And, you might even take pride in your choice like you'd take pride in buying a piece of furniture that really improves your room instead of simply serving a purpose until the next plebeian piece of furniture comes along.

Jeremy

Disclaimer: I shop at IKEA.  I take good care of my furniture but I know very well I'll have to replace it if I ever share my space with anyone else permanently.  That's analogous to, say, accepting over $30,000 monthly in credit card payments.