Comparative Study of Checks vs. Credit Cards for Subscription based merchants
 

Hello GFY,

Over the last few years, checks have started to take on a more significant role as an Internet payment option. Yet, checks are still widely misunderstood and under-promoted. The following study was done by a large volume Internet company that runs a major Affiliate program. We hope that this will help subscription based merchants make better decisions in payment options.

Obviously, one of the key ingredients to successful affiliate programs is the ability for sponsors to accurately forecast the gross revenue created by each sign-up that is sent by it's advertisers. Balancing this against the race to offer higher payouts in order to gain traffic and affiliate market share is a tricky proposition.

Recently, one of our clients did an in-depth analysis of their credit card and check sign-ups. What they found is that they make almost twice as much per check sign-up as they do with credit cards. As a result, they came to us wanting advice on how they can make checks play a larger role in their sign-ups.

But, before we discuss what can be done to increase check sign-ups let's clear up a few of the misunderstandings that exist about checks as a payment method.

1) Checks take away from credit card sign-ups. This is not really true. Certainly, there are some instances where a credit card holder may opt for using a check, but this is the exception. Moreover, this is a very good thing when it does happen as is explained below.

2) There is a problem with returned checks. This is true. Unlike credit cards, there is a limited way in which account information can be verified. However, WTS has developed proprietary systems that result in the lowest Check Return percentages in the industry!

The additional revenues generated by the 75+ million Americans that do not have credit cards far outweighs any cost associated with returned checks. Remember, WTS does not charge for returned checks in our managed ACH program, so you are only dealing with access issues.

3) Checks convert better and have better retention. This is true. Checks convert from trial better and have a longer retention rate than credit cards. More importantly is the following

A) The time in which a consumer can initiate a dispute is limited to 60 days after it posts to a bank statement. As you know, credit card charge-backs often encompass 1 years worth of charges. Since non face-to-face transactions carry this risk, it is important for merchants to understand this.

B) Risk models show that credit card transactions that recur for longer than a certain amount of time become high risk and are sometimes cancelled to limit risk exposure. Not so with Checks! Checking accounts are also not changed often versus the inevitability of expiration dates on credit cards.

C) Checks are cheaper to process than credit cards. Under our managed ACH program, there are no fees for checks that are not collected. There are no charge-back fees, return fees or credit fees. All this equals a cheaper cost of processing with less risk for the merchant and affiliate program operator.

So, how can merchants and affiliate programs capitalize on check processing? Here are some of the basics:

1) Make sure that you give equal exposure to checks as a payment option. In fact, quite a few merchants made it the primary payment option and have been quite happy with the results!

2) Always direct declined credit card transactions to the check option. Track traffic by country if possible to send foreign traffic to appropriate payment methods.

3) Consider discounting check trials or offering free check trials to garner a larger share of check sign-ups.

4) Make sure you take advantage of WTS' Data Dump (FTP/SFTP) service to account for settled and returned checks so you only pay out on settled check funds.

5) Take advantage of our cross-sell, up-sell and loyalty programs to increase check sales and improve retention.

We hope this information is helpful and look forward to the opportunity to process your check transactions.

Kind Regards,
Ben Zuckerman

Web Transaction Services
Toll Free: 1(866)735-5987 ext.1168
Fax: 1(512)263-3099
ICQ: 138827832

wow! thanks for that.

Thanks Ben ;)

muy interesante, Ben!

I get 50% return NSF on checks thats my problem with them

and I don't find out until they have had access to my site for 4 to 5 days usually after the first rebill

I do agree that checks do not take away from CC sales

Using WTS made a huge difference in my attitude towards check processing.

Interesting article, thank you

Nice post Ben! Thanks for the information!

Tanker... you're saying that 50% of your transactions are getting returned for NSF? If so, I'd like to look at your account, because that is a bit out of line than the norm, which is appx 30%. Also, seeing returns as NSF is actually a good thing! In that at least we have valid account information, which allows us to represent those transactions and then go after them through our collections dep't. We wind up collecting about 30% of those transactions! ;-) What you don't want to see is a bunch of returns with reason codes such as.... unable to locate, invalid account, account closed, invalid aba, etc. These returns not only cost you bandwidth, but you have no chance of recovering any funds.

*bump!*:)

People still use personal checks these days ??

They certainly use their checking account! I pay for everything over the internet, but I'm still using my personal checking account. Checks, especially by WTS who has an inhouse staff that contacts those that don't go through, is a GREAT way to make $$$ :)

bigalownz,

Peaches is spot on. The average US consumers have checking accounts, and use them on a regular basis. Online checks are a solution for the millions of Americans who either don't have credit cards, or will not use them on the internet. You tap into an entirely new revenue stream by offering an alternative payment option. It is safe to assume that you could add 25%-35% in additional revenues on your existing traffic simply by adding ACH as a payment option!