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Slice of American Pie

Slice of American Pie

May 2, 2011
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" As with any opportunity there is risk. The question is, can you partner with a provider that can articulate and mitigate the risk sufficiently to allow you to earn more with your current products and services. "

It’s scandalous As a foreign professional who was relocated to the U.S. by an American-owned company, I opened a bank account with no problem but a credit card from that same financial institution was another concern for the bank altogether.

You see, no matter how conservative you are, how great your credit score is in your homeland, or even how strong your history with that bank is, it seems that if you don’t have an American SSN with any history, then clearly you just arrived on earth.

Perhaps you’ve noticed, this country is one with a lot of immigration. We’ll leave it to others to debate the terms of that immigration but none-the-less, people are arriving in this country in pursuit of the American dream. These people will not easily have a credit card at their disposal but a bank account is something they will have.

Above and beyond the immigrants without credit cards, there are regular people simply not approved for credit cards in this credit crunch, consumers who have elected to cut up their cards to ensure they are not using them, others who simply refuse to use the cards because of greater scrutiny at home on the bills, and still others frustrated with their bank declining the transaction or freezing their card due to a purchase.

By giving your consumers the online option to use their bank account for payment of your goods and services, you are able to capture consumers that you were unable to accommodate before and, as a result, you will increase the revenue associated with your offering by adding a market segment that was previously excluded.

This payment channel is known as Automated Clearing House (ACH) processing. People commonly know this as eCheck, direct debit, or electronic checks.

Many of you reading this article already question why anyone would offer such a payment option. After all, its only valid in the U.S., it’s a batch process with no real-time authorizations built in, there is a delay in knowing whether the account information is valid, the rules are seemingly mysterious and complicated and therefore more risky than the identified real-time world of credit card payments.

Without going into detail about this payment channel, let me give you a few reasons to leverage this capability:

1) The number of people with bank accounts is greater than those with credit cards;

2) Bank accounts don’t expire, in fact, account updates are automatically communicated back to the merchant’s bank;

3) Greater consumer confidence in the security of the banking channel. When is the last time you have heard of a data breach on bank accounts?

4) Consumers rarely switch banks like they would credit card issuers; and,

5) The U.S. is a large market with more than 308 million people.

As with any opportunity there is risk. The question is, can you partner with a provider that can articulate and mitigate the risk sufficiently to allow you to earn more with your current products and services. The result will be the creation of a bigger pie so that your slice is larger than it is today. While you are sitting there contemplating this, you could be earning more profits with your current offering simply by including a new payment option like ACH.

And to finish my story, the bank that went into convulsions at the thought of giving me a credit card was the same bank that had provided me with a corporate card in my name for the three years leading up to the move. Apparently that ongoing history doesn’t count when you lack a Social Security number and you are their employee.

Think about it: Not everyone in the U.S. has enough credit or even access to a credit card. How much market are you excluding?

Melody is COO of L3 Payments.


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