Cash may be king, but in a tight economy, more peoples are placing their loyalty in credit cards.
The economic downturn is forcing more businesses – including solution providers – to accept credit card payments from their customers.
“We’re a cash-strapped society right now, and anything we can do to extend the terms and get a grace period before we have to pay helps,” said Fred Joachim, president of iStream Financial Services, a full-service payment management company based in Brookfield, Wis. “On the consumer side, we are finding out that people are so cash-flow stuck they are literally trying to forecast how they’re going to pay for things like haircuts, etc.”
But with a little business savvy and a good credit partner, solution providers can make some extra dollars and build a loyal customer base.
Credit card companies such as MyRecievables.com and GE Money, to name a few, are offering solution providers a way to extend credit to their customers via a private-label credit card. Such a service not only can increase sales and profitability, but also build brand awareness and loyalty.
According to GE Money, private-label credit card customers will spend more than twice as much as bank card or cash customers. Plus, they’re more likely to buy on impulse and purchase more expensive merchandise.
“The business credit market in general has been growing over the last few years. Part of it is due to the economic conditions – that tends to correlate with more interest and need,” said Curtis Arnold, founder of CardRatings.com and author of a number of books on credit including, How You can Profit from Credit Cards. “As we have tracked the market we’ve seen strong growth in the number of cards being offered, and the small-business segment is untapped to a large degree.”
Such cards are different than the Visa debit cards many vendors use to pay SPIFFs to their solution provider partners, which can be used anywhere. These are cards that can be used only to purchase goods and services from the solution provider, like a department store card.
There is a downside, however; solution providers will be charged a fee from the participating financial services firm for offering a private-label credit card. But considering the fact that transaction fees are applied to every other credit card purchase, solution providers may do well to have a captive customer base with the private-label card.
In return for the annual fee, financial services firms will take care of all the back-end operations including application processing and credit evaluation, electronic point of sale transaction processing, electronic settlement of accounts receivable and payment processing and collections. In addition, some firms will offer additional services such as customer statements imprinted with the solution provider’s logo, account database management, custom card production, “frequent shopper” rewards programs and deferred billing options for customers.
“We use corporate cards that give us rewards and we love using cards for several reasons,” Arnold said. “There are a lot of good benefits. So it makes sense that more businesses are using corporate cards to take advantage of those benefits.”
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