Expanding your customer base is critical for sustainable business growth. And providing products that serve new purchasing demographics is a sure way to add value for merchants and increase your own earning potential. In fact, doing so might put you and your customers on top of a gold mine.
One demographic that is getting a lot of attention these days is the “unbanked” – and for good reason. Whether it’s immigrants, teens or adults without credit cards, there are an estimated 50 million consumers in the U.S. who have little or no credit histories. While they may not be using traditional credit cards to purchase goods and services, they are believed to have very strong buying power. Today’s
12-to-19 year old Americans alone hold more than $190 billion in buying power according to MarketResearch.com. Industry research also estimates there are 60-80 million unserved online purchasers. So this leaves a huge opportunity for merchants to drastically increase their revenue potential, but they must offer the right financial solutions to reach this still highly-untapped, underserved demographic.
While unbanked prospects are typically considered high-risk, new types of credit-evaluation data have become available to reduce risk for merchants. Companies such as Bank of America and Wells Fargo are now test marketing new credit cards for consumers in this unbanked market. And even the world’s largest retailer, Wal-Mart, is getting into the action with its newly announced prepaid MoneyCard. So what can you offer your customers to reach this demographic? Alternative payment solutions are the answer.
Alternative payments are on the rise.
The online alternative payment solutions category continues to rapidly gain traction among merchants. In fact, a recent study by Brulant e-commerce consultancy found a 267% increase in the use of non-traditional payment methods from the largest e-commerce online stores. This rise can largely be attributed to increased revenue opportunities that result from reduced shopping cart abandonment.
Customers appreciate the convenience and safety they experience when using these non-traditional payment options because they don’t have to enter their credit card information or subject themselves to the possibility of identity theft.
There are many safe, alternative payment solutions available for ISOs and MSPs. One of the newest technologies on the market is a home phone payment solution that allows merchants to safely sell to consumers who don’t necessarily have a credit card or bank account.
This particular product works by letting consumers charge online purchases to their home phone bill.
Why the home phone bill?
While some consumers don’t have a credit card or bank account, most have a home phone bill. Some advanced home phone payment alternatives offer merchants access to 100 million of America’s household phone bills. That’s 90% of the country! And the access to this many households can drastically open up new revenue opportunities from consumers that don’t have or want to use credit cards online. What’s more, consumers love the convenience.
Home phone payment solutions are available today for purchases of digital content, such as music, video game and podcast downloads, dating subscriptions and online news subscriptions. These products work in a way that allow for monthly pre-set spending limits so that merchants have added revenue assurance. In addition to this feature, advanced home phone payment solutions are underpinned by a built-in risk management system that contain fraud management controls, such as identity verification, analysis and models to maximize profits, reduce risk and ensure peace of mind for the merchant.
How it works
Home phone payment solutions work in real-time, much like a credit cards. And advanced solutions incorporate sophisticated risk management features to protect the merchant. The steps below outline a typical transaction made online using a home phone payment option:
- Consumer visits a merchant site and selects the home phone payment option to make a purchase.
- Consumer enters their name, address, phone or account number and a private piece of data.
- Merchant sends the data to the home phone payment provider.
- The data is matched against a combination of telecom industry databases, carrier data, credit agencies and public records to validate that the end-user is who they say they are.
- The charge is authenticated and authorized in real-time by the home phone payment solution provider.
- The merchant confirms to the user that the charge successfully posted and releases the charge.
- The merchant settles the transaction.
- The telephone company invoices the consumer and settles with the home phone payment provider.
- The home phone payment provider settles with the merchant.
Presenting it to the merchant
Home phone billing solutions are now available to ISOs and MSPs. The commission model for phone billing works in a similar fashion to merchant acquiring agent agreements. ISOs and MSPs can receive a wholesale rate and participate in a revenue share for any merchant accounts that are sold above the contracted wholesale rate.
Today, these home phone payment solutions are available for digital content purchases made online, but advancements are being made to make the service available for hard goods as well.
Non-traditional payment methods will only continue to grow due to their many benefits. All in all, the alternative payment world offers a new ground for merchants to explore. But the home phone bill payment option provides a new purchasing demographic for merchants as well as convenience and safety for the customer, thereby benefiting all parties involved. Adding these unique solutions to your product mix will open up a whole new market for merchants and it could pay major dividends for ISOs.
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