I have an AMEX account with multiple cards. It amazes me how many businesses do not take AMEX. Yeah, I get that it has a higher fee, but AMEX spenders are usually big/loyal spenders. Both of our company’s biggest spenders are without a doubt AMEX card holders.
I tried to buy a bike at a local bike shop not too long ago. They would not accept AMEX, but I overheard another customer getting a 10% discount for being a member of a local bike club. I bet he used a card along with his discount.
Jay is describing my arrangement with PayPal as my credit card processor. In addition to the % of the sale and the 30 cent transaction fee, I pay $30/month for having the system available 24x7. This includes having use of a virtual terminal, where I can place a customer’s order for them (assuming I have all the pertinent ino: cc nbr, exp date, code, billing address and shipping address, email address, and phone number). I have had one or two issues in 15 years of using this system…pretty good track record.
I have one customer who buys a lot of wine without regard to bottle price, and he pays by money order. Yes, money order. I took it to the bank, put my EMH ATM card in the slot, put the money orders in where you would deposit a check, and there it is, in my account. I get a kick out of this guy. Known him a long time. Quirky as all get-out. But money is money.
Checks are basically dead to me. I think I write about 20 a year, usually for the oddball home services job. Everything else is bank payments, Venmo/Square Cash/Zelle, and of course credit cards etc. I think the only time I’ve been to an actual bank recently (other than ATMs) is to get a cashier check for a summer rental. And I don’t think I’m outside the norm. So maybe not that different unless you’re talking about people who avoid tech (e.g., my mom).
There are different ways to look at it too. Convenience for the customer; convenience for the vendor and cost. I get a phone call every day from some company claiming I will save money using their merchant services. Merchant services is big business. Has to be for the amount of calls and advertisements I get. These businesses wouldn’t exist if they didn’t make good money and enough to have multiple call centers calling non stop. It comes down to dollars and sense.
Every merchant service company charges a fee for use, usually a set fee per transaction, but some collect a percentage of the sale price.
Every credit card company, collects a percentage of the sale, usually between 3 and 4.5 %, depending upon the type of card.
Some credit card companies have a minimum charge should a business not have enough sales on their card for the month.
Do not go to a small winery or small retail store and expect a discount for multiple bottles and then throw down a mileage or double rewards card. No problem at BevMo and the major wineries, they are already priced for it.
There is convenience and then there is the cost of convenience.
Whew. I understand why Ken would be frustrated getting hacked, but I lose at least 1 or two credit cards per year to fraud. Nothing is totally secure when it comes to payment systems.
Sorry Jay, cash is going obsolete. Your going to have to move the bed and dig into your stock pile of Drachma and Shekels and convert to Electronic payment
Sorry, but ignorance is not becoming. Another person who should stick with what he knows. Do you see the word CASH anywhere in my post? If You owe me money and you pay me by Paypal and I have to wait 2-3 days to get my money, AND I have a real business that gets paid lots of money every day, having to wait 2-3 days to get my money is a cost I have to absorb. If my gross revenues are $1000 a day, I don’t give a crap because the cost is not a lot, but if I have a small law firm of 25 lawyers and 20 support staff (tiny compared to Counselor Mollen) and my annual revenues are none of your business, then losing 3 days of float (and if they admit to 2-3 days, it’s probably more), the cost to me of being paid by Paypal is about $6000 in lost value of the float. AND cash has nothing to do with it.
You should read the Paypal 10-K. Very interesting stuff. To summarize one key item, at December 31, 2017 (their year end 2018 10-K is yet to be filed), Funds payable and amounts due to customers as shown on the year end balance sheet was $19.742 billion. Total payment volume was $451 billion. Although imprecise because I’m not making all sorts of adjustments for miscellaneous items, that calculates to an the average days of float was 4.39 days. There is a seasonality factor that I can’t measure, but the Christmas float should have cleared out by 12/31, and my guess is that volume is below average, not above, by 12/31, let’s be conservative and say that the 4.39 is distorted on the high side so let’s say 4 days. 4 * 19.742 billion * I(nterest)R(ate). Let’s say the average yield that Paypal could have earned on overnight short term debt was 1% in 2017 [way too low because their treasury management function was a lot better but we’ll ignore that for a moment because it just distorts the analysis in my favor], you have a company-wide value of the float of $2,164,00 for the float. If we do not ignore that and consider that Paypal is really a lending institution that lends out its float through a sophisticated treasury management system, their actual yield on the available cash is about 5 times that, or $10.8 million. Sounds like a lot, but it’s not. it represents less than 1% of their net income. The real revenue driver is fees on payments processed plus interest on credit balances. Of total revenue of $13.1 billion, $11.4 billion is represented by fees on transaction volume.
NOTHING is free. Chew on those numbers for a while. I have to get back to work.
It seems like everyone here is looking at this from a business perspective and not a consumer perspective. But let me give you an alternate millennial reality.
I’m sitting at home surfing through BD10 wine offers on my phone and keep loading up a cart with wines to purchase but I don’t actually finalize the purchase because my wallet is 100 feet away sitting on the counter. Then I stumble upon Grassl Glasses, load up my cart, click through with paypal, and spend $300 on new wine glasses without having to get off the couch. True story.
Now most of you are probably thinking a few things:
Tim your lazy. - Yes, and so are most people after spending 10 hours at work + time with the kids before bedtime. I’m lucky to be awake let alone looking to buy something.
Memorize your CC info. - Too much of a hassle. I’m a privileged millennial.
I think the argument for why paypal works is that they provide a service, at a premium, that drives up customer completion of orders. Some people will find tangible value in this service and others will see it eating into profit margins. But the reality, or at least in my world, is that if paypal isn’t an option I am less likely to complete an order.
As a side note: the ad at the bottom on the page while I’m typing this out? Paypal. Poetic justice.
I am a contributor, not a freeloader, so I don’t see the ads.
I spent decades working 10+ hours and then spending time with the kids, and I am still not a lazy freeloader.
The argument for Paypal is simple. Lazy millennials would rather pay money than get off their collective asses, and Paypal is smart enough to have a business plan that takes advantage of lazy millenials. You want to know what is really interesting? The average age of a member of the Board of Directors of Paypal is 56! The CEO is 60! People from my generation know how to take advantage of lacy millenials.
I disagree that if Paypal is not an option you are less likely to complete an order. What else are you going to do? Let the money burn a hole in your pocket. That is something that millenials will never do. Maybe one order, or two orders, but after that, you will have a need to spend the money and you will satisfy that need by . . . spending it, whether Paypal is an option, or not.
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