New Perspectives
May 2009
Payments in Focus
Direct Selling News Europe asked Marianne Salmans of GlobalCollect how direct selling companies can turn their payments cost centres into revenue generating departments. 
GlobalCollect is one of the world’s premier payment service providers of local e-payment solutions for international businesses. A pioneer of global payment processing with 15 years of experience, the Netherlands based company (with offices in San Francisco and Singapore) has a proven track record of helping direct selling companies increase profits and cut costs. The company’s knowledge of the international payment landscape and local payment preferences qualifies it uniquely to advise on how to increase online conversion rates, expand distribution channels and streamline back-office matching and reconciliation processes.
The success of any direct selling organisation is inevitably related to the results of its distributors. A well-established strategy, built around recruitment and retention of distributors and customers, is key to any company in this industry. Making your distributor feel part of a flourishing business, increasing brand awareness and creating new opportunities through product innovation and distributor training are all crucial aspects.
As part of this strategy, it is imperative to make it easy for distributors to do business with your company. Buying products and receiving commissions are the core activities that link your company to your ‘sales ambassadors’ on a day-to-day basis. More than in any other industry, an efficient flow of funds is vital to keep your business going. A well-established payment strategy will help you to retain your distributors and customers, increase your revenues and cut costs.
Distributor Retention and Increased Sales through Online Ordering Many direct selling companies have embraced the internet to help distributors manage their business. An online shop offers efficiency in finding and buying products and enables a much faster turnaround time to deliver the goods, thus increasing sales.
With this ‘new-commerce’ ability, a vast array of opportunities has arisen for direct selling companies. The introduction of online ordering also gives access to a new range of payment options. Accordingly, a direct selling company can increase its international market share significantly by providing distributors and customers with the ability to pay in their preferred local currency and payment method. The ease of payment is what will make your distributor return to the online portal, moving away from the often cumbersome and inefficient mail or telephone order processes traditionally in place.
There is a vast choice of payment options: Apart from standard international credit cards (Visa, MasterCard, AmEx, JCB), you will find domestic (national) cards (like Maestro UK, CartaSi Italy, Discover US), direct debits (like ELV in Germany), wire transfers, real-time wire transfers (like iDEAL in the Netherlands, Giropay in Germany, Secure Vault in the United States), cash equivalents (like Western Union), eWallets (like PayPal, WebMoney), prepaid cards, cheques and other alternative payment methods. So how do you choose the strategy that works best for you?
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Establishing a supporting payment strategy to increase your business revenue depends on four factors:
- What are the most important payment methods in your target country or region?
GlobalCollect’s experience and studies from Forrester show that offering the three or four most popular local payment methods for each country is more important than many network marketing companies realise. According to GlobalCollect, US, British and French companies tend to cater to credit card use, but in other countries, the credit card is not necessarily king. In Germany, for example (the third-largest economy in the world), approximately 50 per cent of all online transactions are paid with a method other than a credit card. Payment cultures vary widely, with credit cards popular in the United States, bank transfers throughout Europe and cash payments in Latin America, making the online payment landscape very complex. - Who is your Distributor?
What is the demographic profile? Based on demographics, you can establish which payment options are most popular with your target group. - Is your business model prone to fraud?
The characteristics of a payment method can also help you reduce fraud, if necessary. A credit card transaction or direct debit can be reversed by the consumer, so with high-end fraud screening, such chargebacks can be kept under control. If you have doubts about a person buying via your online shop, offering a bank-based payment, such as wire transfers, is always safe because it cannot be reversed. - What is your average transaction value?
By choosing the correct payment options for your business model, you will actually achieve cost savings.
There is a proven correlation between the number of localized payment methods offered and increased customer conversion rates. Figure 2 illustrates that when more options are open to customers, the conversion rate will be higher. However, thinking globally and acting locally is easily said but can be a challenge in such a diverse and complex industry.
Make the Repeated Check-out Process Easy
Many direct selling companies operate a recurring billing model, often referred to in the industry as ‘auto-ship’. Payment methods like credit cards and direct debits, in particular, are very well suited to the recurring billing model. In the online shopping environment, recurring billing offers an additional advantage in creating a smooth check-out process. Distributors can create a profile on your website that stores their credit card or bank information; this way, your Distributors can log in at any time, from anywhere, and place their orders. Subsequently, the credit card or bank account on file is used to charge the order.
Increase Payment Variety while Cutting Costs
GlobalCollect’s advice is to listen to your Distributors on what payment options are most popular and unique to their country or region.
Adapting this strategy of diversification may seem expensive, but you will soon find that it can actually be very cost-effective.
Broadly speaking, transaction fees are calculated two ways. Credit and debit card charges are calculated as a percentage of the transaction amount. Alternative payment methods are generally charged as a set fee, regardless of the transaction value. So, in countries where alternative payment methods are very popular, a company can realise significant cost savings by offering a number of non-card-payment methods to its Distributors and customers. For example: Let’s say your average credit card charge for an online purchase is 3 per cent. On a €200 order, that equates to €6. An alternative payment method, like a real-time bank transfer or direct debit, has a fixed charge of approximately €1, regardless of the transaction amount. If you think about this scenario in relation to your company’s expansion plans, you can easily see how cost savings can be realised.
Expand Your Horizon through Centralisation
Entering a new market will present your company with a number of new challenges, like handling foreign currencies, local legislation, a new banking landscape and Distributors with a different culture. Rather than finding your own way through those tricky waters, consider centralising your collections and payouts with the help of a professional payment service provider.
While many providers limit their service to a technical link with payment acquirers, a full-service provider like GlobalCollect offers their clients a portfolio of additional services—like information about local regulations, area customs and cultural payment preferences. For example, GlobalCollect mentioned that South Korea, China and India can be problematic countries for some network marketing companies. “We can mitigate problems,” says Marianne. “We may be aware of issues the expanding client company is not and advise them accordingly, thanks to our extensive knowledge.”
Paying Commissions
Your Distributors rely on you for their monthly income. So the process of making commission payments to Distributors and Associates has to be efficient, on time and accurate. A professional service enables you to fully automate this process and transfer money electronically to your Distributors or Associates in more than 20 countries. Plus, payouts can be pre-funded in one or multiple currencies. All that is required is the bank account data of the recipient so they can validate the bank account information and transfer funds. Good to know: Payouts come at a fraction of the cost of a traditional wire transfer.
