cash flow online payments

Online payments—let's crunch the numbers

By mihiri Aug 22, 2017 Comments

Online payments

Australia’s appetite for digital connection is growing. The latest figures from the Australian Bureau of Statistics report there are now more mobile handset subscribers in Australia than there are people. In the 2015/16 financial year, Australian businesses recorded an estimated $321 billion in income from orders via the internet – an approximate 12.5 percent increase from the previous year*. Yet almost two out of three businesses didn’t receive orders via the internet. That’s a missed revenue opportunity, believes Mr Chris Urry, CEO and co-founder of specialist payments provider, IntegraPay.

 

Chris_Urry_IntegraPay Chris Urry, CEO and co-founder, IntegraPay

 

“We have an internet-saturated population seeking faster online interactions. That includes businesses that want to deal with their orders and bills efficiently by paying online,” says Urry.

Financial activities (such as online banking, invoicing and making payments) are the most common reason the majority of businesses (87 percent) use the internet, according to the Australian Bureau of Statistics*

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“Businesses that don’t accept money online are potentially failing to meet their customers’ needs, and are making it harder for customers to pay their bills,” says Urry.

87 percent of businesses use the internet for financial activities, including making payments

With late payments a common and sometimes crippling problem for small and medium businesses—the Payment Times and Practices Inquiry recommended  a reform agenda to the Australian federal government—businesses should be innovating their payments solutions to match the market’s expectations of transacting online, says Urry. “Australians continue to embrace the ease and convenience of cards, making 8.1 billion transactions in 2016 – this is up 10.4% on 2015. Businesses that embrace online payments are well-placed to benefit from this ongoing trend.”

How do online payments work?

As cardholders, we know that we can complete an online transaction in seconds. But what’s going on behind the screen? Let’s look at the example of using a credit card to pay an invoice online:

Step 1. The cardholder enters details into a merchant’s (the vendor’s) payment page.

Step 2. The merchant receives encrypted card data and sends the card data securely to its payment gateway, which then passes the card data to the merchant’s bank processor via a secure connection.

Step 3. The merchant’s bank processor submits the transaction to the appropriate credit card network. Credit card networks are financial entities (e.g. Visa, American Express) that communicate and manage the processing, clearing, and settlement of credit card transactions.

Step 4. The credit card network routes the transaction to the customer’s credit card issuing bank (such as CBA, NAB, Westpac, ANZ). The issuing bank approves or declines the transaction based on the customer’s available funds.

Step 5. If approved, the customer’s credit card issuing bank sends the funds to the credit card network, which passes the funds to the merchant’s bank, which then deposits the funds into the merchant’s bank account.

The final settlement process, when the funds are deposited into the merchant's bank account, takes between one and two days, depending on when the credit card was processed. 

Online payments are processed in seconds via a series of entities

The benefits of online payments

A key principle of best practice collections is to make it easy for customers to pay you. According to IntegraPay’s State of Pay Report (2017), streamlining the payments experience benefits customers and also delivers time and cost savings to small businesses:

  • When businesses use an automated payments solution there is a 30 percent reduction in time spent chasing and administering payments. (Before using automated payments, 32.9 percent of responders were spending eight hours per week chasing and collecting payments.)
  • Time and cost savings for small businesses automating payments equals, on average, $15,000 annually.
  • 87 percent of small businesses offering direct debits spent less than two hours per week chasing payments.

“Thanks to security features such as card number encryption and fraud protection, businesses and their customers can transact online with a high degree of confidence,” says Urry.

“Having a payment gateway accessible via your website, invoices and payment reminders creates an immediate opportunity for customers to pay you,” says Chris.

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 For ezyCollect customers using online collections,  15-20 percent of online payments are processed between 8pm and 12am.

“Essentially, you’re open for payment 24/7,” says Urry.

ezyCollect offers free integration with payment providers so you can add online collections to your debtor management strategy. Credit card and gateway fees apply. Call 1300 780 524 or email getpaid@ezycollect.com.au to learn more.

Go to ezyCollect Simply Paid

*Australian Bureau of Statistics, 2017, Business Use of Information Technology and Innovation in Australian Businesses, cat. no. 8129.0

cash flow online payments

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