Risk Management
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Becoming A |
CSP |
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Leverage Your Strengths
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For Increased Revenue,
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by Julie Fergerson
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Recognizing market opportunities and how to capitalize on them is key for sustaining and growing market share, and particularly for companies in the highly competitive financial services arena. One business model that should be of particular interest to ISO's, banks and other financial institutions is the Commerce Service Provider (CSP). CSP's provide a portfolio of e-commerce services that help merchant customers to expand their business and protect them from the increased risk of fraud that accompanies this powerful new sales channel.
The range of services offered by a CSP can be extremely broad or focused on specific components of the e-commerce value chain. There is no single formula for success. A broad CSP offering may include all infrastructure, software, and services needed by businesses to create and maintain commerce-enabled websites, where a focused solution may provide a subset of related services. Key components of a comprehensive CSP offering include:
The key to success as a CSP is to leverage your strengths, experience, and customer base. ISO's, banks, and financial institutions are in the business of managing, assisting, and aiding the flow of financial data to merchants and are well positioned to offer the provisioning of Internet merchant accounts, e-commerce payment processing, and risk management services. Controlling these processes are natural extensions of your current business model. In particular, your understanding of charge-backs and fraud issues make you particularly well-suited to provide the solution to this real and growing problem for merchants selling over the Internet. REVENUEMerchants today often pay CSP's anywhere from $.10 to $.50 for authorizing and settling e-commerce payment transactions. Additional payment services, for example processing level 3 data (common for corporate purchase cards), credit charges, and tax calculations can add an additional $.10 - $.50. Simple fraud detection services range from $.05 to $.10 while advance fraud screening can add $.15 to $.25 per transaction. Authorization, settlement, and fraud detection for a single Internet order could generate $.40 - $1.00 in transaction revenue to the CSP. CUSTOMER LOYALTYIn today's economy, merchants often make buying decisions based on pricing alone. Providing a complete range of related services that meet the emerging needs of your customers is necessary to maintaining business relationships and loyalty. ISO's, banks, and other financial institutions are ideal choices to provide e-commerce solutions, although to date have let various third-party payment servicesencroach on their territory. When a merchant signs up with a third- party payment service, they often ignore the existing merchant banking relationship, opening a new Internet-specific account with another financial services entity. BUSINESS OPPORTUNITY
As a provider of merchant services, ISO's, banks, and other financial institutions are well positioned to extend their relationships with their customers and capture the lucrative revenue opportunity. It is estimated that less than 10% of online merchants offer real time transaction processing. There is still a large market for real-time payment services and protection from fraud as more and more businesses move quickly to leverage the power of this new channel to improve efficiency, revenue, and profits.
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