Last year Xero added the ability to take payments the moment a business issued its invoice through online invoicing with Xero Pay Now. Now payment providers are building on the service with advanced features that give offline businesses the advantages of e-commerce but without the cost.
eWay is the first provider to release a surcharge option called Pay This that lets businesses add custom surcharges for MasterCard, Visa, Diners Club and American Express cards. The Xero user sets the amount for each type of card and the surcharge is applied when a customer pays an invoice through Xero’s online invoice portal.
Xero confirmed that eWay is the first provider globally to add this service and added that other providers would soon roll out their own versions.
“If you take PayPal and credit card on an e-commerce site you’re more likely to process a payment because the customer has more options. We’ve just brought that mentality to the Xero system,” says Trent McLaren, eWay’s “Xero ambassador”.
Surcharges present a neat solution to a growing problem. Businesses complain about high fees on card payments but customers often prefer using plastic.
Despite a proliferation of alternative payments systems, credit and debit cards remain the preferred method for making payments and are expected to make up three quarters of all point-of-sale payments by 2017, market research firm Javelin Strategy & Research has reported.
Businesses that help customers to pay invoices online are likely to decrease the amount of time it takes to get paid. “Instead of that eight-week cycle you’re (getting paid) in days, not weeks,” McLaren says. Even if a customer baulks at the surcharge for a credit card and opts to pay by direct deposit, “we’ve still done our job in terms of helping that customer improve their cashflow”, McLaren adds.
Xero claimed it had statistical evidence that online invoicing and payments reduce the time to collect on invoicing by nearly three weeks, based on analysis of four million invoices lodged through Xero.
Surcharges give businesses the flexibility that customers demand without paying the credit card suppliers’ costs, and they have received a lot of support in Xero’s feature requests forum.
“Partners and users want to pass that credit card fee onto the customer paying the invoice,” McLaren says. “It allows you to recover the cost of having an online payment system.”
The surcharge process is fairly simple. Payment providers can tell the type of card from the first six digits of the card’s number. Xero displays the surcharge on the online invoice’s payment screen in red and the customer is prompted a second time to acknowledge the surcharge before paying it.
eWay charges a range of rates that drop with volume and start at 2.9 percent of the purchase price plus 13 cents. The percentage can drop to 1.9 percent or lower by paying a monthly subscription of $49 a month and up.
This compares somewhat to PayPal’s 2.4 percent plus 30 cents standard merchant rate, which reduces as monthly revenue rises.
Online invoicing, online payment and credit card surcharges fall under Xero's Banking 2.0 concept. It builds on the work done by MYOB with its M-Powered Services which pioneered the ability to add a tearaway chit on the bottom of paper invoices to receive credit card payments. (This technology hasn’t yet yet made it across to MYOB Essentials or AccountRight Live !!)
eWay, led by technologist Matt Bullock, is pushing ahead with the Banking 2.0 concept. It has consolidated the admin and paperwork for businesses wanting to set up a merchant account for Xero Pay Now by handling the approvals process on behalf of the Xero user’s bank.
eWay’s next project is to add automatic late fees to invoices paid through Xero’s online invoicing portal.
Businesses taking advantage of this burst of innovation should see their payment timeframes drop as a result.