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Instant EFT preferred method for South Africans trading online

Date: September 8, 2016

When merchants receive instant EFTs, they stand to save significantly on transaction fees.
Credit card payments are frequently charged at a rate of 2 to 4% per transaction, whereas instant EFT fees are typically much lower.

While online retail still accounts for only 1% of retail revenue in South Africa, year-on-year growth rates of more than 20% since 2000 speak volumes about the importance of every business seriously considering an online presence.
SID's CTO, Kyle Rozendo

World Wide Worx's 2016 numbers, released in April of this year, not only show good growth for the year, but forecasts for 2020 show the figures doubling from their current baseline.

While this is good news for the economy, there are still many barriers for the general business community to overcome when it comes to creating a virtual channel to market.

To begin with, establishing an e-commerce offering is more difficult than one might think.
Most businesses are concerned with selecting the best platform, design, and even delivery method.
Payment options are frequently the last thing on a business owner's mind, and unfortunately, this is where the real problems can arise.

Most website platforms include e-commerce plugins that accept global payment methods like PayPal.
Many payment service providers also accept card payments, which expands the merchant's ability to accept payments.

However, the broader payment landscape in South Africa is not nearly as sophisticated as we believe.

As we all know, only 1% of retail spend is channelled online, and while some seasoned online shoppers may be perfectly content with online security, there are still many apprehensive first-time shopper who may be intimidated by having to set up a Paypal account or nervous about sharing credit card details.

To make matters worse, only one-fifth of South Africa's banked population has a credit card, further limiting a merchant's pool of potential customers.

Fees, deception, and commotion

When it comes to payment options, merchants have two main concerns: what are the benefits to my business, and how easy will it be for my customers to use?

When a customer uses a credit card to make a purchase, the costs to the merchant can be prohibitively high.
Merchants must pay transaction fees to their payment service provider as well as fees to the (acquiring) bank that holds their internet merchant account.

Trust can also be a problem.
While we may feel at ease when transacting with an e-Bay or an Amazon, many shoppers will be hesitant to part with their personal and financial information when using a small, local e-tailer for the first time.

Chargebacks increase the merchant's risk.
If credit card fraud occurs, it is the merchant's responsibility to prove that the purchase was made by the cardholder.
If they do not comply, they may be forced to bear the costs of the reimbursements.

Merchants who accept credit cards must also adhere to the Payment Card Industry Data Security Standard (PCI DSS).
This is a proprietary information security standard for anyone who works with branded credit cards from major card schemes such as Visa and MasterCard.

Setting up an internet merchant account can also cause delays and administrative headaches for a company eager to get their product online.

The acquiring bank's consultant will not only conduct a full audit of the website's compliance (terms and conditions, privacy, delivery and refund policies, and so on), but the company will also be subjected to additional compliance checks on their financial history.

Working with a payment aggregator can eliminate the time-consuming process of applying for an internet merchant account.
However, paying higher transaction fees to use their platform will be the trade-off.

Providing options that are beneficial to both customers and your company

Merchants must find the best way to reach their customers while also making the most business sense.

Including an instant EFT solution in the e-commerce payment offering can significantly improve both the merchant's business and the user experience.

When merchants receive instant EFTs, they stand to save significantly on transaction fees.
Credit card payments are frequently charged at a rate of 2 to 4% per transaction, whereas instant EFT fees are typically much lower.

It should be noted, however, that merchants must also consider how long it will take for their funds to be received from their payment service provider.
This can range from one to two days (as in the case of SID) to up to five days for some of the aggregators.
While this is important for any business, it is especially important for small businesses that rely on cash flow.

Instant EFT payment services are simple to set up, and website developers can quickly get merchants trading online.

EFT is something that the buyer is familiar with and trusts.
Customers will interact with their banks online via a secure payment page, which will increase their comfort and sense of security.

Furthermore, because there is instant feedback, if there are insufficient funds in the account, both the customer and the merchant will be notified immediately, reducing fees associated with returned transactions.

Most importantly, instant EFT enables a much larger number of people to trade and shop online.
A valid bank account is all that is required of the merchant, and the customer only needs their regular online banking username and password.

In South Africa, EFT has reached maturity. South African Payment Gateways
Customers recognise and trust it as a means of payment.
Businesses that want to go digital should make sure they have instant EFT in their payment bouquet.
Ignoring instant EFT would not only cut them off from the majority of local shoppers, but it would also cut them off from a payment method that offers the lowest cost to the company.

Source: Kyle Rozendo

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