Financially Speaking / Archive RSS Feed
Archive for August, 2009
Chris Winn of Bloom Apps found TransFS through our friends CheddarGetter and had such a great experience with us that he wrote blog post for us about it. (Yeah, we’re patting ourselves on the back a little. Can you blame us?)
Check out Chris’ post below and please check out his CRM application “Bloom.” If you use this URL – http://bit.ly/TransFS – and you are one of the first 50 to do so you will get access to Bloom before anyone else can (in software industry speak, you’ll be part of the “private beta”).
————————
There is a world of CRM systems and web applications to help manage the sales process. Earlier this year I began shopping for one and I wasn’t thrilled with my choices. They were expensive, buggy, frustrating or downright ugly. Frustrated, I told my friend and colleague, Kamran, that I wanted to write our own app. He sign on immediately and Bloom Apps was born. In the midst of our private beta I decided we needed world-class credit card processing to give the customer a great checkout experience.
Like the search for a CRM, my search for a great processing solution offered no good choices. My local bank didn’t provide one; other companies seemed seedy at best; and still others drown you in contracts and fees.
And then I found TransFS. In just a day I had several great options fed to me through their auction process. When I had questions, I received personal emails from the owners of both TransFS as well as the processor we ultimately chose. Everyone made me feel like they were on my team, there to help Bloom Apps set up shop online. In other words, they turned what was a frustrating experience into a joy. Who knew finding a credit card processor could be fun?
As a startup working to launch our first product, I take the service they’ve shown us very personally. Bloom Apps will sink or swim by the quality of our own product — and having great partners like TransFS means we can stress less about the business, and focus more on our product. They’ve turned something hard into something easy, and that’s worth everything right now.
Chris Winn is the president and co-founder of Bloom Apps, a web application development company. Their first app, Bloom, is currently in private beta.
Intuit recently soft-launched their new payment network called, appropriately, the Intuit PaymentNetwork. The Intuit PaymentNetwork is billed as a “new and affordable way to send and receive payments over the internet for individuals and small businesses.” This would seem to put Intuit onto PayPal’s radar in a big way.
The Intuit PaymentNetwork charges $0.50 per payment received for any amount of money* for small businesses that use the network. There are no monthly charges or equipment charges or set-up costs. Depending on what one’s average transaction size is this could be a fantastic payment method to employ.
The Intuit PaymentNetwork works in a similar way to PayPal in that it utilizes email addresses as identifiers.
For more info please check out the Intuit Small Business United blog.
*There are some restrictions.
(via Payments News)
Ars Technica reported yesterday that PayPal increased their fees in June as part of a routine upgrade and failed to make this change transparent to its users. What is interesting about PayPal’s fee change is that it affects all personal account users. You’d think a sweeping change would be clearly communicated to these users, but it apparently was not. In fact, as Ars Technica reports, the announcement was made via a “formal notice” that was really legalese buried behind the login wall at PayPal.com.
PayPal responded to the customer backlash by sending out their PR manager Charlotte Hill. Hill told PC World, “We didn’t want to make a huge formal communication out of this pricing change, because we weren’t really adding any fees, and we were hoping it would be a more useful experience for people.” As you can imagine, that comment only fanned the flames especially since fees were actually added.
You might be thinking to yourself; What was the change PayPal wasn’t entirely forthcoming about? That is a good question.
Under PayPal’s previous system the account type and where the payment was coming from played a big role in determining the fees charged and who they were charged to. Premium and business account owners were charged 30¢ plus 2.9 percent of the transaction. This fee applied to all accounts. It didn’t matter whether the money was coming from a credit or debit card instead of a PayPal balance or directly from a bank account.
Personal account holders, on the other hands, could make all of these payments to anyone else for free. In that sense, PayPal was just like Mastercard, Visa, AMEX and others where the merchant pays a fee to accept credit cards and credit card users do not pay any per transaction fees to transact on their cards.
PayPal amended their user agreement in June to allow premium and business account holders to make personal transfers to friends and family for free. That was welcome news for all of PayPal’s premium and business users that also use their PayPal accounts for personal payments. However, PayPal failed to clearly mention that any transfer having to do with goods or services would be charged the 3o¢ + 2.9 percent fee no matter who or where it is coming from.
So what does this really mean?
Well, it really just means that sending money to friends and family is free (to settle meal tabs, etc.), as it has always been, but personal account holders who do sell goods and services on occasion will be charged the same per transaction fee that business and premium account holders are charged for those transactions.
This really isn’t all that bad of a change. Sure, personal account holders will now incur some fees they hadn’t incurred before but they will only incur these fees if they sell goods or services (money transfers that don’t involve any “commercial” elements are still free).
What is bad about this situation is the way PayPal (didn’t) inform users. Had PayPal been transparent about this change they still would have received flak. After all, anytime anyone starts charging for something that was once free, backlash soon follows. However, if PayPal chose to be more open about the change and to explain it clearly to all its users the backlash would have been much less severe.
The payments industry needs to start becoming more transparent and forthcoming if it expects to satisfy its users. PayPal, being the innovator that it is, really should be one of the leading firms in the move to openness and transparency.
A few days ago I wrote about the incredible growth of Intuit’s payments and payroll business. Since TransFS is a comparison shopping engine for merchant accounts (and more financial services in the future) we are often asked about whether Intuit Merchant Accounts are a good deal. It’s actually quite hard to tell.
Intuit has two websites for payments – http://payments.intuit.com and InnovtiveMerchants.com (this was a company Intuit bought a few years ago and formed the base for their processing business). InnovativeMerchants.com has no pricing information and payments.intuit.com advertises a swiped rate of 1.64% and a non-swiped rate of 2.44%. However, both those rate are for “qualified” transactions. In many cases, less than half of a merchants’ transactions qualify for the Qualified rate.
While it isn’t representative of everyone’s situation, a friend of ours showed us his Intuit Merchant Services bill, which is below.
A few comments:
1. Good – they stay true to their advertised pricing – 1.64% (Intuit has since lowered prices – at the time it was 1.72%) for card-present transactions and 2.44% for card-not-present.
2. Bad – the bill is formatted such that the overall amount of fees are hidden. The top line on the statement only shows about half of the total cost $244.00, while an additional $342.95 was subtracted from this business’ revenue before being deposited in the bank. In total the true cost of this merchant account is $586.95.
3. Neutral – While this is a tiered rate merchant account, so it is impossible to know exactly what the underlying interchange rates are. However, we can make some pretty good guesses. For example, the largest category for this merchant is Visa Mid-Qualified, with $11,150.00 of volume. Contained within that category are transactions of several types.
First, Card Not Present Visa Debit, for which the interchange rate is 1.60% + 0.15. Second, Card Not Present Visa Credit (Non-rewards) with a rate of 1.85% + 0.10. Third, Rewards2 with an interchange rate of 1.90% + 0.10.
His average ticket is around $1500, so the average cost for a Visa Mid-Qualified Transaction is $1500 * 2.44% = $36.60. Meanwhile, the underlying interchange rate ranges between $24.15 (debit) and $28.60 (rewards credit cards). So Intuit is raking off between $8-$12 / transaction, or between 0.54% and 0.84%. That isn’t the worst markup in the world, but business owners who find their credit card processor on TransFS.com usually get a markup between 0.10% to 0.50% (depending on size and industry).
So, overall, it’s not a great deal from a pricing perspective, but it’s not the worst either. Also, Intuit Payments naturally has the best integration into Quickbooks and a reasonably good reputation for customer service.
Intuit Payroll and Payments
Intuit recently announced Investor Day 2009 will be on September 24th. Intuit financial results and discussion are fascinating reading for anyone interested in small business finance. I have a lot of respect for Intuit, own some Intuit stock and use a few of their products.
Over at Slideshare there is a copy of the 2008 Intuit Investor Day Presentation, which I spent a few minutes digging through this evening in search of interesting insight.
One cool bit of data from the presentation is that revenue from Payroll and Payments exceeds revenue generated from Quickbooks, which was surprising to me since Quickbooks is far better known than Intuit’s Payroll and Payments products.
Payments and Payroll Exceed Quickbooks Revenue
Payroll and Payments revenue is also growing much faster than Quickbooks. If the trend continues it will constitute the nearly all of Intuit’s Small Business revenue within a few years.
Also interesting: Intuit generated that $561M in payroll and payments revenue from around 1.25M customers, averaging out to around $449 of revenue per year per customer. Furthermore, those customers tend to stick around for at least a few years. In contrast, a copy of Quickbooks Pro 2009 can be purchased for $200 at intuit.com and around $100 at amazon.com and those customers typically only buy a new copy of quickbooks every few years. It is no wonder that Intuit sees payroll and payments as an appealing business.
