The high(er) cost of doing business online

Some banks are charging dotcoms up to $1 more per transaction than their brick-and-mortar cousins to process credit card purchases, a Gartner Group survey has found

Some banks are charging dotcoms up to $1 more per transaction than their brick-and-mortar cousins to process credit card purchases, a Gartner Group survey has found.

20 July 2000 - According to the survey, a $100 transaction charged on a credit card could end up costing a Web-based retailer $3.10 to collect as opposed to $2.10 to process the same type of purchase at a real-world retailer.

If true, the survey results highlight another problem for struggling dotcoms, which rely heavily on credit card sales. By some estimates, nine out of every 10 purchases is made with a credit card.

"The Internet was supposed to level the playing field," said Gartner Group researcher Lavivah Litah. "The bottom line is e-tailers are getting hit from all sides."

Litan said banks that issue credit cards still don't trust Internet sales, where there may be as much as 12 times the fraud as the traditional shopping methods, according to the survey.

"They want smooth transactions, no problems," she said. "They don't want to have to refund anyone (because) they lose money and their good name."

Dotcoms disagree
Several dotcom retailers disputed the findings, saying privately that they pay the same rates as brick-and-mortar stores. None of the companies contacted for comment -- including Petsmart.com, Amazon.com and Wines.com -- would discuss the survey conclusions on the record.

Litan said no company is willing to air its credit problems in public, fearing investor panic.

It also hints at collusion in an industry whose top two players, Visa and Mastercard, have already been accused of monopolizing the market, she said.

Gartner reached its findings after surveying more than 160 companies. None of the participating companies earned less than $1 million last year, and several did more than $1 billion in business.

The differences go beyond credit card processing fees. According to the survey, they also occur if a credit card purchase turns out to be fraudulent.

Traditional shops usually have only to show a credit card company a signed receipt, and the card's issuer absorbs the loss. But the survey found that online retailers are usually responsible for tracking down bogus buys, a costly and time-consuming process.

www.zdnetasia.com
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