How Do More Payment Options Affect Merchants?

by Stacey Cox on Jul 12, 2015 3:00:00 PM e-Commerce

How_Do_More_Payment_Options_Affect_Merchants-719334-editedThe evolution of technology has completely revamped the way businesses conduct themselves. Companies are no longer afraid to use the latest technologies to grow their business in a cost-affordable manner. Alternative payment options attest to this mindset with selections like Square, Stripe, and PayPal—attracting a wider audience of consumers.

This lucrative market entices consumers, therefore, challenging merchants to evolve with their desires for faster and simpler payment methods. Especially in the card-not-present arena, more payment options equals more sales.

When it comes to consumer needs, an innovative example in the e-commerce space is Amazon’s sect, Amazon Prime. The method by which payments are processed by Amazon Prime allows one-click purchasing once customers use their card for a purchase via a wallet method.

Alternative payments are changing the transaction process for consumers, but what about merchants?

The Amazon Factor

Amazon is the first example of companies that will provide a costly problem for merchants when it comes to filing a chargeback due to its innovative payment process for consumers. The company announced additional fees for U.S.-centric merchants using alternative methods such as Checkout by Amazon and Pay With Amazon. Cross-border processing fees will jump from 2.9 percent to 3.9 percent, and authorization fees will become nonrefundable. Not to mention, these merchants will also be responsible for a $20 fee whenever they want to dispute a chargeback claim, adding more issues to an already costly process.

Although Amazon has promised to protect merchants from chargebacks from a criminal fraud standpoint, the merchants who sell on their site are not protected, and therefore, held responsible for common chargeback reasons known as “friendly fraud.” This type of fraud can result in merchants possibly losing the original revenue from the product, the merchandise itself, shipping and processing costs, as well as inquire a fee imposed by a bank when their customer files a chargeback. The totality of a chargeback can completely diminish a merchant’s revenue, and for those who use Amazon’s alternative payment methods, they will have to face a fee if they are willing to fight. Essentially, Amazon is protecting their revenue with the implementation of the dispute fee at the expense of the merchants whom they showcase on their website. Why unfairly punish the merchant versus the friendly fraudster?

Preventative Measures

Merchants selling online not only have to be on the defensive, but offensive stance due to alternative payments. As trends continue to show, alternative payments will continue to increase as the normal payment option for both merchants and consumers by the end of 2015. But with new forms of payment comes new forms of fraud, which is a susceptible dilemma for this progressive industry. E-commerce merchants should implement preventative efforts into their business practices—especially for those selling on Amazon, chargeback prevention is a stipulation.

For a merchant, choosing an array of alternative payment options can substantially increase their business revenue due to the fact that almost every region, country, and industry has a preferred method of payment. Evolving with the likelihood of consumers, online merchants have to adapt a payment solution that has the capability to identify fraud, so that revenue can not only sustain but increase.

Photo by Stuart Miles/

Stacey Cox is media coordinator at Chargebacks911.

Stacey Cox's blog
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