SiteWatch® Xpress Card Clearing®
What are the financial benefits and costs of Local Approval Mode?
If you are a regular reader of DRB Systems’ studies, you might remember a study a few years ago that looked at how often the Mr. Wash car wash organization in Washington, DC had Internet issues that were made invisible by SiteWatch’s Local Approval Mode feature. You can read about it here.
A question I often get asked is: “With the Internet being so reliable today, does Local Approval Mode still provide a benefit?” The resounding answer from our users is “Yes!” From city to city and town to town, our users find that their Internet connection often drops, whether only momentarily or for hours. Yet, our SiteWatch users are able to continue accepting credit cards without missing a beat and without even noticing that their connection is down.
Some car wash owners who are installing SiteWatch for the first time explain that they understand the benefits of using Local Approval Mode in keeping their line moving when the Internet connection is down, but also have asked the “cost” of using it. As you may know, Local Approval Mode queues the credit card for later processing until the Internet connection is reestablished. At that time, the customer has likely left your facility and his/her credit card may be declined. When that happens, you have no recourse and will lose the money for that sale.
To answer that question, we took a look at a chain of exterior car washes that allowed us to look at their sales, analyze their data, and anonymously report the results to you. First, here are a few specific statistics about this organization. In 2014, considering all the sites combined, this organization had 700,100 transactions that were paid for with either cash or a credit card for a total of $8,049,343, averaging about $11.50 per sale. Of those sales, 259,701 (37.1%) were paid for with a credit card, averaging $16.47 per transaction (for a study that looks at the difference between cash sales and credit card sales, see Impact of Credit Cards on Car Wash Sales).
During 2014, every one of this organization’s sites experienced some kind of Internet outage. For some of the sites, there were only a few short outages. For others, there were regular outages. Specifically, at one site, about 1.6% of their credit card sales were processed while the Internet connection was down. That means for every 125 cars washed that paid with a credit card, about 2 of them relied on Local Approval Mode to keep them speeding through the car wash.
In all, this organization used Local Approval Mode to process 993 credit card sales when their Internet connection was down. That’s 993 times the operator didn’t say “I’m sorry, our Internet is down. Can you pay with cash or come back later?” These transactions represented $14,745 in revenue; and, it is revenue that the operator might have otherwise lost.
Finally, to get back to the question originally asked of “how much of that revenue was later approved and how much truly was ‘lost'”? When the Internet connection was later restored, this particular organization had $14,611 (99.1%) approved and $134 (.9%) rejected.
Just as an added comparison point, we looked at another organization and found that their percentage approved was a very similar 98.8%.
If you are thinking about using Local Approval Mode and are worried about how much gets rejected, you should consider the above numbers. For this organization, the benefit clearly outweighs the cost.