Processing Health Club Payments

National Fitness Trade Journal

This year brought rapid change to the health club industry and the payments industry. Debit cards are quickly becoming the choice for consumers. In fact, according to a study by the American Bankers Association, debit cards were the only payment method that showed an increase in usage.

The study found that in 2004, consumers initiated 36% of in-store purchases with a debit card, compared with only 21% in 1999.

People used cash for 32% of transactions last year, down from 39% in 1999, and checks accounted for only 14% of purchases. Credit card usage accounted for 21% of transactions, slightly down from 22%.

It appears that Americans are on the verge of paying more transactions with debit cards then with cash. Currently 32% of all transactions are cash and 31% debit cards-a 500% increase in debit card payments since 1999 when only 21% of consumers used debit.

Even with check payments on decline, consumers still wrote more than 15 billion checks at the point of sale (POS). 5.9 billion are bad checks, 70% are attributed to NSF and 30% to fraud.

Health clubs are under intense pressure to increase revenue and implement best practices that improve the bottom line. Some clubs experience attrition rates in excess of 10%-20% annually. Attrition drives market prices lower and leads to lost profits and higher member acquisition costs.

Analysts estimate that acquiring a new customer is five times more expensive than keeping an existing one. With this in mind, it’s clear that member retention is crucial. As competition for new customers grows more intense, you must focus more on cross selling and up selling to existing members.

Spend time analyzing your member’s data to really know and understand who your valued customers are. Your goal is to connect to those members in order to improve retention.

Understanding the change in payment processing and the habits of your customer base will help you create a solid foundation for the future. If you still do your billing and processing services in-house you may want to examine your options. Processing/Financial companies are up to date on the latest banking and payment processing technology. They understand the change in consumer habits, payment activity and collection laws and how it relates to your business. They also can adapt much quicker in the changing environment. This is extremely important to your bottom line and the ability to keep your cash flow steady.

If you presently do not utilize the services of a billing/financial processor consider it! No successful health club today processes or builds a processing engine on their own.

Financial companies/processors are far cheaper and superior to anything that could be developed in house. Software designed specifically for health clubs is generally superior to applications developed in house primarily because of economies of scale. If you do decide to develop your own solution it is clear that the security, features and reporting capabilities will not be as robust, stable or as user friendly as a professionally developed application built by specialists. The time spent on processing payments and follow up would be better spent on building your business. Trying to keep up to date on the technical processing requirements, consumer habits, laws, collection activity and the ever changing horizon is a full time job in itself.

A financial partner can help you efficiently manage the collection and tracking of your membership fees. Recurring billing becomes a hands-off reliable payment collection service that provides you with useful reports and timely notifications. Basically a recurring billing service can take care of your billing and collection responsibilities so you can focus on running your business.

As the end of the year approaches, re-examine your business and your processor/financial billing company. Is your processor a partner in change? Are you armed with the data, applications and tools you need to add value and dollars to your bottom line? If not, use 2006 to modify your business model and challenge the status quo. Change happens faster than you think.

You owe it to your business to do the research, consider every direct and hidden cost of maintaining your own in house system, and then take a good look at the alternatives. The time spent examining your business operation and expenses could make the difference in maintaining a profitable outcome.