Sometimes the biggest — and best — stories for an industry are the non-stories. These are the stories that are made up of untold tales of things that are successful and well-entrenched technologies and business practices. And in the fitness industry one of the biggest non-stories is electronic funds transfer [EFT].
The practice became widely adopted in the '80s, as health clubs began automatically collecting payment for bills from clients' credit cards or checking accounts each month, transferring the money to their own account, either through banks directly or through third-party companies. The process helps to eliminate billing, collections paperwork, and other hassles — no more mailings, processing checks, chasing late payments or resubmitting bounced checks. Most impressive of all, cash flow becomes more controlled with EFT and retention rates tend to improve as well.
“EFT is not a new thing anymore. It has been embraced so readily and it is very well understood,” says Mark S. Johnson, senior vice president of Check-Free and GM of its health and fitness division. “I have never seen statistics, but I would assume it is used in as high as 80 or 90 percent of clubs, a much higher saturation than many other industries.”
Bill Nichtberger of Aphelion agrees. “EFT is prevalent in the industry, and elsewhere today, he says. “There may be a few not using it, mostly due to antiquated systems, but they are truly the exception not the rule.”
The reason for this high saturation rate comes down to a savings in manpower, time, and outstanding dues for clubs of all sizes.
“When I first bought my club, my staff and I spent an inordinately large amount of time ‘chasing’ down clients' money,” says Julia Wheatley, owner of Women's Fitness Center Inc. of Harrisonburg, VA. “[EFT] stabilizes monthly revenue at my club. When people are paying their bills by choice, the priority items are going to be the rent, electricity, telephone and other ‘staples’ of daily life. The last thing to get paid is going to be the health club membership bill, particularly if the individual hasn't been coming to the club and therefore doesn't perceive the need to pay for something he/she is not using.”
And it is that reduction in credit loses is the main selling point for utilizing EFT, particularly the services of third-party companies — despite the slightly higher rates charged than when going directly through the bank.
“A club can pay lower rates and go through a bank but the credit losses will be higher than utilizing a third-party provider,” says Tamara Valdez, VP of marketing and communications at third-party provider ASF. “This is because that while the bank can collect the membership fees, it will not provide the billing, collection, and marketing support we do. This will lead to the club having to chase down delinquent accounts-the thing they are trying to avoid by utilizing EFT.”
But there are some other benefits to utilizing EFT that may not be as obvious.
“Using a recurring billing process like this shows a balance to a health club's cash flow from month to month,” explains Scott Elowitz, CEO of Custom Designs, one of the many companies providing third-party services to the fitness industry. “This shows a steady revenue stream to potential investors, lenders, etc. This receivable base is even more important to these people — even more than cash — because it gives real equity in the club.”
And as more people accept various electronic forms of money management it will become an easier sell for clubs, even to the most old-fashioned members.
“EFT is a very accepted form of payment today,” says Elowitz. “The health club industry is probably one of the most mature when it comes to EFT, and as society becomes increasing accepting of technological means of issuing payment it will become a necessity to compete.”
The increasing use of electronic means of payment is evident as NACHA, a non-profit association that develops operating rules and business practices for the Automated Clearing House (ACH), reports that The ACH Network saw almost 1.6 million transactions conducted during the 4th quarter of 2001 alone, and totaling $1.59 billion.
“When I first switched to this payment system years ago, it was not as common,” says Wheatley. “People, even here in our rural area of Virginia, are familiar with and have been exposed to the EFT form of payment in some aspect of their lives and are pretty accepting of it.”
But when running into a customer that is still not comfortable with the process, Wheatley says it is important to use the right words to help them feel comfortable with signing up for EFT.
“I am a big believer in the verbiage that my staff uses in presenting the monthly payment option. We never call it EFT or electronic funds transfer. We also never say ‘automatically deducted from your account,’” she explains. “We try to use ‘softer’ language to present the payment system in the most positive light possible. For example, we explain that the billing company offers many choices for payment, including selection from one of five different accounts as well as six different payment dates during the month.”
While it still may take a sales pitch to convince a member to opt for EFT, the benefits to them and the club as a way of paying for memberships and more are undeniable. End of non-story.