When “The Check is in the Mail” Isn't Cutting It: A Lender's Guide to Getting Paid
Remember when "the check is in the mail" was an acceptable response? Neither do your customers.
3 min read
August 22, 2016
Klik Technologies Corp. offers a host of receivables management products and services to merchants, homeowner associations, utility companies and other organizations – a one-stop shop so clients can obtain all of their receivables in one channel.
Take Robison Oil in Elmsford, N.Y., which provides heating oil, biofuel, natural gas and electricity to area residences. In March 2015, Robison went live with the KlikRemit lockbox solution. Then this May, Robison went live with eKlik, which maintains direct links to a series of major payment originators. These payments are channeled electronically into eKlik each day and then posted to Robison’s bank account.
Banks and credit unions should take a second look at their merchant services provider in today's competitive payments environment.
As technology advances, even more providers are entering an already crowded marketplace, delivering solutions that use flat-rate pricing and very simple sign-up and processing—think Square, PayPal and Stripe. All of these card processing or payment processing services are going directly after businesses. A bank should not only have a great solution, but also a partner to help sell it. The bank should have a set of solutions with great rates to really take the wind out of the other solutions in the market.
First and foremost: When is the last time your bank’s management addressed the revenue share arrangement between you and your merchant services provider? Banks and credit unions make their money by sharing revenue with the provider. Are the rates you are being paid worth the effort?
Secondly, you should re-assess the relationship that you have with your provider: Do you at least get monthly touch points in reporting, and at least quarterly updates addressing volume of successes—or lack of successes? Is the provider also checking in with you on a quarterly basis, as part of nurturing the relationship?
You should be re-examining how well your merchant services provider helps you with the marketing and labeling of programs. Many banks and credit unions are left on their own to market and label programs.
Then there are issues to consider about the types of rates that merchant services providers charge the business customers of banks and credit unions. Revenue sharing is important for financial institutions, but if they can’t sell the services to merchants because the rates are too high, they can’t get much revenue.
Make sure your merchant services provider has bottom-line competitive wholesale pricing to market, as not all processing and not all providers have the same pricing. If you are being courted by a merchant processor, you should provide a sample set of actual statements from clients and tell the provider to come back to you with a proposal so you can tell if the company is, in reality, truly competitive.
Financial institutions have not typically focused on strategically leveraging credit card processing and card loyalty programs as a key element of their overall strategy. Starting to look at online portals as a way to drive electronic versus paper payments is one piece that is becoming a big part of receivables requirements. Lower merchant card prices could become a key enabler making treasury solutions more adaptable to the needs of the businesses you service.
Finally, does your merchant services provider offer any other services, and does your provider offer a more consultative approach? More and more, banks and credit unions want to be able to partner with a holistic provider—a one-stop shop, to lower their compliance burden and increase their chances of success.
Here is a checklist for management teams of important factors to consider when choosing a merchant services provider:
• What is your revenue share from merchant sales and do you have a per-new-account fee?
• Does your provider also offer gift card and loyalty programs?
• Do you have good marketing materials and design provided to you?
• Are you provided with reports and a vendor management package necessary for compliance?
• Does your provider give you a dedicated sales force?
• Does your provider offer the ability for fast settlement of funds for your clients?
• Does the company have a full suite of online and virtual solutions for processing?
• Is your provider a direct competitor, for example, does it offer similar products or represent other banks in your market? Exclusivity is important, but not always obtainable.
• What is your provider’s closed deal ratio and when you lose business, why are you losing it? The statistics should be provided as well.
Overall, it is critical that you choose a partner with the best revenue-sharing structure, best marketing structure, and one that is capable of helping you market your services.
Remember when "the check is in the mail" was an acceptable response? Neither do your customers.
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