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Updated by 11.20.2023
Payment Solutions Take Sting out of Inflation
Let’s get the bad and the obvious news out of the way first: Consumer prices are on an uptick, rising inflation to a new four-decade high in June 2022 and subjecting consumers to unmitigated, ongoing rising costs. Specifically, according to the U.S. Department of Labor, consumer prices ballooned by 8.6 percent in June 2022 from 12 months earlier, faster than April’s year-over-year increase of 8.3 percent. Behind that surge were much higher prices for food, energy, rent, airline tickets, and new and used cars.
But there’s a silver lining here: Merchants can turn negative into positive increasing goodwill and boosting the potential for stronger client relationships by offering payment solutions that may remove some of the stings of inflation, for customers and even themselves. Here’s a breakdown of viable options.
Putting Payments on Repeat
The financial strain of inflation is causing many consumers to miss payments on their bills and accrue big past-due balances in certain cases putting them at risk of losing services (like utilities), facing eviction, or the like. Some of these consumers would undoubtedly welcome an opportunity to avoid such problems by making a payment arrangement to handle overdue balances in smaller increments rather than in a large lump sum. Offering a solution that facilitates recurring payments is the easiest way for merchants and consumers alike to handle payment arrangements, and for merchants to ensure collection instead of “taking a hit” to the bottom line.
In a recurring billing scenario, merchants use a system that allows them to automatically accept electronic payments from their customers at pre-defined intervals, for example, on a certain day each month. Consumers sign up for recurring billing by designating a credit, debit, or bank account from which payments will be automatically drawn. When a payment is due, it is then charged to or against the appropriate account, with funds then transmitted to merchants via ACH or wire transfer.
With some solutions, among them E-Complish’s RecurPay, consumers automatically receive an email to remind them just before a payment is due. An email advising them that a credit card is set to expire shortly, and requesting updated payment information, is also generated in advance for customers’ convenience.
Fast and Easy Funding
Receiving funding quickly, for example, for loans, furniture and appliance purchases, or insurance claim payments and tax refunds is an appealing proposition for cash-strapped consumers and a great alternative to check payments. Push payment solutions, including E-Complish’s Push2Card, allow businesses and other entities to electronically transmit funds to recipients’ debit card accounts in lieu of issuing and mailing checks. Funds reach their destination in near or real-time.
In addition to making customers happier by giving them faster access to cash, push payment solutions improve merchants’ financial picture, quite likely lessening the impact of inflation on their bottom line. Think of it this way: According to one study, issuing checks costs U.S. companies an estimated $26 billion to $54 billion annually. Admittedly, individual costs per company can vary, but the study revealed that issuing 500 checks per month, with three employees handling this task, costs more than $1,200 in labor alone.
What’s more, when the price of supplies, check printing, and postage is added to the equation, this expenditure adds up to $2,045 monthly and $25,540 annually. Larger businesses and entities that issue more than 500 checks will face higher check-issuing expenditures than those quoted here. By contrast, the cost of sending funds to consumers via a push payments solution is only a fraction of this total.
A-Plus for ACH
Surcharges (“convenience fees”) for paying bills with a credit card can add up, so it stands to reason that consumers will welcome an alternative to doing so at a time when inflation is wreaking havoc with their budgets. ACH processing solutions like E-Complish’s ACH Processor, which allow consumers to electronically pay for merchandise and services through their checking or savings account, with funds automatically deposited into merchants’ bank accounts, comprise such an alternative.
To leverage these solutions, merchants obtain the ABA routing number and account number of the bank account from which funds will be taken. ABA information is provided to merchants by any means agreed upon by the customer, including phone, Internet, and fax communication. Merchants then input the information into an ACH processing utility in one of several ways: manually, via scanning, through upload as part of a batch file, or, in the case of ACH Processor, using E-Complish’s DevConnect API. Information received by the system is sent through the ACH network and the Federal Reserve banking system, effectively transferring the payment from the remitter’s bank account to the merchant’s bank account.
In addition to saving consumers money by freeing them up from convenience fees, ACH processing solutions afford merchants a bit of financial relief because they command nominal fees per transaction, with no percentage of the payment total (interchange) added to the processing cost. By contrast, interchange makes credit card processing a pricier option. Here’s an example: A merchant is owed $500. If the merchant were to process a credit card payment for that amount, with an additional interchange fee of 2.3 percent of that $500, processing the payment would run $11.50. Processing an ACH transaction would amount to a fraction of that total around 55 cents.
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