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Updated by 07.13.2023
Selling Consumers on Text-Based Payments
Texting (messaging via SMS) has become the most widely and frequently used smartphone app, with 97 percent of Americans using it at least once daily and more than 80 percent of adults in the U.S. doing so to at least a certain degree, according to Pew Internet. Meanwhile, Forrester Research estimates that more than six billion text messages are sent in the U.S. each day.
Given these statistics, it is also no surprise that texting is now a widely accepted bill-paying solution, with businesses that bill consumers and take recurring payments such as utility companies, insurance companies, financial lenders, and “rent-to-own” firms, to name a few adopting them at a rapid pace.
Implementing a text-based bill payment system benefits businesses in many ways, ranging from cost and labor savings to faster collection and a significant reduction in late and missed payments. However, the benefits to consumers are equally compelling. Highlighting and clarifying these benefits in marketing messages will make it easier for businesses to convince their customers to adopt the text-based bill payment option they offer.
How Text-Based Payment Systems Work
Text-based systems are quick and easy for consumers to use. Consumers register in advance to leverage “pay by text” with a particular merchant that offers such an option, providing their payment information (credit or debit card number or checking account and bank routing numbers) to that company.
Payment information is stored in a secure system maintained by the merchant’s payment solutions provider. With some systems, such as E-Complish’s Text2Pay, the signup process includes a step where consumers create a personalized PIN.
When a bill comes due, consumers who are registered for the service receive a text reminder that this is the case and a link to click to initiate payment via a return text. Consumers can make their text-based payment whenever they like, using their PIN number for verification if the system requires it. Specific plans are set up to not make a payment by text; they can sign up to receive a text reminder that that payment is due. Text2Pay offers this option.
Advantages for Consumers
More than ever, busy consumers crave convenience and demand quick, secure means of paying for goods and services. They want to complete transactions and handle bills whenever and wherever they desire. They want to do this in real time without worrying about exposing their data to hackers and other unsavory parties. Given the instantaneous nature of text delivery and built-in security, SMS-based systems meet these demands. That consumers can make these payments from any smartphone and have these payments registered immediately is an enticement as well.
Additionally, when customers sign up to take advantage of a subscription-based payment system built around SMS, they no longer need to receive and grapple with the hassle of paper bills. There are no inconvenient trips to the post office or mailbox to send payments. There is no accumulating clutter or hunting around for misplaced bills. Late or missed payments and the fees that accompany them are reduced because invoices arrive via text, payment reminders are an option, and payments can be scheduled ahead of time and remitted via SMS.
Card Payment Benefits
While the advantages mentioned above of text-based bill payment systems are compelling, businesses would also do well to share with consumers that using a credit card rather than a debit card to text their remittance makes sound sense. The “perks” of doing so include:
Signup bonuses: Many credit card issuers offer attractive bonuses, such as cash rewards, to consumers who sign up for their cards. Few standard debit cards come with these rewards.
Cashback: Cashback rewards have become a staple “perk” of many if not most, credit cards. Some cards allow consumers to choose one category of purchase, like groceries or restaurant meals, for which they will receive a higher reward. Debit card rewards are far more limited if they exist at all. For example, Bank of America features a select number of cashback deals each month. These deals are tied to specific merchants, and most have a cap—e.g., 2% back up to $10.
Points: With credit card usage, consumers can accrue points (typically up to five) for every dollar they spend. Points that can be redeemed for prepaid cards are then awarded when given thresholds are reached. Applying these cards to special-occasion purchases (e.g., gifts) or even to purchases for themselves is an easy, cost-effective way to manage spending.
Frequent-flyer miles: With COVID-19 travel restrictions beginning to lift, the prospect of earning frequent-flyer miles is once again a compelling reason for Americans to use their credit cards. Airline credit cards allow cardholders to accumulate one mile for every $1 or $2 they spend. In the best-case scenario, consumers can, in the span of a few months, cover 50% to 100% of their flight expenditures by combining earned frequent-flyer miles with signup bonuses.
Investment rewards: Some credit cards offer heftier rewards to consumers who deposit the money into investment accounts rather than other accounts.
Security: Credit and debit card fraud continues to be a significant threat, especially in light of the increasingly sophisticated schemes perpetrated by criminals. Credit and debit card companies do not hold cardholders responsible for fraudulent card charges. By contrast, while there are some exceptions, reversing forged debit transactions and restoring funds to consumers’ accounts usually takes time because banks must perform a thorough investigation before reversals can occur.
Moreover, should legitimate online debit card payments and checks that follow a fraudulent one result in a negative balance, insufficient fund fees, unhappy creditors, and damaged credit ratings can ensue. There are no such problems with credit cards.
Grace periods: Delayed due dates leave cash in place in consumers’ bank accounts for two to three weeks allowing them to earn more on their funds during grace periods in most cases and freeing them up from checking their bank balances whenever they shop to avoid overdrawn status. Conversely, funds are deducted from consumers’ bank accounts the moment they make a debit card purchase.
Credit scores: Responsible credit card usage helps consumers build or repair their credit. Debit card transactions are not reported to credit bureaus, so they have no bearing here.
Insurance: Valuable consumer protections, such as extended product warranties and insurance covering travel and rental cars, are a “credit cards only” perk.
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