October 17, 2019
7 Questions on Taking Online Payments
American consumers prefer to pay bills online, but, for the businesses, it’s not quite as easy. Here's some advice.
When American consumers go to pay their bills, they prefer going online to mailing a check because going online is simple. But for the businesses, it’s not quite as easy. Here’s some advice.
One reason online payments are so complicated is that eight players are involved. There’s the cardholder, the credit card company, the merchant, its bank, the payment gateway, yet another bank, the credit card network and, finally, the Federal Reserve.
When you sit down with a payment provider, here are seven big questions you should ask:
What are some reasons to accept payments online?
You never want to turn down a customer payment. Customers like to pay online, using either a credit card or a checking account number, because it’s quicker than hunting around for the checkbook and a stamp, and they can be certain when the payment has arrived, avoiding late fees or cancellations. In fact, the timing issue was the main reason people have been willing to pay fees for online payments. But business owners like them, too. They speed up your payables, allowing you to be more productive and avoid any difficult situations where a customer is having trouble paying promptly.
What are some drawbacks to accepting online payments?
It’s tricky. Many vendors add processing fees, set-up fees, chargeback fees and other hidden fees that can eat directly into your already tight profit margins. Integrating payment into your website can also be costly, especially if you need custom coding. There are also security concerns that require an understanding of proper handling of customer data and banking information. And, in the insurance industry, there are additional state regulations to meet.
Why is compliance important?
Running your operations with disregard for, or ignorance of, the law is never a good business model. Card rules violations may lead to card companies taking away your ability to accept payments or in some cases levying fines of up to $25,000 per violation.
What can I do to ensure my payment system is secure?
Look for PCI Level I validation, the highest level of security, from any vendors you choose. Ask how long they have been in business. Read the contract to find out who is responsible for a breach: you or the vendor.
Does every state have the same payment processing regulations?
States have varying regulations with payment processing that prohibit the agent from charging additional fees. For the insurance industry, states also have rules on how the premium fund must be handled, while credit card companies also have specific regulations. With multiple layers involved in being compliant, it is important that you choose a payment provider that ensures you are operating within the rules, at all times.
Does my state allow people in the insurance business, such as agents, to charge additional fees?
While other businesses have the ability absorb processing costs as a standard part of their pricing models, typically this is not the case in the insurance industry, but it varies from state to state.
Does my state have a “convenience fee” law?
A convenience fee is an additional charge to your consumer on top of the payment due. It is referred to as a “convenience” fee because your business has provided the consumer with another avenue to make a payment outside of standard ways of paying. The rules on convenience fees are state laws, not guidelines, and violating these could come with significant consequences. To make things more complicated, the status of convenience fee laws may have current legal action pending in your state. Make sure your payment provider satisfies the requirements of these laws.
See also: Find Your Voice as an Insurance Agent
By understanding the laws and regulations for your state, you can confidently run your agency knowing what you can and cannot do when it comes to payment processing. Not all payment processors are created equal, and a poor decision could cost your business in custom development work, unnecessary features, hidden fees and insecure data, and even land you in big legal trouble.