Paula Monroy Oct 21, 2021 2:24:02 PM 20 min read

8 important considerations when choosing a secure payment gateway for digital collections

Building a solid relationship with customers is critical to remain competitive in today's economy, especially during volatile times. 

COVID-19 forced businesses across virtually all industries to revamp their communication strategy when interacting with customers. The digital transformation took a major leap, triggering a sudden shift toward online interaction with consumers. 

That said, it comes as no surprise that 'Customer Experience' has become a hot keyword among publicly traded companies. 

We're seeing in research how adopting a humane approach increases and sustains customer loyalty. According to Forrester's US Customer Experience Index for 2021, 21% of brands performed better by engaging empathetically with customers throughout the pandemic.

Indeed, going digital is no longer optional.

It's a matter of survival. You should take customer experience seriously. 

The truth is there are many ways to care for and interact with customers. And now more than ever, online payment gateways are genuinely convenient to do so.

As our 2021 North American consumer repayment preferences survey revealed, past-due customers expect a digital transformation and need empathy.

 

Adopting a humane approach to collections

When customers become past due, a gap begins to form in the experience. 

While paying customers are handled with care, those who've become past due are very likely to suffer. They're left dealing with an antagonizing experience that lacks compassion unless payments are made.

Customer care should be of relevance if you fancy a higher ROI from the collections department. After all, you're connecting with real people, not mere numbers. 

Of course, numbers matter.

And by attaining higher satisfaction rates, retention is likely to follow. This notion is relevant, for acquiring a new customer is more expensive than retaining an existing one.

If you are already looking to streamline your past-due customers' payment process and reap the benefits, you should be aware that online payments are the best way, and those require a payment gateway. 

Payment gateways not only make it easy for your past-due customers to pay you, but these also demonstrate your goodwill to be flexible and empathetic.

 

What is a payment gateway?

A payment gateway is a highly secure service to collect payment information, execute transactions and transfer the funds to a merchant account. Popular payment gateways used in digital collections include Stripe, Square, Zum, and Chase.

"Essentially, it's a way for someone to collect money in an e-commerce context," explains Michel Jamati, Lexop's Chief Technology Officer. 

See the payment gateway as a metaphorical cash register.

Here's how Michel proceeds to describe it for us:

I could use a gateway to add payment capabilities to my eCommerce website. The gateway will provide me with a nice checkout page that accepts PayPal, Apple Pay, and credit card payments. My customers will use that to enter their payment info and submit it. In the background, the gateway will use a payment processor to execute the transaction between my customer's VISA account and my merchant account (which is connected to my bank account).

 

Payment Gateway ≠ Payment Processor

That's correct! Functionally, they're not the same thing. 

Look at it this way. To execute payments, you need banking infrastructure. A lot of payment gateway providers are tech companies that focus on building tools to improve the user experience, provide the customers with analytics and actionable insight to drive sales, and leverage the data they gather to identify questionable or fraudulent transactions.  They may not handle that actual transaction and instead opt for a partnership with a processor.

A payment processor will securely process a payer's credit card information and ensure the transaction is completed across the different financial institutions.

 

Important factors to consider when choosing a secure payment gateway provider for digital collections

Besides facilitating automatic recurring payments, payment gateways optimize the payment experience of past-due customers. 

Proceeding are eight factors we advise you to consider while searching for a payment gateway provider to include in your digital collections strategy.

1. Transaction fees

Consider the volume and value of your transactions. Doing so will give you a good sense of how the payment gateway will impact your bottom line. 

Essentially, you want to look into these*: 

  • Interchange fees. Regularly adjusted, and usually represent 70-90% of the total fees paid to the bank.
  • Credit card association fees. It's paid to the card-issuing bank to cover handling and bad debt costs, fraud, and the risk taken in the payment approval. 
  • Processor markup fees. Vary by industry and by your monthly processing volume.
  • Payment processor fees. These are operational charges additional to the interchange fees.

*Inquire directly if information about any of these fees is not easily accessible on their website.

Look for payment gateways that offer a fixed monthly fee and a low transaction fee for high-value transactions.

2. Contract length 

Are you looking for a long-term commitment to saving money? Or, is it flexibility that your company prefers for now? Although you know best what to look for in a contract with a business providing you a service, it's always pertinent to read the Terms and Conditions of your candidates. It will give you a better idea of how much leverage you'll have during the negotiation process and if there is a termination fee. 

Watch out for 'auto-renewal costs' if they don't offer an early termination fee waiver. In some cases, you want to be wary about something called liquidated damages. Liquidated damages are based on projected revenue losses ensued from your early termination. 

3. Available payment methods 

By now, it's no secret that offering your past-due customers as many avenues to self-cure as possible will earn you brand loyalty. What's more, by increasing the number of payment methods, you will give more flexibility to your customers and increase your chances of getting paid.

You want to focus on security and make it convenient for your customers. Check what payment methods they already use to handle their payments. Facilitating a payment type for past-due customers will keep you from running into fewer security risks.

4. Ease of integration

Can you integrate the payment gateway into your website or mobile app? How easy is it? Can anyone do it?

Using an external checkout page implies that the customer is taken to the payment provider's website when entering their payment details. Similarly, it is possible to embed a checkout form in your website or app. In both cases, all financial and other sensitive information entered by the customer is saved in the gateway—which reduces the risk for you.  However, the first option will push the client outside of the user experience you’ve designed and into a third-party checkout process, which may cause friction and lead to fall-off.

It’s always possible to design your own payment form if you believe the gateway’s doesn’t align with your vision, but that means you’ll need to worry about vaulting to safeguard your client’s financial information, PCI compliance to ensure you’re approved to do so, and overall application security now that sensitive data will be exchanged with your servers.

5. User experience 

Offer your customers a positive experience when paying. As discussed throughout this article, doing so will improve your relationship with the customer and substantially increase retention and cash flow.

Less is more when it comes to the user interface. The less you ask your customers to do, the higher your chances to engage and convert. Make it easy for them to complete their transaction as efficiently and safely as possible.

6. Security and availability 

Payment gateway services will store your customer's credit card and bank account information, so consider weighing their transaction fee against your security costs. For example, a payment gateway with lower prices that is outweighed by the money you might spend on additional security concerns is not worth the investment.

You want to be protected from security risks like fraud, as well as transaction failures such as insufficient funds, exceeding credit limits, closed accounts. Likewise, double-check that their solution offers secure encryption. 

Make your due diligence to protect your customers' data by verifying how compliant the gateway is with the Payment Card Industry Data Security Standard (PCI DSS), a system of standards to validate security provisions across the internet. Working with companies that are PCI compliant guarantees the protection of your customer data and payment information.

7. Management capabilities 

Some basic capabilities include logging into the payment gateway user portal to:

  • View transactions
  • Flag payments 
  • Generate reports

In general, you want the payment gateway to be user-friendly and easy to adopt for management capabilities. And based on the complexity of your collections process, creating a hierarchy of permissions within the payment gateway interface is a feature you'll need.  

8. Integrations with CRMs

Reduce manual work for reconciliation. It's worth considering if the payment gateway can connect with your invoicing or accounting software. This way, the corresponding customer profile will get updated automatically in your CRM every time you get paid. 

You will be saving a lot of time and effort since you won't have to reconcile that information in your booking system manually. 

 

Was the information useful? 

Hopefully, the information shared in this article serves as an excellent kick-starter to finding the best payment gateway for your digital collections strategy. Choosing the right payment partner is crucial, and knowing how to choose may save you from making rushed decisions. Customer experience should be of special attention in your search. If you value customers regardless of their overdue status, your revenue will grow. It's that simple. 

If you're looking for a tool that will allow you to automate the recovery of past-due accounts and integrate with your existing payment gateway(s), try Lexop. Our intuitive software can help you provide an exceptional personalized experience for past-due customers cost-efficiently and seamlessly. Lexop’s agnostic approach to payment gateways will simplify your life. We currently offer easy integration with the following providers:
  • Stripe
  • Moneris
  • Chase
  • Eigen
  • Repay
  • Zum
  • VoPay
  • Square
  • Bambora

 

Get in touch with us and book a demo today! 

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Paula Monroy

Paula is Communications Specialist at Lexop. With a formal background in urban planning and creative writing, Paula writes about pretty much anything.