The Push to Accept Debit Card Payments
Sigh—Another bill came in the mail, time to get my checkbook. After you fill out the check, you realize you’re out of envelopes and stamps, time to go to the store.
The nation’s top lending organizations have taken measures to eradicate this antiquated system. 60 percent of the top US lenders are now accepting debit card processing for loan payments. Customers demand the ease and convenience of using their cards for all transactions—including payments on loans.
In a recent survey, 40 percent of the top 20 US lenders accept debit cards for on-time loan payments, while 20 percent are only accepting them for loans in collections.
Why? The movement toward accepting debit cards for loan payments began with collections. Many lenders allowed customers who fell behind on payments to pay using this method. But, many customers enjoyed this capability, and began to ask, “if you’ll take card payment when I’m behind on payments, why can’t you do so when I pay on time?” That’s when lenders realized that accepting debit cards for loan payments was a good idea to keep customers satisfied and paying on time.
Benefits. Many lenders are reluctant to accept debit card payments due to confusion about the cost, thinking that the costs to the lender are higher than they actually are. But, meeting customer needs doesn’t mean you will absorb the costs. The majority of lenders are able to accept electronic payments at little to no cost to themselves, by allowing the customers to pay convenience fee.
In assessing if you organization should consider accepting electronic transactions, it’s important to look beyond interchange costs, by considering the potential long-term costs savings and revenue gains.
Allowing your customers to pay electronically will reduce operational costs. This payment method reduces the amount of time lenders need to spend to collect payments. Debit card processing functions more efficiently, allowing lenders to place fewer phone calls. Less phone calls mean fewer costs to operate the call center. Compared to ACH payment, debit cards shorten call times by 80 percent.
Lenders who have already began allowing their customers to use their debit cards for on-time and late payments, have reported significant revenue growth. Customers who are satisfied with their overall experience are more likely to open new accounts with their lender. Providing a simple and convenient way for your customers to pay loans will most likely increase business with each customer. According to J.D. Power & Associates, 90 percent of highly satisfied customers will purchase additional loans from that lender.
If you would like to speak to one of our experienced collectors at CMCS, we can provide individualized information regarding your specific needs to provide you with the best options in your collection. Call us today at 800-223-6259 to get started.
