Receivable/Accounts - Information for Credit and Collection Issues

Friday, August 15, 2014

Opening Up The Payment Channels


A huge factor often overlooked by credit managers and agency owners is not the process of convincing a past due account to pay, but the pitfalls and hurdles in actually accepting the payment.  We live in a modern age where people can borrow on account from their smart phone, transfer certified funds by email, view statements online and yet, many companies are still expecting the cheque in the mail …

In some cases, companies try to take payments in a more comprehensive manner, but shoot themselves in the foot by not making their payment process intuitive for both the customer, and their credit staff.  Ease of use is a huge part of making the customer comfortable with paying their account, and retaining the customer for future business.  If a customer is told ‘we can’t accept your payment in that manner’, something has gone wrong.

So, I believe that means that creditors need to have multiple avenues to allow payments to flow into their company, and do everything they can to make the system smooth.  Here are my thoughts and experiences with different payment methods in Canada.


Mailed Cheque/Money Order: Ah, the old ‘cheque in the mail’ … this payment method will never truly go away as long as consumers are wary of technology and sharing banking information, even though ironically that data is available once the cheque arrives at the creditor.  Regardless, there should always be the option to pay by cheque for those customers who need it.  This isn’t necessarily the first option you want customers pursuing, but you need to have it available. 

To make this payment option viable, you need to process and note accounts on a daily basis, and educate your credit department on what is a reasonable turnaround for a cheque to arrive via Canada Post – my rule of thumb would be one week.  Multiple promises to mail a cheque should indicate a more immediate payment method is necessary …


In-Person Payments:  It would be great if all our customers could show up at our door with money in hand – in many cases, creditors such as hydro commissions or local cable companies still rely on this method for receiving funds.  If a creditor wants smooth transactions in person, they need to have a receipt/record system and hopefully a debit machine for the more modern folks who aren’t carrying around that old fashioned paper money.


Electronic Fund Transfer (EFT): So, rather than wait for a cheque in the mail, you can take the chequing information over the phone and process it through your bank or payment processing company immediately.  There’s no guarantee the funds will clear (just like a cheque), but you eliminate paper and the mailman from the equation.

The important thing here is to follow the rules set down by the Canadian Payment Association (https://www.cdnpay.ca/) in handling EFTs – you need to have recorded consent to take funds from a customer’s account (a signed form, recorded phone call, etc), clearly identify the amount and date, and you can only re-present the debt a second time.  You also need to have security measures in place in your workspace to make sure that personal banking information is treated properly.


Pre-Authorized Payment (PAD): Just like the EFT, pre-authorized recurring payments are an excellent method for recurring customer costs.  However, just like an EFT, banking information needs to be kept securely, and consent needs to be clearly identified.  Because this is a recurring payment schedule, the terms (or number of payments) needs to be identified by the customer, and whether the payment amount is fixed (the same every time) or variable (changing based on use, etc).


Credit Card: Just as convenient as EFTs, consumers often wish to make payments by credit card.  This can be more challenging than PAD/EFTs, as you must be PCI compliant with consumer credit card information if you are storing that data or running virtual credit card payments without the customer present with card in hand, and the cost of processing credit cards for the creditor is significantly higher than a PAD/EFT.  A credit card can be used for fixed or recurring payments, but recorded consent is absolutely necessary before running the credit card payment.


Interac e-Transfer: A lot of creditors don’t know about this process, or aren’t set up to receive these funds, and that’s a shame.  In the third party debt collection environment, or for industry segments with high rates of returned cheques or charged back credit cards, this is definitely a payment method to consider.  Imagine if you will, a customer emails you certified funds with a password that you can receive and deposit into your bank, all in minutes.  The cost is negligible, the payment processing trail is clear, and everyone wins. 

Of course, just like any other payment method that handles funds, it needs to be secure – payment passwords should be regimented and separated from the staff who actually handle and process the funds, so two layers of security are in place – while payments do not display banking or credit card information, these emails should be treated like cash and reconciled accordingly.


Western Union:  When I moved to Kingston Data and Credit three years ago, I tried to open a Western Union account for our company, because in some cases it was still a viable payment method – overseas funds transfers, convenient locations across Canada and the US, in a certified fund transfer.  However, it has significant downsides – payment notification isn’t until the next day, the customer needs a code to transfer the funds, and the cost is exorbitant ($15 in Canada for a Quick Collect payment).  I believe this payment method is being phased out as customers move to Interac e-Transfers at a tenth of the cost or less.  I found out that Western Union is no longer accepting new third party collection customers in Canada … I’m not horribly saddened, but it’s just a sign that Western Union is on the decline in Canada.

If you can receive payments by Western Union, I definitely recommend having it as an option, but beware it’s pitfalls.  As the payment is customer-driven, there isn’t a lot of security necessary, but ensure you are recording your daily payment faxes on a timely basis.


Streamlining Everything: This is a good starting list of payment methods to accept – there are other options out there (UseMyServices, Square terminals, PayPal, cloud invoice systems, and so on), but this should cover the majority of mainstream options available to most creditors.  The important thing to consider as you accept various payment methods is to make any option simple and intuitive for consumers and your staff.  If an EFT payment is an option, but your company requires a physical original signed EFT authorization form, that kind of defeats the purpose of being able to take a payment over the phone.  If your staff need 15 minutes to process a single credit card payment, you may need to improve your process to keep your productivity.  Having multiple payment options is good for every company, but it needs to run smoothly for everyone.

If anyone has any questions or comments about payment processing from the credit management side of the table, I’m certainly interested in chatting – I’ve worked with clients and agencies that have amazing systems, and others that are challenged, and I’m always happy to share what I’ve seen and experienced.

Thanks kindly!

Blair DeMarco-Wettlaufer
Kingston Data and Credit
Cambridge, Ontario
226-946-1730