Bill payments lingo you need to know
Every industry has its lingo, and that’s certainly true of electronic bill payment. That can pose a challenge if you are in the market for a new bill pay technology platform that will better suit your changing business needs and provide a higher level of customer service.
You need to have enough understanding of bill pay terms to discuss them with the prospective provider and make an informed and well-suited decision. After all, a long-term contract with the wrong vendor can have far-reaching (and expensive) consequences for both your company and your customers.
Here is a quick glossary of common electronic bill payment terms and why they matter to your business
To help you round that learning curve, here is a quick glossary of common electronic bill payment terms and why they matter to your business:
Ways to pay & get paid
Payment types/tenders are forms of payment your customers can use to pay their bills, for instance cash, Automated Clearing House (ACH), debit or credit card, as well as mobile-first types such as Apple Pay, PayPal and Venmo.
Why they matter to you
Just as with payment channels, offering your customers the full spectrum of tender types gives more choice and increases the likelihood that they will pay on time. Remember that about 24% of US households are unbanked or underbanked, according to the Federal Deposit Insurance Corporation (FDIC) – meaning they have little or no access to a checking account or debit/credit card.
Having a cash option for bill payment, therefore, is critical. Some bill payment platforms have digitised the cash process, offering a fintech option of remote cash payment by partnering with retail sites your customers already frequent. The customer simply shows a customised barcode to the cashier, pays cash for the bill on the spot and receives a receipt that the payment has been successfully received.
Offering easy, mobile-first payment methods is also crucial for encouraging on-time payments. By adding simple mobile payments options like Apple Pay & Google Pay, millennial and Gen Z customers (as well as tech-savvy payers of all ages) can make mobile payments in only a few clicks, anywhere and anytime on their mobile devices.
Payment channels are the various ways customers can pay their bills. Some examples include in-person (point-of-sale), mail-in, online, digital wallets, interactive voice response, text message or email direct link, to name a few.
Why they matter to you
Meeting your customers where and how they want to interact with you is key to developing great customer payment relationships. Knowing which payment channels your customers prefer, and offering those channels as options, will also improve the likelihood of on-time payments.
To take it a step further, your bill pay technology platform can help you consolidate multiple payment types and channels in one user-friendly platform and offer a seamless user experience for you and your customers. An all-in-one platform removes the need to invest, manage and integrate with multiple vendors and solutions.
Disbursements are funds you send to customers for purposes such as loan initiation, reimbursements of overpayments (e.g., escrow) or insurance claim refunds.
Why it matters to you
Disbursements are a necessary part of business, but you can reduce your cost and compliance risk and improve customer satisfaction by choosing a bill payment platform that offers digital disbursements. Digital disbursements can be sent in near-real time to a customer’s bank account via debit card or overnight via ACH. Customers won’t have to wait for a check in the mail, and you don’t have to wait to reconcile your accounts. Digital disbursements also reduce the risk of fraud and the cost of mailing payments.
Payment exceptions are transactions that must later be reversed due to issues like non-sufficient funds (NSFs), chargebacks or ACH returns.
Why they matter to you
Exceptions delay payment, interrupt cash flow, and require staff intervention, which hampers productivity. To reduce the likelihood of exceptions, take proactive steps like putting automated flags on customers with a history of NSFs, requiring them to pay with cards or cash. Talk to any prospective bill pay technology partner about ways they can use their platform and resources help you reduce exceptions.
Fees
Convenience fees, in bill payment, provide a way to allow for the offset of transaction processing costs. The fees must be added on at the time of payment or rolled into the total payment. Convenience fees differ from surcharges (illegal in some states), which charge customers simply for using a credit card. And, there are several rules around when you can charge customers for either.
Service fees for bill payment are just like convenience fees except that the amount can be variable and the transaction is separate from the total payment amount, meaning consumers will see two line items on their bank statements. Service fees are typically only used in government and higher education.
Why they matter to you
Convenience fees are fairly standard ways to cover the payment costs and, yes, convenience of payment choice. However, fees must be clearly outlined for customers prior to payment so they can make an informed choice. You never want them to feel blind sided.
Who you’ll work with
Acquiring bank is a bank that either you or your payment processor uses to actually submit transactions into the network and is usually the bank where the funds settle.
Issuing bank issues the payment card or otherwise holds the bank account from where the consumer is pulling their funds. When transactions are sent through the system, the acquiring bank collects the transaction, sends it into the network, where it ultimately gets sent to the issuing bank to approve or deny the transaction.
Both the issuing bank and the acquiring bank may have rules around the types of transactions/merchants they will accept.
Payment processor completes payments by transmitting data between your business, the issuing bank (which issued the card) and the acquiring bank. If you plan on accepting card payments online, you’ll likely need both a payment gateway and a payment processor.
You’ll also require a front-end user interface for accepting payments. That’s where a bill payment service provider (BPSP) comes in.
Bill payment service provider connects biller and payer through a customer interface. It allows you to offer multiple payment options, from ACH, credit card, debit card and remote cash to Apple Pay or Google Pay, and may also offer features such as agent portals, payment validation reporting and interactive voice response.
Why it matters to you
Some billers have the expertise and bandwidth to create and operate their own customer interface, but those who don’t will need a bill payment technology platform to facilitate smooth, secure and customer-focused bill payment. Using a modern, tech-forward bill payment service provider also ensures your system meets current customer demands and changing regulations. That frees up your staff to focus on business-related matters rather than getting bogged down with bill collection and its technical challenges.
Compliance
Nacha (National Automated Clearing House Association) governs the Automated Clearing House (ACH) network. It is not a government agency but rather an industry organisation made up of stakeholders (banks, billers, etc.), who fund its services and agree to abide by its rules and standards.
Why it matters to you
To accept ACH, you must adhere to Nacha rules or face hefty fines (or worse, suspension from the platform entirely). Luckily, Nacha offers helpful resources on its website, including certification and continuing education. Your bill payment provider also should stay informed on Nacha matters and be willing to help you navigate rule changes as electronic payment evolves.
PCI-DSS compliance stands for Payment Card Industry Data Security Standard, a set of security standards designed to ensure that merchants maintain a secure environment for all credit card information they collect or manage.
Why it matters to you
Maintaining PCI-DSS compliance can be complex, especially in the COVID-19 environment when many customer service personnel are working from home without the necessary secure phone lines, keycard entry facilities and other essentials. The right bill payment technology platform can help you minimize risk by providing technologies, such as interactive voice response payment, pay by text or pay by email, none of which require collecting payment details over the phone.
Next steps for choosing a vendor
Having a general understanding of these terms will guide important conversations with your current or prospective bill pay technology platform provider. But remember, you also want a vendor that will explain anything you don’t understand about electronic bill payment and coach you on how to achieve the best payment experience for you and your customers. When you’ve found that combination of expertise and customer service, you will know you’ve found the right bill payment partner.
The word for that? Success.
