It’s no secret that the COVID-19 pandemic has disrupted daily life and devastated financial markets across the world. Inflicting the worst damage on the U.S. economy since the Great Depression, the novel coronavirus resulted in record unemployment, fractional commercial activity and a slow recovery.
Certainly, times are tough for all companies, but the ones that seem to feel the economic decline most acutely are small businesses. This is especially true for those that depend on customer confidence and spending, such as consumer lenders, CBD and Native American merchants. These businesses already face significant regulatory and payment processing challenges.
However, as the reopening economy slowly creeps back toward pre-pandemic levels and mask-wearing shoppers cautiously venture out of their homes – increasingly favoring contactless and cash-free options for purchases – there are payment solutions available that can help you save money and grow your business. For some merchants, one of those is by using a debt repayment program, which is good for you and your customers alike.
What is a debt repayment program?
Debt repayment programs help qualified businesses to reduce costs through subsidized interchange rates on debit card transactions. Intended to incentivize the acceptance of loan payments made by debit and prepaid cards, these programs offer eligible merchants lower swipe fees. Some also include the option to apply a convenience charge to each transaction.
What programs are out there?
Visa Debt Repayment is the predominant one, but Mastercard also has a consumer loan repayment program for merchants and Discover introduced an interchange program for its unregulated debit and prepaid cards, as well.
Program details and interchange rates can vary, but to increase efficiency and customer satisfaction, it is best for businesses to choose a provider that offers debt payment solutions for the most widely used card brands.
What are the benefits?
For customers, the advantages of a debt repayment program are ease, speed and convenience. In an ever more paperless world, most people would rather simply pull a debit card out of their wallet to pay back a loan than provide all the information needed for an ACH transaction. Streamlining the process and satisfying your customers means they will be more likely to follow through, actually make a purchase and come back to borrow again.
For merchants, in addition to the obvious cost savings from lower interchange rates, accepting debit and prepaid cards also allows them to cast a wider net and appeal to more consumers with flexible payment options. In addition, most customers prefer to use the same debit card on repayments, so merchants can easily tokenize and store the card information for future automated transactions, without having to worry about chasing down payments every month. Other potential benefits include enhanced security, Payment Card Industry (PCI) compliance and accurate data and reporting.
Consumer interest in debit card payments has been steadily growing, so state licensed lending companies that accept them stand to profit considerably from these programs. Lenders that offer debit card processing can obtain more payments on time, decrease default frequency, reduce their loan losses and see increased revenue.
Who is eligible?
From a merchant perspective, most lenders are eligible.
The debt repayment program primarily focuses on industries that already deal with borrowing on a regular basis, such as auto financing and mortgages, as well as bank, installment, personal and student loans. For example, EPX, one of the leading debt repayment solutions providers, serves clients in two Merchant Category Codes, 6012 financial institutions and 6051 non-financial institutions.
In general, eligibility requirements are not overly strict. As long as you’re a legitimate, legal business with traditional loan products and reasonable interest rates, and you take debit and prepaid cards, you should qualify.
How FLEX Payment Solutions can help
With consumer demand for convenience and businesses’ desire to save money, loan repayment by debit and prepaid card has become a preferred payment method. And it’s now more financially advantageous than ever, with reduced interchange rates that make the cost of accepting debit cards comparable to check or ACH for enrolled lenders.
Debt repayment programs can benefit all merchants. However, some have more difficulty than others finding a payment solutions company that will provide the credit or debit card processing they need – particularly those labeled high-risk, CBD and Native American businesses. FLEX delivers debit card processing for specific niches, such as hemp-derived CBD chains, vape stores, pawn shops and tribal lenders, and it has the specialist knowledge needed to ensure compliance in those industries. Offering one-second instant funding for debit cards and a relatively lower interchange rate due to special banking relationships, as well as a unique compliance background and superb customer service, FLEX Payment Solutions can help you select a Debt Repayment Program that will help your business grow.
