Electronic payments can cut down on the costs of processing payments by 80% and do away with paper and cash transactions. The best-known options for electronic payments include a debit card, a credit card, ACH payments, virtual cards, digital wallets, and electronic checks. We take a look at the benefits, the risk of fraud, and how this can get you blacklisted.
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The Benefits OF Electronic Payments
The costs of processing payments are significantly reduced by opting for an electronic payment system. For example, checks have to be printed and signed before being placed in an envelope and mailed. Postage must be paid. Cash has to be withdrawn and carried around. This increases the risk of theft or loss.
Supplier relationships are enhanced as payments are safer and faster. Reconciling payments with accounts is smoother due to the completeness of the information that accompanies electronic payments.
The security offered by electronic payments is one of its best features. Additional features are included in systems to make them even safer. Virtual cards are one of the best methods to ensure secure payments.
It is easier to track electronic payments. This makes them better for audits and finding problems when the books don’t balance. It is also simpler to collate information on spreadsheets for decision-making.
Risk Of Fraud And Electronic Payments
Businesses are at risk of fraud and chargebacks. Due to the competitive nature of the marketplace, companies operating online are compelled to offer their customers as many ways to pay as possible. This increases their exposure to bad payments and fraudulent activity. The user experience (UX) has taken precedence over other valid concerns.
Criminals are easily able to access credit card details and use these details to make illegal purchases on someone else’s account. The legitimate owner of the account will institute a chargeback request. Sometimes a child will use a parent’s credit card to make purchases without their knowledge, which may be disputed.
Frequent chargebacks (one percent ratio to sales), industries considered risky (such as subscription services), poor credit ratings, and not having an account for long can result in a business being classified as high risk by MasterCard or Visa. This may result in increased banking fees and being charged $25,000 to have your account reviewed bi-annually. Ultimately, your account will be closed.
If your company has been identified as a high-risk merchant, you will be charged higher fees by institutions handling your banking payments. However, you can apply to Envestnet Yodlee for a high-risk ACH merchant account. A high-risk ACH merchant account through them will reduce fraud and provide a safe way to make and receive payments even in a high-risk industry. As ACH payments are not involved with credit cards at all, they have a much lower fee, even for a high-risk ACH merchant account.
Ach accounts are one of the most cost-effective methods of making electronic payments. Whatever the size of your business or its identified risk level, you will save with an ACH account. Getting your subscription or monthly paying customers onto an ACH account will help you to combat fraud and save on bank charges.
Alex is fascinated with “understanding” people. It’s actually what drives everything he does. He believes in a thoughtful exploration of how you shape your thoughts, experience of the world.