Collections Merchant Accounts are a facility offered by financial institutions and banks that will help your collections agency accept credit card payments from customers. This can save you vital administration time and also make it easier to collect from clients. Credit cards may be a preferred method of payment if a client does not have the cash immediately available.
Providing merchant accounts is not an activity without risk to the bank or financial institution that offers it. Often banks will assess a risk rating for each business that asks for an account. A high riskí retailer or business would be a company that they may not wish to work with, or to whom they would only offer services subject to relatively high fees.
Collection agencies are seen as a relatively high-risk business because often the clients that you require payment from may be at risk of default. This may mean that there could be problems with the transaction or with other administrative issues such as processing errors, credit card theft or credit limit refusal. Just as you as a collection agency might want money up front, down to the risk of the creditor defaulting, an account provider might similarly consider a collections agency to be a high-risk customer because you offer this credit facility.
Merchant accounts are important because more and more people find reason to spend and to pay bills and make repayments over the internet. Due to the financial nature of the merchant service, any account offered may involve a complex arrangement. Merchant services often rely on an agreement between you, the person seeking a merchant service, and the bank that will accept and process the card payment.
While it may be hard to find a good rate for a merchant service provider, it is still a good idea to be selective when it comes to finding a provider. Many trustworthy, well-known banks offer accounts that will suit your needs. A merchant service may often involve a third party who will process the card and pass the payment onto your bank, although this is often nothing to worry about as banks usually have robust requirements for the third parties they work with: which means that third parties will be vetted and have to adhere to very specific regulations.
A merchant account can handle both online and offline collections; so therefore can process payments both in-person and without the customer being present – either over the phone or on the internet.
Internet transactions will involve using a payment gateway where users of your collections website will be directed to a third-party website to submit their card details. This third party will administer a payment from the card and pass the money along to the bank; then inform you that the transaction has been successful. This payment gateway usually involves a virtual terminal where clients can submit their payment details, and a secure API so that the gateway can connect to your website in order to gather the details of the payment and to make confirmation once the transaction has been processed.