The success of any lending operation hinges on the ability to recover the loan. Across the nation, millions of people and businesses are borrowing cash to supplement their income or augment working capital. A base of nearly 10 to 12 million Americans rely on short-term borrowing every year. The market is worth billions of dollars and is serviced by a growing number of financial service providers.
Service providers extend loans to small businesses, homeowners, workers, and car owners to plug a gap in liquidity. Cash offered on short-term basis can keep a business afloat or help a homeowner pay the bills before their check arrives.
These small financial firms offer a vital service, and like any other service they need to keep up with changing customer behaviors. Three emerging trends are shaping the small loans industry - regulations, cashless payments, and digital adoption. To stay ahead as the market evolves, financial service providers will need to adopt digital ACH payments processing and move their services online.
Although cash still makes up the bulk of transactions across the country, digital payments are proliferating fast. In 2018, the total value of digital transactions is expected to reach $1 trillion. The aggregate value of these transactions is expected to grow 11.1% compounded annually between 2018 and 2022, leading to total transactions worth $1.4 trillion by the end of this period. Payment processing solutions such as POS terminals and online ACH payments gateways have made online transactions safer than physical card payments.
Consumers are increasingly shopping online, not just for everyday items from Amazon and Walmart, but also sophisticated online services like loans and mortgages. A segment of the online payment processing industry that is growing faster than any other is the automated clearing house (ACH) network.
With recent modifications to the network that allow same day ACH payments, the network supports billions of transactions every year and is connected to every financial institution in the country. ACH allows merchants to offer payment processing through a federally regulated platform that is fast and intuitive. ACH allows merchants to withdraw money directly from customer accounts and to implement rolling payments. Meanwhile, eChecks based on the ACH network and Check 21 technology make it easier for borrowers to repay their loans with fees and interest without compromising critical bank details. The network is more secure and convenient for merchants and consumers, which is why the rate of ACH adoption is skyrocketing in recent years.
Digital payment processing through ACH merchant accounts is ideal for financial firms and short-term lenders. Through this platform, lenders have the ability to implement recurring payments from borrowers. This helps to schedule interest and capital repayments over the lifecycle of the loan. Borrowers frequently cycle their short-terms loans over the course of months or even years. The ACH network is built to handle these frequent, high-value payments directly from the customers’ bank account.
Payment processing through this network allows lenders to integrate a payments gateway with their website or app. Developer API tools allow lenders to make online payments fast and convenient for all borrowers. The automated structure of the network reduces the risk of human error while processing loans and securities. A Level 1 PCI-DSS platform can also ensure enterprise-grade data security, keeping your business and your customers safe online.
Secure ACH payment processing can help you reduce the risk of fraud or chargebacks. Customers don’t need to rely on credit or debit cards to complete payments and your business doesn’t need to manage the risk of chargebacks. These benefits can help you streamline your lending business, reduce costs, mitigate risks, and ultimately boost profits.
Want to streamline your lending operations and boost profits while making your service more convenient for borrowers?
Contact us today to learn more about how your business can benefit from ACH payments and card processing solutions for lenders.