Merchant processing makes collecting on-time payments from borrowers easier and faster for consumer lenders. Consumer installment loans, typically provided by both the traditional storefront lenders and the newer online lending fintech companies, are attractive to borrowers for many reasons.An installment loan is fast, simple, can be inexpensive with a fixed term, and is a great option for debt consolidation, home improvement, or an unexpected expense. In the last year, 34% of Americans have taken out a personal loan, according to a PureProfile survey.
How can lenders effectively leverage payment processing options to fund loans and make it easy for borrowers to repay?
Traditional Payment Practices
The largest marketplace lender, Lending Club, accepts credit and debit card payments online and through pay by phone features. Avant accepts card payments from borrowers through a call into a live operator. SoFi, whose primary loan product is student loan refinancing, does not offer a card payment option at all as most loan servicers in the student loan market require a direct debit from a bank account. With credit and debit card payments so ubiquitous, you would think any public-facing business, including consumer lenders, would offer multiple card payment options.
And you’d be wrong.
Lenders have a huge opportunity to implement payment processing to not only make repayment easier, but to provide a fast and seamless funding experience. Let’s check out the newest opportunity for lenders – push payments.
The Push Payment Opportunity
Both pull and push payments can make payments faster, easier, and cheaper for both lenders and borrowers. A pull payment is the traditional, well-known payment
method - it is initiated by the lender, who pulls the money from the borrower’s account after the borrower provides the account information and payment authorization. Push payments, on the other hand, enable the borrower or the lender to send (or “push”) the money to a recipient one time or on a recurring schedule. Push payments have faster settlement times and lower costs.
There are huge opportunities for push payments within the lending industry. Not only can lenders accept card payments as a form of repayment, they can use push payments to transform the lending experience. Through push payments, lenders can send funds directly to their borrowers’ debit or prepaid cards, and those funds are typically available for use within minutes of authorization approval. With this real-time processing and funding, push payments eliminate the waiting period associated with ACH and paper checks. Borrowers won’t have to make a trip to the bank to deposit a check, and storefront lenders won’t have to carry or handle cash. Another great benefit is that the push payment network is available 24/7/365, which means lenders can push payments to fund loans at any time, any day of the year, including holidays and weekends.
Lenders can use push payments to gain competitive advantages in the marketplace by delivering fast and convenient funding experiences to their borrowers. Push payments add tremendous value for borrowers and lenders, reducing costs and wait times for everyone.