How The Automated Payment System Saved The Marketplace
In the marketplace – the space in which commerce is conducted – there’s a general understanding that goods and services will be exchanged for some kind of payment. That payment might be monetary, or it could come in the form of a trade. Either way, the agreed upon exchange is expected.
Sometimes that exchange isn’t met on time. When the consumer pays for their services after they’ve been received (or is allowed to continue receiving the services unpaid), they can forget or get a little lazy. Before automatic payments, this was a big problem. Companies with billing departments spent plenty of money paying their employees to collect on overdue invoices.
Automatic services created the need for automatic payments
When a merchant provides ongoing services to someone (like a monthly subscription to cable TV), the company doesn’t shut it off at the end of the billing cycle and then turn it on only when the next payment is made. That would be cumbersome for the cable TV company to deal with. Instead, the services are provided continuously, without interruption, and the consumer is expected to pay the bill on time. There’s usually a grace period, after which services do get shut off. Though, it usually takes a month or more.
The convenience of providing continuous services despite late payments saves companies from the monotonous task of micro-managing each person’s account. Imagine the labor involved with shutting off and restoring services to hundreds of people who paid a week late. This is part of the reason automatic payments were created.
Automatic payments help businesses stay in business
When businesses don’t have to spend all of their resources on chasing down late payments, they can use those resources to expand and grow inside of their market. They can spend more on marketing, and upgrade their equipment. However, it’s not just the merchant who wins with automatic payments.
When a consumer sets up an automatic payment with a merchant, they give them permission to draft their account for the total of their bill each month. Provided they have money in their account, consumers don’t need to worry about being late and getting shut off and merchants know they’ll get paid.
Almost everyone uses automatic payments today
Businesses in every sector use automatic payments including gyms, subscription boxes, car insurance, lenders, and even landlords. The biggest reason businesses use automatic payments is they know they’ll get paid faster.
Manually collected late payments affect every business
The reason for late payments is different in each industry. For landlords, it’s just the nature of the rent collection process. As Green Residential points out in an article on collecting rent online, it can take a couple of days to collect rent checks through the mail. If a tenant mails their check late, it could be longer. If a tenant is out of town, the landlord may end up having to wait a week.
This time delay, combined with people’s excuses, makes the process of manually collecting rent a nightmare. “That’s why online rent collection is a beautiful thing,” the article states. “It removes any opportunity for a tenant to come up with an excuse. Rent is automatically drafted each month and if you don’t get paid, you know it’s because there’s no money in their account.”
For landlords, there are now several applications that help collect rent online. The fact that competition exists in the same space means there’s a demand for the services.
The companies that process automatic payments for businesses do charge a fee, and that fee can be charged monthly, per transaction, or a combination of both. These fees are how the companies make their money. Before dismissing them because of their fees, consider that they’re just like any other business in the marketplace. They’re providing a service to those who are providing a service. These companies make it easy to get paid. Considering the amount of time and energy it takes to chase down late invoices, it’s worth the fee.
Automatic payments are governed by rules
Although an agreement can be made to automatically deduct money from someone’s account, the agreement isn’t forever; the automatic deduction can be stopped at any time. You can stop automatic payments if you cancel your services, or just want to change your payment method.
If the company providing the service won’t comply with your request, you can contact your bank and tell them you’ve “revoked authorization” for them to debit your account. Or, you can instruct your bank to put a “stop payment” on your account for that business.
Although there are pros and cons, as far as the marketplace is concerned, automatic payments make it possible for business to be done at high volume and with ease.