Not Ready for Rising Card Fees? Try These 4 Payment Alternatives
Credit cards emerged from the pandemic stronger than ever. After bearing the brunt of decreased recreational spending in 2020, the industry is riding the wave of ecommerce growth to top an unprecedented $500 billion in online credit card usage. Resurgent travel spending, higher wages and generous rewards programs all bode well for credit card payments.
But as card spending stabilizes among consumers, their issuers must contend with the broader impact of economic downturn.
Credit Card Payments Under Pressure
The country is seeing record numbers of credit card debt and growing delinquency rates. Economists at the Federal Reserve Bank of New York report that credit cards are the most prevalent form of household debt and expect this trend to continue—particularly with student loan payments resuming.
Talk of congressional action to lower swipe fees and rumors swirling around rising interchange fees also loom large for merchants that rely on credit card payments. With so much uncertainty, how can businesses protect their bottom line?
Bolster Your Business Growth With More Ways to Pay
Prepare for volatility in the credit card space by diversifying your payment methods. Consider these alternatives to safeguard your cash flow and generate revenue in any economic conditions.
4 Alternative Payment Methods
Automated clearing house (ACH) payments are a strong solution for businesses seeking reliability. This payment method allows merchants to draw funds directly from the customer’s bank account, limiting risk and excess costs.
ACH processing expenses are generally low compared to other forms of payment. Unlike credit cards, which are subject to fluctuating fees, ACH doesn’t require merchants to make authorization requests to credit card networks or issuing banks. This means that not only does using ACH save businesses money—it also insulates them from rising interchange fees if Visa or Mastercard choose to schedule increases.
ACH is also a more secure payment option. Credit card fraud is on the rise, with global losses projected to surpass $43 billion in the next five years. What does that mean for merchants? More chargebacks, less revenue and greater overall risk.
ACH payments also come equipped with security features that protect businesses from fraud. With end-to-end encryption and tokenization, sensitive payment data is disguised during transmission. It’s one of the safest payment methods available to businesses today.
2. Same-day ACH
Businesses can further optimize their electronic payments by implementing same-day ACH transfers. This method carries the same benefits as standard ACH payments, but with the added promise of receiving funds within a single day.
Payment processors traditionally could expect to see direct transfers reach their accounts in around four business days. But those that partner with a same-day ACH provider are guaranteed usable funds much sooner, provided they initiate the transaction by the designated cutoff time.
By bypassing processing delays, businesses enjoy the following advantages:
- Faster payments, with lower fees. The speed of same-day ACH processing is comparable to credit cards. But with lower costs involved, the former provides merchants the best elements of both.
- Streamlined cash flow. Automated transfers and reduced cycling times simplify delivery and allow for better control of cash flow.
- Optimized customer experience. When you enable customers to pay their bills closer to the due date, both sides benefit. Same-day ACH processing helps last-minute payers avoid penalties, while faster crediting is applied to late payments.
- Expedited payroll disbursement. Same-day ACH can also be used to pay employees via direct deposit. Faster issuance reduces administrative burdens by providing quick resolution of late payments or emergency distribution.
Real-time payments (RTP) can also quickly provide your business with cash flow. Much like ACH, this method supports quick electronic transfers between banks. But the similarities stop there.
RTP transactions are instantaneous—faster even than same-day ACH. These payments are initiated, cleared and settled with virtually zero perceptible delay. The unrivaled speed of RTP is a contributing factor to its international appeal: one 2020 survey found that consumers across six different markets consider real-time payments at least as important as internet access.
Speed isn’t RTP’s only convenient feature. Year-round availability is another unique benefit. Unlike ACH, real-time payments are also available on weekends, holidays and after business hours. Because it’s processed by The Clearing House rather than banks, RTP isn’t subject to the same limitations and enables 24/7/365 payments.
However, he RTP system isn’t always the answer. Transactions are capped at $1 million, and only credit payments are supported. Its network is also smaller than that of ACH—not every bank covers RTP.
But RTP is gaining popularity, and as it does, these drawbacks are expected to shrink. The U.S. Federal Reserve recently rolled out an instant payments service of its own in FedNow. As banks push for faster fund processing, the government’s network will offer them additional high-speed coverage options, making RTP more broadly available.
By stimulating competition with this move, expect to see increased adoption of real-time payments in the U.S.
4. Alternative Methods of Payment
Non-traditional payments are also available to businesses seeking credit card alternatives. To capitalize on these options, connect your bank account to an e-wallet that is compatible with popular payment methods. These might include:
- Physical or digital gift cards
- Loyalty points
- Apple Pay
- Google Pay
- Direct carrier billing
Offering customers the capability to use their preferred method encourages on-time payments, increased revenue and a seamless CX.
Get A Consult: Find Your Payments Fit
Payment methods should be built for your business—not the other way around. Connect with CSG Forte to get expert advice on which payment processing options will work best for you. Get started.