In late March 2020 UK businesses were hit by an almost unimaginable crisis. Covid 19 was starting to run through the population, and at that point, with no vaccine available, all we could do was leave our offices and ‘lock-down’.
Had this happened ten, or even five years earlier, it’s not clear how business would have coped. But with ubiquitous, fast, home broadband and new remote working tools like Teams and Zoom, there was a way forward, and indeed even with the worst of the pandemic behind us, these new technologies continue to give us better ways of working.
Roll forward from 2020 to 2022, with the pestilence behind us, we now face the next unimaginable crisis with war in Europe. The indirect effects on all of us of massive energy and food prices rises are large and growing. We’ve moved from a health crisis to a cost-of-living crisis.
The Changing Ways Customers Pay
At the heart of this developing crisis will be the relationship between businesses and their end customers, and particularly the growing challenges to consumers of paying their bills, and to businesses of getting paid. Just as we are all looking at our central heating timers and home thermostats to make sure we are controlling our energy use, consumers, and small businesses are reprioritising how they pay their bills and when they pay them – controlling their money.
On the margin, this is going to increase arrears and bad debts for many businesses, but even for the bulk of customers that are still willing to pay, the way they pay is going to change. We know from evidence at the start of the pandemic, that the first thing consumers do to get control of their money is to cancel all but the most vital Direct Debits. Thanks to government action over the last ten years there is no longer a ‘poverty premium’ associated with paying by non-Direct Debit means. So, there is no down-side for consumers cancelling their Direct Debits and moving to contact centre card payments or bank Faster Payments. They don’t cost the consumer anymore, but they do keep them in control.
The same is not true for businesses, for whom non-Direct Debit payments are directly more expensive when taken with cards, and indirectly even more expensive when you consider the growing costs of chasing payments, working through reconciliation challenges and moving more payments into a collections environment.
Can businesses help themselves AND their customers?
Well, in the same way technology in the form of Teams and Zoom helped us through the health crisis, there are new technologies that can help us all, businesses and consumers alike, through the cost-of-living crisis.
Financial Technology companies like Ordo, an FCA authorised Open Banking payments provider, are changing the rules on the handling costs and ease of use of payments and giving businesses of all sizes new ways of getting paid in this difficult time, new ways that like Teams and Zoom could outlast the current crisis.
If customers cancel their Direct Debits, or won’t set them up in the first place, what are business’ options?
Until recently you only had two options, you could either collect payment on a card (online or from a contact centre) and pay your card acquirer a percentage of the transaction value for the privilege or encourage your customers to make Faster Payments to you, hoping they got the account details right and correctly referenced their payment with their account details, so you knew who had actually paid you.
Not only do these approaches increase your direct and indirect costs of getting paid, but they also introduce complexity and friction for your customers that makes the act of paying more difficult and therefore more likely to be put aside to another day, increasing arrears and the risks of bad debt.
So how can new services like Ordo’s Open Banking payments help?
Emails, Buttons and QR Codes for Payment Requests
Firstly, by giving you a low-cost alternative to expensive card payments, and secondly by making these payments from your customer simple to initiate, impossible to mis-reference and easy to authorise.
With a straight-forward one-off API integration into Ordo’s cloud service, you can generate a secure token for each payment you need from each customer. Encrypted within the token are all your bank details, the amount due, your reconciliation references, and if you want, invoice information and options on due dates and single or multiple payment options for your customers.
This token can then be presented to your customer when payment is due in a number of different ways. It can be a secure link in a payment request message or email, it can sit behind a ‘Pay Now’ button on your online account service, or it could even be rendered as a QR code on a paper bill or reminder.
For the customer, paying couldn’t be easier. They either follow the link, click ‘Pay Now’ or scan the QR code with their phone and are immediately taken to a customised payment page showing your branding, the payment due and simply asking them to select their bank. With the power of Open Banking, their mobile banking app pops up with your payment fully configured and ready to go – all they need to do is agree using their fingerprint or face-id, and payment is made. Directly from their bank account to yours, in real time, irrevocably, and with your reference always attached.
It couldn’t be simpler or safer. There are no account details or card details to enter or secure, no risk of getting paid the wrong amount, or not having good payment references, and in fact the Ordo platform will tell you through our webhooks the moment you’ve been paid and what you’ve been paid for, so bank references are no more than belt and braces.
And the costs of this? A few pence to Ordo and perhaps a few pence to your bank to receive the Faster Payment.
Manageable Chunks for Payment Plans
The Ordo token not only makes it easier for you to get paid, but you can also replicate it to your customer in follow up communications. If you wish, you can let your customer make part payments, breaking a single bill up into more manageable chunks, but each lump having the correct referencing and you getting the real time notification of each part payment as it’s made.
Regrettably, given the severity of the growing cost of living crisis, even with the measures above giving customers greater control of their bill payments, some are going to get into arrears and need help in meeting their obligations. Open Banking payments services like Ordo’s can help here, minimising the difficulties and uncertainties for customers, and keeping payments costs under control for businesses.
Ordo’s payments platform can make a real difference in a consumer or small business collections environment. Whether following up cancelled or failed Direct Debits or collecting a payment as part of a longer-term payment plan.
At the point your agent has agreed with the customer that they are going to make a payment, Ordo gives you a new, and easier to pay option. Rather than providing bank details to the customer and hoping they make a payment or passing them to a card payment system to gather their card details to make an expensive card payment, your agent can stay on the phone and send a secure link to the customer via SMS.
While still talking to the agent, all the customer needs to do is follow the link, select their bank, and then authorise immediate payment through their banking app. The customer gets to see the amount they are paying, there is no risk to them that the business tries to collect more money than agreed, and the contact centre agent is informed in real time that payment has been made. Not only this, but because the payment comes through Faster Payments, the customer gets to see their updated bank balance as soon as they make payment, no pending card payments to worry about.
Just like the first use case above, there are no bank or card details for the customer to enter, and as a business not only are you informed in real time of payment, but you are also guaranteed that the bank payment you receive will go to the correct account with the correct referencing.
Individually Configured Requests for Each Customer
It’s not just call centre contacts that can benefit from this new technology. If you agree a payment plan with your customer, you can send out, through whatever means makes sense, payment requests individually configured for each of your customers and the payment you need from them. For those businesses that have face to face contact with their customers you can even use Ordo to produce QR codes in-store or in-home to allow your staff to securely and simply collect payments from your customers when they see them.
In these difficult times, Open Banking services like Ordo’s can’t solve the cost-of-living crisis, but we can make it more manageable for both businesses and their customers. And just as Teams and Zoom have become a permanent new way of doing business post pandemic, Open Banking payments with their inherent cost efficiency, simplicity and security will become an increasingly important way to pay and be paid for the foreseeable future.