If you are thinking of starting a collection agency (or you have started the wheels in motion), then sooner or later you are going to need a merchant account and a payment gateway. Why? Because collection agencies collect monies owed to other companies, and many of the people who owe the debt are used to paying online. As a result you are going to need to be able to take payments online.
What is the difference between a Merchant Account and a Payment Gateway? It is fairly simple.
Merchant Account: A merchant account is like an online bank account for money you have collected. It is a “holding tank”, so to speak, for any money paid to you from a debtor. The merchant account verifies the customer’s credit/debit card information, including running checks on their address and if nothing is flagged the payment goes through and the money is deposited from the debtor’s bank into the agency’s merchant account. From there, the money can be withdrawn and deposited in a business bank account. A merchant account can accept deposits in multiple forms of payment, including credit cards, debit cards and ACH payments.
Payment Gateway: A payment gateway is a method for debtors to pay their bills online. It is an online webpage through which the person who owes money can make a payment online. In addition to the webpage, it is also all the software behind it so that the collected payment can be processed securely and compliant with all governing entities. An online payment gateway can be thought of like a credit card machine, only in an online website. A gateway allows your customers to submit payment information via the web and allows you to accept that payment online in a safe, secure and compliant environment.
How they work together: A payment gateway allows the agency to collect credit card, debit card and ACH payments online. The online transaction occurs through a secure hosted payment form (the website) and then is submitted for approval to the credit card issuer (VISA/MasterCard/Discover/AMEX) or debit card processor (financial institution). Once the credit/debit card processor approves the transaction, the money is transferred electronically from the bank/credit card to the merchant account. The payment is then held in the merchant account for a pre-determined amount of time before it is transferred to the collection agency’s bank account. This is to lower the risk of problems with such things as cancelled payments, chargebacks and fraud.
Which one is right for your agency?
Ideally, you are going to need both. The payment gateway will allow you to take all kinds of payments online and the merchant account will hold those payments until they clear with the bank/credit card issuer. With whom should you get these accounts? Well, you can do a lot of research, but it is best if you work with a company that can provide you with both. The best reason is because they will be compatible with each other so there are no interface problems that could lose payments, or worse, could cause compliance issues. BillingTree offers both merchant accounts and payment gateways. They are easy to implement and PCI-DSS, HIPAA and SSAE-16 compliant so that you can begin taking payments and rest assured that it is being done with full compliance. If you would like more information contact BillingTree at 877-424-5587.