How to Implement Payment by Text in Your Small Business

The payments industry’s continued evolution has brought new payment options like payment by text to the global marketplace. SMS or text messages are now utilized worldwide to make payments to different types of small businesses.

In 2020, technology services provider Weave conducted a study of 350 small business owners and 380 customers. The company found that 35% of customers want a text-based real-time payment experience. Furthermore, customers under 35 were twice as interested in using the SMS payment system as older buyers.

Text messaging’s 98% open rate means customers are almost guaranteed to respond to merchants’ purchase-related notifications. This helps to facilitate higher sales. In this article, we’ll take a closer look at how small businesses can easily implement payment by text.

What Is Text-to-Pay?

Text-to-pay transactions are also called SMS (or Short Messaging Service) payments. This increasingly popular payment method bypasses often-laborious eCommerce checkout pages or in-store queues.

Instead, customers can quickly complete their product or service payments via their mobile phones. Each SMS payment transaction must comprise a maximum of 160 characters.

As such, payment by text is a very secure transaction. Customers don’t need to share their personal account information (including bank account details). They don’t face risks from sharing card information.

SMS payments are ideal for nonprofit groups

Nonprofit organizations frequently ask donors to pay by text. This super-fast payment encourages more donor gifts. The donor’s phone bill reflects the donation amount and related charges.

However, this payment method isn’t a realistic option for businesses. Therefore, some text messaging services are adding highly secure payment processing functions.

How Does Pay by Text Work?

SMS payment processing is surprisingly simple and leads to high customer satisfaction. The entire text message payment cycle takes just a few minutes. Here’s how it works:

1. The customer shares their phone number with the merchant. The customer also opts into texts if they have not already done so.

2. The merchant texts a short link to a product or service invoice. If the customer initiates the transaction, they send a shortcode number to the merchant. In turn, the merchant texts the invoice link to the customer.

3. The customer clicks on the invoice payment link, routing them to a secure SMS payment processing platform. The customer views their invoice details.

4. The customer provides their payment information on the invoice form and sends the message. They can also request to keep the card on file. This will save time during a future purchase or recurring payment.

5. The merchant sends the customer’s payment information to their mobile payment provider. The provider ideally approves the purchase transaction.

6. The customer often receives a transaction verification text. Once they approve the purchase, the transaction details are routed to the merchant’s payment processor.

Text payment pricing details

The pricing of payment by text varies with the payment processor. The type of credit card or debit card also influences the payment-by-text pricing structure.

Merchants may be hit by standard payment processing costs plus the provider’s markup (or transaction commission). Certain providers charge the merchant for every text-to-pay message they send.

5 Benefits of Offering SMS Payments

Payment by text offers benefits for small businesses and their customers. These efficient payments can encourage repeat sales and facilitate business growth.

• Supports multiple forms of customer payment
• Processes customer transactions with less manual work
• Enables scheduled on-time payments without annoying customers
• Syncs with customer loyalty programs and marketing campaigns
• Improves overall customer satisfaction levels

How to Choose an SMS Payments Solution Provider

Merchants want their customers to enjoy a smooth and efficient SMS payment experience. At the same time, business owners want to ensure that customers can make a PCI-compliant secure payment.

Working with the right payment solutions provider sets the stage for a positive customer experience. These five tips can be useful in evaluating payment providers for payment by text.

1. Proven familiarity with the merchant’s industry

Small business payment processing needs vary with the industry and the merchant’s customer base. When choosing a payment solutions provider, business owners should look for a company experienced in the specific industry.

For example, a casual dining restaurant should select a provider with other restaurant clients. A provider that lacks familiarity with the industry won’t fully understand the restaurant’s needs.

In the short run, the business owner is likely to be dissatisfied with the provider’s service. In the long run, a poorly informed provider can affect the restaurant’s profitability.

2. Acceptance of diverse payment methods

Nearly one-third of consumers use more than one bill payment method. Besides card processing acceptance, the payment solutions provider will ideally process payment by text. The provider should also accept mobile payments and automated clearing house (or ACH) payments.

Finally, the payment platform should be equipped to process recurring payments without a hassle. Examples include fitness center memberships or subscription-based products.

The business’ recurring payments acceptance avoids payment reminders, phone calls, and accounts receivable lists. Customers always make on-time payments by the due date.

3. Industry-standard credit card data security protocols

All payment solutions providers should demonstrate that they have adopted credit card data security measures. Specifically, the provider should have proven compliance with the Payment Card Industry Data Security Standard (or PCI DSS). Providers must maintain compliance with this credit card fraud prevention protocol.

4. Additional data security measures

Cyberattacks are becoming increasingly sophisticated. Criminals often thwart existing credit card fraud prevention measures. Therefore, merchants should seek a provider that uses multiple fraud prevention tactics.

Credit card verification protocols include an address verification system (or AVS) and the CVV verification system. The latter system utilizes a card-specific code found on each credit card’s reverse side.

5. Round-the-clock merchant support

Merchants should look for a payment solutions provider that offers 24/7 customer and tech support every day. Ideally, well-trained internal service representatives will provide this support. These highly skilled workers understand the company’s products and/or services best.  

Select a Well-rounded Payment Solutions Provider

Small business owners should choose a payment processor that accepts multiple forms of payment. Budget-friendly rates, and no nuisance or cancellation fees, are also important. Of course, top-tier customer service is the icing on the cake. 

Payment Depot checks all these boxes (plus many others). To learn how you can offer a variety of different payment methods to customers while keeping your credit card processing costs low, contact us today.