HINT: It’s The Payment Funnel

The rise of social media influencers has led to an uptick in software as a service (SaaS) and digital marketing agencies needing flexible payment processing. Influencer marketing will account for over $10 billion in advertising spend by 2020. To put that into perspective, that spend was a meagre $500 million in 2015.

It’s already stressful to chase clients to pay their invoices. The last thing anyone wants is to worry about his or her payment funnel. But, unaddressed problems like this can lead to business failure.

So what should you do? Get smart about your payment strategy to collect receivables more easily without losing revenue to payment processing.

More payment options can mean more $$$ for a digital marketing agency

SaaS and digital marketing agencies juggle several different services and pricing schemes. For example, a social media management platform may operate on a monthly subscription basis, but offer trials and annual membership packages too. Alternatively, a web and graphic design agency might operate on a project-based fee structure.

For the record, these product types are all deemed high risk due to the high amount of the transaction. A client can commit chargeback fraud by paying their $8000 bill, and then calling their bank to reverse that payment.

There are SaaS firms that need recurring billing options for monthly licensing services. Affiliate software proprietors or digital influencer agencies often need to transact weekly and issue monthly commission payments. Thus, flexible and secure payment solutions are necessary.

It’s not unusual for large-scale organizations to charge a $50,000 up-front fee for a website redesign. They might take a $30,000 retainer and subscription fees, and pay out $15,000 to influencers or affiliates over several days. See why restricting yourself to one payment platform is big headache?

That said, how can you improve your payment processing options to scale and earn more revenue?

Diversify your payment methods

All our A-list merchants in the advertising vertical earning $100k or more per month in revenue have learned it pays to diversify. They have multiple payment methods in place, be they credit cards or direct debit transfers. They don’t place all their faith in one provider or payment channel.

This is all the more reason software and digital marketing merchants must rethink their payment strategy! Credit cards still take the number one spot as a method for payment, but it is declining globally. Here are all the options to widen your payment funnel!

Direct transfers from bank accounts

Only available in the US, ACH or e-check processing is a very under-explored opportunity for SaaS and marketing agencies. If you collect payments and want them wired to your business bank account, then these methods will help.

There are big benefits with this payment option. Fees are much lower compared to high-risk merchant accounts. Banks we work with allow clients to issue commission payments to partners and affiliates directly from an ACH or e-check account. Also, this can be a strategy to collect payment history (over 30-60 days) for your future merchant account application.

Merchant accounts

Now, with regard to merchant accounts, agencies worldwide can use it to accept both online and mail order/telephone order (MOTO) credit card payments. Obviously, online payments are facilitated directly through your website’s order page. However, MOTO is very much in demand.

Some agencies receive payment via telephone, mail, fax or some other means. The payment gateway connected to your merchant account will facilitate invoice payments through MOTO. It acts as a virtual POS machine to “swipe” your client’s credit card.

Offshore merchant accounts

Some marketing agencies struggle to accept foreign orders through their domestic merchant accounts. That’s because your domestic merchant account may block some debit and credit card transactions from other countries. This is a much-needed fraud prevention measure; but, it’s bad if your valid transactions are being declined. Conversions are always lower for non-domestic traffic.

In that case it makes sense to apply for an offshore merchant account. For example, if a UK-based firm wants to accept subscription orders more seamlessly in North America, an offshore merchant account in Canada can increase profitability for both Canadian and US customers. Should a US-based agency have a lot of clients in Europe, it makes sense to register a business and bank account in one of the European Economic Areas.

A word about Asia-based marketing agencies

Businesses from South and South-East Asia are familiar with being declined for many different payment-processing solutions (including merchant accounts). Part of this is due to reputational damage caused by multiple instances of fraud and geopolitical uncertainty.

European and North American payment processors do not look upon businesses headquartered in India (or other regions in Asia) favorably. These are legitimate concerns given the high instances of fraud and spamming from marketing companies in this part of the world. If you really want to legitimize your business, you must distinguish your marketing agency by building a high-quality website and processing history with low chargebacks. It’s also mandatory to have personnel (including a local director) within the region the merchant account is being issued.

You can leverage large trading blocs to open up several new markets by utilizing just one location. For instance, a Singapore company that has a native-staffed office plus a business bank account in Cyprus has the ability to apply for a merchant account in any of the remaining 30 countries contained within the European Economic Area (EEA).

Take preventative steps against chargeback fraud

Marketing and social media agencies serve other businesses. But they are also serving “solopreneurs” who only need Instagram and a credit card to make a full-time income. This phenomenon has driven companies into offering their services as online subscription-based platforms, so they can serve both B2B and B2C clients.

In some instances of the B2B sector, chargeback fraud has become associated with free trials and subscriptions. Thus, merchants using these billing methods need to take preventative steps to lessen risks. Ensure that free trial offers and their accompanying terms and conditions (including cancellation policies) are clear and unambiguous. You want to make ignorance a difficult defence for a customer trying to issue a chargeback. Also, ensure to obtain consent from customers to avoid unintended disputes.

The same for alerting customers to exactly how payments will appear on their credit card statements. Get your descriptor right the first time! It should be no more than 22 characters in length and relevant to your business name so your customers recognize it.

Additionally, collecting a $10,000 payment can be a challenge for some businesses. A client may run into cash flow issues or bills might be delinquent. You might want to consider instalment payments. This works regardless of whether you’re using a merchant account or ACH processing.

Come to an agreement that the bill will be paid in three instalments over three months. This benefits your client and merchant account too. A payment provider sees less liability in a $3000 transaction than a $10,000 one.

Use authentication tools

Using the latest online software such as 3DS2 and PSD2 requires customers to have personal authentication. Adding this layer of security at checkout simultaneously helps reduce chargeback fraud and makes the chargeback reversal decision process much easier. Eventually, these authentication tools will be mandatory for all order pages.

Lastly, merchants can hire chargeback management or machine learning companies to drive ratios down. Good risk management will help you increase your monthly sales cap. It will also make you more appealing to new payment solution providers.

Unfortunately, the rise of “influencer fraud” has made many acquiring banks twitchy. It is a process whereby an influencer leverages fake fans and engagement to receive large sponsorship deals. Companies are now taking legal action against marketing agencies over these deceptive practices. In turn, incidents of this nature can impact merchant account approval.

Adhere to guidelines set out by the FTC and other national governing bodies. Verify that testimonials are genuine and endorsements are easily distinguished from traditional content. Ensure you’re replying to online complaints and negative feedback associated to your Marketing Agency. It will help prevent both you and influencers from incurring the negative reputation associated with false advertising.

Start exploring better payment options today

The spread of advertising methods, in particular the rise of social media influencers, has shifted the objectives of SaaS and digital marketing agencies. They need many types of services and payment processing methods to achieve continued growth. DirectPayNet can tailor your strategy, so you can focus on marketing, design and client retention. Contact our team today!