How To Fix The 6 Biggest Challenges Businesses Have With Pre-Authorized Debits

Posted on November 8, 2023

In a B2B environment, the difference between a digital pre-authorized payment process and a traditional paper-based process is substantial. 

The need for a smooth transaction is vital for any platform. If you are not using a digital pre-authorized payment solution, the impact on efficiency and security can be significant.

The truth is digital pre-authorized B2B transactions are better for everyone involved.

Here’s how to fix the biggest challenges businesses have with Pre-Authorized Debit Payments:

1. The Challenge of Customer Consent and Authorization

Getting customer consent for pre-authorized payments can be a significant roadblock for businesses. The traditional paper-based process requires customers to provide physical documents such as void cheques or a pre-authorized form provided by the bank. This is often a time-consuming process on both ends. That means delays in payment collection and significant human resources to manage the process. 

Solution: Fast & Secure Pre-Authorized Payments

The solution to this challenge lies in adopting digital pre-authorized payments. By embracing this approach, businesses can eliminate the need for physical paperwork. Instead, they can electronically send digital Payment Authorization (PAD) agreements, allowing customers to provide consent swiftly and securely online. This accelerates the process and enables the safe storage of authorization information for future transactions.

2. Payment Failures and Declines

Payment failures and declines are supremely problematic for businesses when it comes to recurring payments. Did you know failed payments cost the global economy  $118 billion annually? Dealing with issues like insufficient funds, expired credit cards, or manual data input errors leads to payment failures, necessitating time-consuming efforts to chase customers for payment.

Solution: Bank Account and Fund Verification

Reduce NSF returns to near zero. Advanced payment technology solutions that integrate open banking technology offer a way to address this challenge. Open banking technology enables automated payment retries and real-time notifications by providing businesses with complete visibility into customer accounts and available funds. This ensures that payment issues are promptly identified and resolved, reducing the burden on workforce resources and saving time and money.

3. Complex Payment Workflows 

Traditional payment processing is often rigid and lacks flexibility. Setting up and managing pre-authorized payment schedules tailored to different customers and billing cycles can be complex and counterproductive.

Solution: Customizable Payment Flows 

Digital pre-authorized payment processes offer businesses the flexibility they need. They can create custom payment schedules based on individual customer preferences, accommodating various billing cycles and specific customer requirements. This adaptability ensures a smoother and more customer-centric payment experience. 

4. Lack of Transaction and Cash Flow Visibility

Payments orchestration is incredibly complex. Matching pre-authorized payments with corresponding invoices or services provided can be daunting for anyone in finance. Traditional methods often lack the tools for efficient reconciliation, not to mention manual payment reconciliation is extremely labour-intensive when there is a large number of accounts payables and accounts receivables. Retrieving data is no small feat when enterprises navigate various disparate financial systems and hundreds, if not thousands, of bank accounts. In these complex cases, reconciling payments manually is not a viable option. 

Solution: Transaction Data and Detailed Reporting 

Digital pre-authorized payment solutions like VoPay offer robust transaction data, messaging capabilities and real-time reporting. These systems allow businesses to collect payments efficiently and provide valuable insights into customer behaviour to facilitate business growth. A user-friendly dashboard and comprehensive analytics make managing pre-authorized payments, outstanding payments, and account balances easy.

5. Security and Compliance Risks Around Financial Data

Securing sensitive financial data in pre-authorized payment processes is paramount. Handling this data necessitates stringent security measures. Ensuring a smooth onboarding process, performing KYC (Know Your Customer) checks, and adhering to industry regulations and standards are substantial undertakings. Businesses must comply with measures like PCI DSS (Payment Card Industry Data Security Standard) to protect customer data, mitigate risks, and thwart potential fraud.

Solution: Increase Security and Compliance

Digital pre-authorized payment processes have evolved to offer robust solutions to these security and compliance challenges. They incorporate top-notch security measures such as encryption and tokenization, fortifying the safeguarding of sensitive customer data. Understanding the risks around money movement and mitigating them requires expertise and knowledge. When compliance is seamlessly integrated into a payment system, businesses gain peace of mind in knowing that their financial data remains secure. 

6. Customer Churn and Cancellations

With limited real-time visibility into customers' account statuses and payment methods, businesses often struggle to promptly address issues like expired cards or insufficient funds, resulting in resource-intensive recovery efforts. Manual handling of cancellations and a lack of flexibility in payment methods lead to a negative customer experience, making customers more likely to disengage from the service. Inefficient authorization management further exacerbates the problem, ultimately causing businesses to lose customers, incur operational costs, and risk their long-term success.

Solution: Automated Payment Flows and Real-time Insight 

A digital pre-authorized payment solution provides real-time insights into customer accounts and payment methods, helping businesses detect issues such as data errors or insufficient funds. Automated notifications and payment retry mechanisms swiftly resolve these problems, reducing the need for resource-intensive manual intervention. Moreover, digital solutions offer flexible payment scheduling and customizable options; this flexibility enhances the overall customer experience and minimizes the likelihood of disengagement, ultimately improving customer retention.

Stay Ahead of the Curve and Transform The Way You Do Business. Solve Pre-Authorized Debit Challenges with Digital Innovation.

Contact Us Today!

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