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In theory, collecting payments should be pretty straightforward. If you've read our Intro to Payments article, you know that when a payment is logged LMS, the system communicates with Secure Payments, where the borrower's payment profile (a specific bank account or card) is saved. Secure Payments then works with an integrated processor to move the money from the borrower to you.
At each step along the way, there are tools available to help improve your process for collecting payments. Some tools are our own creations, and others are from our integrated partners. This article will go over what tools are available in Secure Payments and point you in the direction of more in-depth articles on each of them.
Use Case: ACH Integrations
Use Case: Payment Integrations/ACH
Lenders want to make it easy for borrowers to pay the money they owe by offering a variety of payment options. One of the ways lenders accomplish this is through Automated Clearing House (ACH) network. In order to set up ACH payments, lenders have to find a bank partner who is willing to process the payments. They have the responsibility to submit each payment without missing any and make sure that they don't submit any payments twice. This requires that lenders batch all the ACH payments into a format that is accepted by the bank, usually a NACHA file.
Alternatively, lenders can use a payment processing service to complete this task. However, they would need to submit payments to the service and then record the payments in their own loan management software. It can take considerable time and effort to coordinate all these moving parts.
We are integrated with several ACH payment processing partners. The partners we've chosen were specifically selected because they can approve lenders for processing on their platforms. Lenders can submit payments through these integrated partners directly within the LoanPro software. LoanPro batches payments and automatically updates and reverses payments that have been returned due to insufficient funds, removing the time, cost, and organization that the process would otherwise cost.
Use Case: Events and Webhooks
Use Case: Webhooks/LMS and Secure Payments
A lender uses a their own system to do the accounting for their loans. Every time a payment is made, they receive an email notification from their loan management system. They then have to manually input payment data into their accounting system in order to properly journalize the payment. This is time consuming, and it's easy to miss an email or accidentally read it and not input the accounting information.
LoanPro offers webhooks from both our LMS and Secure Payments applications. The webhooks get sent out based on lending and payment events or customizable triggers. Webooks can communicate directly with other software systems, and provide the data associated with the events. The lender uses webhooks to directly and automatically update the accounting system. This saves lots of time and effort and eliminates human error.
To learn more, check out our articles on Webhooks, Event-Based Notifications, and Secure Payments Events.
Use Case: Pre-Transaction Verification
Use Case: Pre-Transaction Verification/Small-Dollar Rule
A lender wants to follow the CFPB's Small-Dollar Rule, which prohibits them from repeatedly attempting to draw funds from an account that fails, without requesting that the borrower re-authorize the use of the account. In order to avoid breaking the rule, or needing a re-authorization, the lender only attempts payments around the date they believe their borrowers gets paid. However, the information on borrower payroll dates is not always accurate, and the company spends a lot of time and effort getting new authorizations for payment accounts. Often, the lender can't get a hold of borrowers to re-authorize, and loans stop performing.
LoanPro provides a service through our integrated partner, LoanPaymentPro, that will check the borrower's account to make sure funds are present before attempting a transaction. This allows the lender to attempt to collect payments whenever they need to, which raises collections ratios, increases profits, and reduces the time and effort spent pursuing re-authorizations.
Within Secure Payments, there are a range of different tools available. Some are settings that you toggle on or off, like the switches that enable or disable each of the payment methods. Others are tools that are used on individual payment profiles, like the bank card and bank account attribute lookup. Some are completely free, and others cost a small amount for each use. Broadly, we can break these tools into a few categories:
- Payment Processing
- Payment Profile Migration
- Information Lookup and Controls
LoanPro is integrated with several processors who handle payments from bank cards and bank accounts, both in the US and in Canada. We can also batch bank account payments into NACHA or CPA-005 files. On the Actions page, you can toggle whether each of these methods are available.
Each processor has its own features and idiosyncrasies. To learn more about these processors and which ones are right for you, check out our articles Intro to Payment Processors and Setting Up Payment Processors.
One additional tool we should mention is LoanPaymentPro's Pre-Transaction Verificiation. When a bank card payment is logged on a processor with this setting turned on, then LoanPaymentPro will start by placing a hold on the money. If the account has enough money, a second transaction will pull the actual funds. If it lacks the money, then LoanPaymentPro won't pull any money.
Payment Profile Migration
There are several tools to help you more easily move borrower's payment profiles into Secure Payments, where they'll be safely stored and tokenized. If you want to enter profiles in bulk, we recommend a Payment Profile Import. Alternatively, you can set up iframes on your own website, allowing borrowers to enter their payment profile information directly into Secure Payments. You have some tools to customize that iframe's appearance. Alternatively, you can use an iframe from our integrated partner Finicity, who are in turn integrated with banks. Borrowers just need to enter their banking credentials and Finicity can pull their payment profiles into Secure Payments.
Getting payment profiles into Secure Payments is your first step towards getting paid back, but those payment profiles won't do you any good if they have incorrect account info, insufficient funds, or other issues. We have two tools that can check a payment profile to ensure it's valid and likely to work: LoanPaymentPro's Bank Card Attribute Lookup and ValidiFI's Bank Account Attribute Lookup.
If you're looking up bank card or account attributes, you can also use that information to limit which profiles can be used. Bank Card Controls let you limit cards based on their types (such as credit, debit, prepaid) and brands (like Visa or Mastercard). Bank Account Controls let you toggle each of the AVC codes that ValidiFI returns. For example, you could deactivate any payment profiles that return an AVC1 code, which indicates that the routing number is structured incorrectly.
Secure Payment Events work a lot like webhooks and event-based notifications in LMS: When a certain event happens, the system sends a bundle of information to a specific URL. When that URL (which might be your own software or a third-party you work with) receives the information, it can trigger behavior in those systems. For example, you might set up your system so that when a bank card payment profile is created, the event sends a message that triggers the Bank Card Attribute Lookup. Or, when a profile is deleted, the event could start an audit process to see if the borrower has another payment profile on file, and whether they need to add a new one.
Where Do these Tools Fit?
These Secure Payments tools and integrations should be seen in the broader context of LoanPro's software and your organization. Using any of these features alone won't grant you the same benefit as it would to use them in tandem with each other and the other tools in LMS and Connections.
This Feature is Not
Let's take a moment to clear up any possible misunderstandings about the payment tools discussed in this article:
- These are not the Tools in LMS or Connections. LMS has its own set of tools for loans, customers, and the entire tenant; Connections has tools relating to integrated services, background research, and collateral.
- These tools are not required. While most lenders will use several of these tools, especially our integrated payment processors, none of them are absolutely necessary. You can turn off every one of them without breaking LMS. We don't recommend that—you'd need to develop a new system for receiving payments, like only taking cash and paper checks or building your own integration with another payment processor—but if that makes sense for you and your operation, the choice is yours.
From here, you're ready to learn about the individual articles explaining how to use each of these tools. Just click the links next to whichever tool interests you and dive in. For a quick guide on where to turn many of these tools on or off, check out our article Secure Payments Actions.