Introduction

This is a brief overview on what payment processors are and which ones are available in LMS; here, we'll explain the payment process and how processing companies play a role in making transactions. Each payment processor works a little differently, but they have the same purpose: to make it easy to move funds between accounts. Our Setting Up Payment Processors article explains how to add a processor in the software. 

Highlights

If you've never worked with a payment processing company, you may not be aware of what they are and what they do. Whenever a customer makes a purchase with a card or an e-check, a processing company is involved. The processor connects with the banks where the customer and merchant have their accounts, and then handle the actual transfer of funds out of one account and into another.

Payment processors in LMS work the same way: when a borrower makes a payment, it's the processing company who actually works with the banking network to get money from the borrower to the lender. We're integrated with several processors, giving you a wide range of options in function, availability, and pricing. There isn't one processor that does it all—most are limited in the type of payments they process, and none operate in both the US and Canada.

Payment Process

Using a processing company to make a payment can be complex, but here's a breakdown of the steps for making a transaction in LoanPro.

1. The process begins with creating a payment profile. Payment profiles are saved in Secure Payments, but they can be created through the LMS UI via an iframe, which is essentially a bridge into Secure Payments. Regardless of where you input payment profile information, the profiles are saved in Secure Payments. When creating a payment profile, you will enter in your payment information, such as bank accounts or bank cards. Your banking information will immediately be saved in Secure Payments, keeping your payment data encrypted and safe.
2. Secure Payments tokenizes payment profile information and sends it back to LMS. LMS will store your token to be used to transact payments or manage the profile in the future.
3. The next step is making a payment. From within LMS, you will select a payment profile from any of the customers associated with the loan.
4. LMS allows you to choose a processing company when initiating a payment. You can set a specific payment processor to be your 'Default' processing company every time you make a payment, select a different processor manually each time, or set up automated rules that will determine which payments go to which processors.
5. LoanPro has no part in the actual processing of the payment; it is in the hands of the processing company. Your token will be sent from Secure Payments to the processing company.
6. The processor will evaluate your transaction and send a status response to LMS saying whether it was successful or failed.

Where Does Payment Processors Fit? 

LoanPro is integrated with different types of payment processing companies. When selecting which processor you'd like to use, it's essential to understand that they all differ in what they specialize in. The following are things to look for when choosing a processor:

• The Cost – The cost of a processor varies depending on what processor you choose. Selecting NACHA is the cheapest route, but it is a complex method to use — you would have to be educated on how to use and format NACHA files.
   
• Setup – When you sign up for certain processors, they may need a merchant services provider. In most instances, the processor is its own services provider but there are times when you will need to select a merchant services provider. For example, you need a merchant services provider when you sign up with Authorize.net (we recommend SelectBank Card).
   
• Approval – Oftentimes, small-dollar, high interest, and tribal lenders have a harder time getting approved by processing companies.

Here is a breakdown of the available processors:

This Feature is Not

Let's clear up some possible areas of confusion.

• LMS does not process payments. LMS and Secure Payments connect with one another, which means that when you create a payment profile in LMS it will immediately be stored in Secure Payments. LMS has no part in the actual processing of a payment; the processing company does the transaction and LMS posts whether the payment was successful or failed.
• Secure Payments isn't a payment processor. Secure Payments stores payment profiles, and communicates with integrated payment processors to get them to move funds between you and your borrowers. It acts as a safeguard for payment transactions, sending transactions to processing companies.
• The National Automated Clearing House Association (NACHA) and the Canadian Payments Association (CPA) are not processing companies like our other integrated partners. These organizations developed standardized files that customers use to send files to banks. Whereas our other partners deal with banks and card issuers on your behalf, NACHA and CPA-005 files let you handle your ACH/EFT transactions directly. This means more work on your end, but greater control over your process and a reduced cost for each transaction.

What’s Next?

Now that you've got the basics of how payment processors are used in LoanPro, you may want to learn more complex concepts on this topic in Setting Up Payment Processors.