Recently, we were invited as a significant POS Software supplier to a meeting to discuss the new payment method, PayTo, which is slowly being released.
The argument was that it would help with merchants' payment processing fees and reduce the frustrations of delayed settlements, customer arguments and chargebacks. It may help with the payment fee but certainly will help with the significant pain points of delayed settlements, customer arguments and chargebacks.
Think of it as an improved debt card system that can replace much of your credit card fees.
It gives you direct access to your customers' bank accounts and a faster, more secure, cost-effective payment method.
Let me start by saying that several larger retailers are using it, and soon, customers will expect it in your shop. I doubt you can avoid its usage. The big plus for the customer is that there is little to no cost for them.
It's excellent for larger items and items that need payment terms. They are looking at mid-this year for PayTo to go critical.
What is PayTo?
PayTo is a digital payment system that allows you to receive payments directly from customers' bank accounts. It's a modernised version of direct debit designed to be faster, more secure, and more flexible. As it operates in real-time, you get speedier cash flow.
How Does PayTo Work?
To use PayTo, your business must be sponsored by a bank, financial institution, or payment service provider. It is unclear if this sponsorship will involve you with a setup fee from your bank, but the process is straightforward once you're set up. Here's how it works:
Create a PayTo Agreement
You must define payment terms, including the amount, frequency, and duration. This agreement can be used for one-off, recurring, or ad-hoc payments.
Customer Authorisation
Your customer provides their PayID. The PayTo agreement is sent to their bank for authorisation, and they must approve it through their banking app. It ensures transparency and Security.
Payment Execution
Once authorised, PayTo debits the customer's account according to the agreed terms and instantly transfers funds to your business account.
Key Benefits of PayTo for the Merchant
Real-Time Payments
This is a big plus, as with PayTo, you instantly get the funds into your account. This will eliminate many of the delays associated with traditional payment methods. It means you can access your money immediately, improving your cash flow.
Lower Transaction Fees
Unlike credit card payments, PayTo does not go through a credit card supplier, so there are none of their fees.
Reduced Risk of Chargebacks
Since the customer has authorised it, the risk of chargebacks is reduced. In practice, this has been shown to reduce disputes.
Enhanced Security
Your customer agreements are now authorised through your customers' banking apps. It would reduce the risk of fraud.
5. Streamlined Reconciliation
The banks have reports that provide detailed transaction data, making matching payments and managing your accounts easier. Once this gets going, we will look into automating this in your POS System.
How to Get Started with PayTo
Check it out online
Click here
Contact Your Bank
You should contact your bank to learn about their PayTo options; there are some issues to resolve, particularly the potential costs.
Setup Fees
To use PayTo, your business must be sponsored by a bank or financial institution. Depending on your commercial arrangement, this may involve setup or access fees.
Transaction Fees
While PayTo generally has lower transaction fees than credit cards, I am unsure about debt cards.
The cost I was quoted was $0.30 fixed. Now, if I am doing a $500 transaction, that is quite reasonable, but if I am doing a $5.00 transaction, $0.30 is not so good.
Conclusion
PayTo is a modern payment solution that addresses many of the challenges retailers face with traditional payment methods. As I stated, it's coming; we can do nothing about that. Customers will want it.
Key Takeaways
- PayTo enables real-time payments directly from customers' bank accounts.
- We are on to it.
- It offers lower transaction fees and reduced chargeback risks compared to traditional methods.
- Retailers can benefit from improved cash flow, enhanced security, and streamlined reconciliation.
- To get started, contact your bank or financial institution and explore PayTo's resources.
