For banks looking to improve their customer engagement while also driving sales and revenue, the answer may come in an unexpected place: loan repayment. According to McKinsey & Company, experience-led growth strategies, such as your consumers’ payment experience, can increase customer satisfaction by 20% or more and boost cross-sell rates by 15 to 25% and share of wallet by 5 to 10%.
This is great news, except when the payment experience bumps up against two major pain points. According to recent research, only 55% of financial institutions accept debit cards as a form of payment. That means almost half do not extend this convenience to borrowers repaying their loans, creating an irritant to those who want more payment options and a deterrent to potential borrowers who may not know their bank account and routing numbers, but can quickly access their debit cards for easy payment.
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For lenders that enable borrowers to repay their loans using card payments, there’s another concern: the bank’s heavy dependence on card processing networks.
When a merchant processor goes down, any bank connected only to that processor won’t be able to process card payments—even if your payments platform is up and running at 100%.
The fallout is immediate—transactions fail, loans remain unpaid and customers are left frustrated by late fees and potential damage to their credit scores. This type of negative experience erodes trust in your bank’s lending services, leading to increased customer attrition and a tarnished reputation that can take years to rebuild.
The high cost of card processing outages
Not only do outages inflict lasting damage on the crucial relationship between your bank and your customers, they can also result in serious financial losses for your bank.
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By GlobalDataAccording to Uptime Institute’s Outage Analysis Report, more than 60% of outages now cost more than $100,000, a significant increase from 39% in 2019. Even more concerning, 15% of outages exceed the $1m mark in losses, up from 11%.
These financial losses stem, in part, from the enormous strain a single outage places on your bank’s customer service resources.
During a card processing outage, customer service centers get flooded with calls, especially if the incident coincides with a peak loan payment date like the 1st or 15th of the month. That increased agent activity comes at a cost when you calculate that the average cost of handling a customer call is $0.95 per minute, according to industry data.
Making matters worse, call center staff aren’t able to accept card payments during an outage. They must ask already frustrated customers for another form of payment, which those customers may or may not have readily available.
There are downstream impacts as well as this surge in calls quickly overwhelms even the most well-staffed customer service teams, resulting in extended wait times, unhappy customers and inflated operational costs.
Building in backup measures
Unfortunately, no bank can completely avoid card processing failures, but you can avoid negative outcomes through a common-sense solution: card processing redundancy. By partnering with a payments platform provider that connects to multiple merchant processors, your bank can ensure card transactions are quickly and seamlessly rerouted in the event of an outage, minimising downtime and protecting the loan payment experience for your customers.
While redundant card processing has long been the standard for e-commerce merchants, it has traditionally been out of reach for most banks due to the complex, technical infrastructure and ongoing maintenance required. That’s why it makes sense for banks to work with a payments platform provider that has built card processing redundancy into its platform and the technical expertise to support it.
Questions to help you assess your current risk
The first step in protecting your bank against processor failures or outages is to have a candid conversation with your payments platform provider to determine what safeguards they have in place, if any.
Here are some questions to get that conversation started:
- What monitoring mechanisms do you have in place to rapidly detect card processing failures and outages?
Your payments platform provider should have a monitoring system in place to detect processor outages in real-time. This could include alerts when there’s a sudden drop in successful transaction rates, longer-than-usual processing times or unusual error messages. To better understand your provider’s capabilities, ask for specifics such as the metrics being continuously tracked and the thresholds that trigger alerts.
- What measures, if any, are you taking to reduce my bank’s card processing downtime during outages?
In the event of a processor outage, your payments platform provider should be able to quickly reroute transactions to a backup processor so you can continue processing card transactions. This shouldn’t require any additional work or configuration by your bank’s technical team.
- Do you have card processing redundancies built into your platform? If so, how do the redundancies work?
Your payments platform provider should connect you to multiple merchant processors to enable fail-safe card processing redundancy, similar to the approach e-commerce businesses commonly use. And, if failover is deployed, it should be seamless with no impact to your contract, settlement or reconciliation reports.
- In the event of an outage or failure, can you quickly shift my bank’s card transactions to another processor to minimise downtime? How much effort is required on my bank’s part to make this happen?
Managing multiple merchant processor relationships and integrations should not fall to your bank’s technical team. That’s a responsibility best left to your payments platform provider, which can connect to multiple merchant processors through a single integration and contract.
There are many reasons why card processing outages occur. The cause could be a technology glitch, a widespread power outage or a disruption at the internet service provider level. While your payments platform provider can’t prevent an outage, it should be prepared to protect you against losses when outages happen.
Given the fact that a single outage can cost your bank tens of thousands of dollars (or more) and erode customer relationships, this is a risk you shouldn’t just “have to live with.” With the right technology in place, you can insulate your bank’s lending business from losses incurred during outages. That’s an investment that will yield happier customers, steadier cash flow and much greater peace of mind.
Steve Kramer is the Vice President, Product at PayNearMe, where he leads the product development team
