We all know and love our Short Messaging Service (SMS) — better known simply as the text message. But did you know that you can start taking SMS payments for your business? And that it is relatively easy to get started?
In the United States, we are just now warming up to the idea of sending and receiving payments by text, but businesses throughout the world have already adopted SMS payments for everything from mass transit tickets to lattes.
While Americans are less likely to pay by text for everyday purchases, text payments are still an undeniably growing trend. You may already be familiar with payments by text when it comes to charitable donations, but home service providers (e.g., AT&T) are starting to offer SMS payments for their customers as well.
Text payments offer potential growth for many other types of businesses, too. Pizza shops, salons, or any business that has âregularsâ could benefit from text payments. SMS payment services are probably not for everyone, however, so letâs take a look at how text-to-pay works and if itâs right for your business.
How Do SMS Payments Work?
When it comes to the nuts and bolts of how SMS payments work, itâs pretty simple, really. While there may be some variations with each company that offers text messaging payment services, generally you can expect the following elements when it comes time to pay:
- A business sends a text to their customerâs phone number or the customer texts a shortcode number to the business to initiate the sale.
- After communicating what product or service the customer wishes to purchase, the business sends the customer a link to a secure, mobile-friendly payment form.
- The customer enters their payment information and can typically approve saving the card on file for recurring payments or a future purchase.
- The customer may get a unique code to complete the purchase.
The customer may also get another verification text from the payment processing company to confirm their intent to buy. As stated above, the exact process may vary by company, but you can expect a similar procedure to complete the sale.
Mobile Carriers Vs. Payment Processors for Text Payments
Many people associate text message payments with charity donations (often the amount is added to their phone bill). What is lesser known is that phone carriers generally only allow organizations to accept donated amounts in $5 or $10 increments. By setting up these limits, phone carriers reduce their own risk from non-paying customers. While the phone carrier setup can work great for flash-giving campaigns and allow an organization to avoid paying some payment processing fees, it isnât a viable solution for businesses.
Enter companies like Relay, Pagato, and Sonar. These companies, and those like them, support SMS payments by integrating their messaging services with secure, PCI-compliant payment processing.
What Do You Need to Accept SMS Payments?
To get started accepting SMS payments, youâll need to choose the company with the services that fit your needs best. There are some differences between the ways companies like Relay, Pagato, and Sonar price their services. Letâs briefly take a look at each of these three examples.
Relay (formerly Rhombus):
Relay charges $50/month for 250 âticketsâ which refers to completed conversations. With that, you also get 1000 free SMS texts. All plans include automated responses, unlimited contacts, customer segmentation, and other engagement tools. Donât forget about the actual credit card processing fees, however! Relay integrates with Stripe, and you pay 2.9% + $0.30 per successful transaction. You can accept every major card at the same rate with Stripe processing. (If you arenât familiar with Stripe, check out our Stripe Payments Review.)
Pagato integrates with Stripe, Braintree (read our review), and Quickbooks Payments (read our review). In addition to the payment processing fees of your merchant account, youâll pay 1% per transaction with a minimum of $0.20 per transaction. With Pagato, you can accept payments through SMS and social media channels like Instagram and Facebook, too. You wonât have additional setup, monthly, or hidden fees.
Sonar offers packages starting at $24.67/month and $0.025 per SMS message. You can send automated messages, track customer data, set up campaigns and even A/B test them as well. Sonar integrates with Stripe, and your payment processing fees are 2.9% + $0.30 per transaction.
These are examples of some lesser-known companies, but the more prominent players like Square and PayPal allow you to send a text with a link to pay individual customers, too. The Square Cash App and PayPal donât have the muscle to do much beyond sending a link to pay, however. You canât A/B test marketing campaigns for an offer that you send out with Square or PayPal, for instance.
Keep in mind that most of the SMS messaging platforms mentioned above offer a free trial period and a demo to learn more about the exact features. So donât hesitate to ask a lot of questions to get the information you need. Itâs also a good idea to meet with your team and discuss the benefits of each platform, and of course, determine if your sales team has the bandwidth to have multiple open text conversations with customers. Text can be a powerful way to connect to your customers, but it is definitely not suited for every business model.
Which Types of Businesses Benefit Most From SMS Payments?
Without a doubt, there is value in using SMS messaging to build a marketing campaign and nurture those ongoing relationships with your customers. When you consider that the global average open rate on a text is more than 90%, it makes sense to start building your phone list and reaching out that way.
As far as what businesses benefit from adding SMS payments to the mix, consider this:
If your business model provides delivery, your revenue depends on recurring payments, or you target a ârepeatâ customer base, SMS payments can make a lot of business sense. However, you need to have the staff and time to support the nurturing of customers via text. Text conversations can be a bit longer than a phone call if there is a specific issue, so training your team on escalation procedures can help you both save time and money with SMS texts.
All this connection can be great, but not all customers are going to love texting or getting âsalesyâ texts from you. While SMS texting and payments can help your sales team if you use it the right way, some may find automated sales messages impersonal. Keep in mind who your customers are and what supports their journey with you when you set up your SMS services.
Another significant benefit to SMS payments is the secure and compliant payment processing services that you can integrate with, such as Stripe. Because you donât transmit the credit card data or store it on your servers, you can significantly reduce your liability when it comes to fraud risks. Not to mention that your customer has a fast and easy way to pay you, and all of it happens from their phone!
Are SMS Payments Right For You?
Being able to take payments by text offers potential â as long as the benefits outweigh the costs. Features vary by company, so do compare service packages before making a decision. One company may find a lot of value in the extra capabilities to target and segment lists, while another may be more focused on cutting down telephone orders. What services you choose mainly depends on your business model. Because text messaging offers a clear path to your customers’ hands, it may be worth finding the right balance to connect, engage, and encourage your customers to pay by text, too.
If you are discovering what else is out there in payment processing, be sure to check out our resources here at Merchant Maverick. Our Merchant Account Comparison ChartÂ is a great starting point for payment providers!Â
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