Spring ushers in a new phase, and it’s the perfect time to clean up what’s not working for you relating to dealer payment processing. Legacy systems, limitations, manual work, and growing costs all indicate that it’s time to rethink this vital part of your financial health.
Dealerships process payments across many areas of the the business. Service customers typically use cards, and new vehicle buyers remit down payments. These transactions require secure, compliant, and integrated point-of-sale technology. Those are the basics, but there’s so much more to improve.
Your current platform and processes may suffer from inefficiency and extra costs. It’s time for a spring cleaning and transitioning to a web-based, dealer-centric solution for payments and intelligent reporting.
You can turn inefficiencies and complexity into a clean workflow. Learn how to modernize your dealer payments processing technology with a spring refresh that can deliver happier customers, more insightful data, and lower costs.
Customer Experiences Improve with a Neat, Easy Way to Pay
Every touchpoint with a customer matters. If it’s inconvenient or poor, it jeopardizes their loyalty. This is something that takes years and positive interactions to build, but what really impacts satisfaction?
In the latest Cox car buying journey report, the factors contributing to this the most were efficient processes and seamless experiences. There are many ways to weave this into your dealership with innovative technology, including dealer payment solutions.
The most common payment activities by customers happen at the service center, followed by sales and finance. With the right solution, customers gain flexibility in how to pay, speeding up the checkout process.
When assessing your current state, you may find lots of gaps that are impacting experiences negatively, hurting your customer satisfaction index (CSI) scores.
Refreshing these dynamics ushers in an era of change that helps your customers and staff.
How to Welcome Change in Your Dealership Point-of-Sale
Every spring cleaning needs a checklist, and here’s the one you should be using to evaluate dealership point-of-sale systems:
- Payment flexibility, including card and check processing, digital wallets, text/email payment links, and buy now, pay later
- Customer-facing hardware with added security
- Advanced surcharging features, which allow you to cover some of the processing fees with greater agility that won’t harm CSI and retention
- Reduced friction with tailored payment options, covering all types of customer needs and preferences
Outdated Dealer Payment Processing Systems Drive Up Costs
Spring is a busy season at dealerships. New models have arrived. More shoppers stop by, and service appointments trend up. With more activity comes more payment processing. Your current solution may do the job, but what’s it really costing you?
Payment processing does incur fees. Any merchant account has various rates that accompany each transaction. If you’ve been using the same payment processing platform for years, those costs have likely grown. In your spring cleaning, it’s time to uncover all those expenses.
The rates and fees associated with payment processing vary depending on the card type, risk, rewards, and available information. By expanding the information about the card and cardholder, your rates can be lower. So, how do you ensure this happens with every transaction?
More Information, Less Fees
The primary way to ensure that the most information is available in a transaction is with address verification (AVS). It’s a way to eliminate extra costs associated with card-not-present transactions and corporate, business, or purchasing cards.
With the right technology, AVS is automatically part of the workflow. The information includes:
- Calculated taxes
- Reference numbers (e.g., RO, VIN, parts ticket)
- Transaction description
- Other enhanced data
Total savings for using this approach can be between 0.40% – 1%.
Integrated Payments Solutions Leave No Dust Trails
A connected ecosystem for dealer tools drives efficiency and productivity. Without this, you likely spend considerable time on manual work and have clouded visibility into revenue operations. Adopting an integrated payments solution enables this much-needed transformation.
There are considerable advantages to this shift, including:
- Streamlined operations: Unify all the components related to payments into a seamless system, ensuring convenience for customers and faster processing. When payment solutions integrate with your inventory management system, vehicle availability and pricing updates in real-time.
- Simple, meaningful reporting: With a connected system, reporting and analytics are accurate and available, driving more informed decision-making. These insights also provide valuable insights into cash flow.
- More payment options: Your customers want choices in how they pay, and an integrated platform makes this possible.
- Enhanced fraud prevention: Advanced fraud prevention features protect you and your customers.
A Clean Sweep Uncovers Hidden Risks in Payment Processing
Another area to tackle in your spring refresh is chargebacks. These disputed transactions have an impact on your financial ecosystem. They can be costly, erode margins, and affect customer trust.
Defending against chargebacks works best with a proactive stance. Your point-of-sale system should include these features to minimize chargebacks:
- Multi-factor authentication (MFA): This robust authentication method ensures that charges are legitimate and authorized.
- Real-time transaction monitoring: A system that lags suspicious activity helps you reduce probable fraud by identifying these in the moment.
- Data encryption: With this capability, you’re protecting sensitive customer data while in transit or at risk, thwarting the breach attempts of cybercriminals.
- AI fraud detection: This tool incorporates AI into your financial transaction streams, analyzing anomalies and bringing them to your attention.
- Digital signatures: When customers make payment via payment request, requiring digital signatures can reduce the chance of chargeback disputes.
Chargebacks can be a growing risk, impacting customer experience and financial health. Having a solution that focuses on ways to prevent them should be a priority in your payment processing strategy.
A DMS for Payments Creates Disorganization in Your Infrastructure
Do you currently use your dealer management system (DMS) for payment processing? It may seem like a suitable option. However, there are numerous challenges that can cause financial disarray.
Let’s look at the problems that can arise.
Security and Compliance May Be in Peril
An essential part of payment processing is meeting the Payment Card Industry Data Security Standard (PCI DSS). Most DMS vendors don’t have this, which means fraud and liability are more likely to occur.
The critical security features in the best payment solutions include encryption and tokenization. A DMS has a gap here, too, which leaves you much more vulnerable to data breaches.
If you opt to surcharge or have cash discount options, you’re also exposed in this case. If your solution isn’t tracking and following these in real-time, you could face fines and reputational harm.
Payment Selections Have Limits
Remember, your point-of-sale experience for customers should be fast, secure, and easy. They also want to choose how they pay you. You’ll hit a wall of obstacles with a DMS. They rarely support modern payment options like mobile wallets. They also can’t deliver payment links via text or email.
The manual processes required to attain certain functionality put a lot of stress on your staff. It can also create human errors when keying in data.
Slow funding can also be a concern, as many have early batch cut-off times. You could have to wait as long as 48 hours.
Higher Processing Fees Eat at Profits
A DMS is really good at many things; payment processing isn’t one of them. The rates for processing are often much higher than what you’d get with a dedicated processor. The only viable reason for higher rates would be if you were a high risk, which you likely are not.
They are also infamous for tacking on hidden fees that they “bundle,” so you aren’t even sure what you’re paying. The total of all the fees you pay is your effective rate.
You calculate it by dividing the fees paid by the total amount processed. If you process $150,000 and fees are $10,000, your effective rate is 6.67%.
Effective rates will vary every month as the amount you process changes, as can interchange rates. A DMS provider may also be throwing in other fees hidden in this bundled rate. They may also charge a host of other expenses that are only visible in the fine print. This lack of transparency erodes profits and makes it hard to budget for these costs. Double check your processing and DMS statements for duplicate line items, too.
Support Could Be Rusty
Another drawback would be a lack of specialized help. This is one area of your business you simply cannot accept rusty support.
The DMS provider may not have payment experts and may force you to contact third parties. Those companies don’t understand car dealerships and your unique circumstances. It can be frustrating and cause disruptions across your financial landscape.
A Spring Refresh for Dealer Payment Processing: Modern, Optimized, and Future-Forward
The consumer payment space is evolving at a rapid pace. Being able to deliver the best payment experience requires a modern, optimized, and future-forward partner. It ranges from being able to accept mobile wallets to being more strategic in surcharging and chargeback prevention. It’s critical to be agile and prepared for what comes next.
Payment processing is no longer just a commodity, nor is it simply one component of a tech stack. Rather, consider it to be part of your strategic business plan. As such, the solution you use should have a modern infrastructure with tools that process payments, easy integration options, and features that help you run your dealership more efficiently.
Understanding its importance is why Dealer Pay built a real-time communication ecosystem that connects payments seamlessly while creating a smooth, secure payment experience for customers.
We’re becoming more dependent on technology every day. Think about it—you have a DMS to manage operations, service-lane technology to optimize workflow, and data analytics to make smarter decisions. So why wouldn’t you do the same with your payment processing?
Payments drive cash flow, and cash flow drives your business. The right payment technology doesn’t just process transactions. It empowers you to operate smarter, reduce risk, and maximize profitability.
With us, your payments work for you, not against you. Our trusted technology and innovative spirit make us the perfect partner for dealerships. We prioritize efficiency, security, flexibility, and the customer experience. You can achieve cost savings without compromising on any of these pillars.
Spring is a time to welcome change. Take the first step by requesting a demo today.