Using your Dealer Management System (DMS) for payment processing might seem convenient, but it comes with significant risks and limitations that can impact your dealership’s operations, security, and profitability. Here’s why:
1. Security & Compliance Risks
- PCI Compliance Issues: Most DMS providers do not enforce Payment Card Industry Data Security Standard (PCI DSS) compliance at the highest levels, exposing dealerships to potential fraud and liability.
- Data Breaches: DMS platforms are often not designed with the same level of encryption and tokenization as dedicated payment processors, making them a potential target for cyberattacks. This includes mandating certain FTC Safeguards and user credentialling.
- Chargeback Vulnerabilities: If disputes arise, DMS platforms may lack the robust dispute and fraud prevention safeguards and resolution tools that specialized processors offer.
- Surcharge/Cash Discount compliance: abiding by ever changing credit card rules, state rules, with respect to specific mandated requirements, puts dealers at risk of fines, losses and reputation damage if these are not being tracked and followed in real-time.
2. Limited Payment Flexibility
- Fewer Payment Options: Many DMS-based processors don’t support modern payment methods like mobile wallets (tap-to-pay, Apple Pay, etc.), ACH/Check processing, recurring payments and the ability to securely store customer payment’s data securely, all limiting customer convenience.
- Limited Functionality: This includes the inability to send text/email payment links to include ROs, Parts Tickets, etc., and capture digital signatures on final documents, partial payments, refunds and more. Much of this detail makes a big difference in overall accuracy and productivity in each department utilizing the system.
- Manual Processes: Even with “internal” payments processing, many are simply redirecting to a third-party site or embedded form, still requiring users to copy/paste data and/or key-enter data that results in errors or misinformation.
- Slow Funding: The DMS 3rd Party payments providers have early batch cut-off times, either making some transactions processed before close of business, post to the following day, or funding is outside of 48 hours, creating cash flow inefficiencies.
3. Poor Process Flows with Accounting & Reporting
- Limited Visibility: Many DMS systems don’t organize batch reporting and transaction data correctly or usefully, making reconciliation harder and more time-consuming.
- Imbalances: Often times the batch reporting will not match the daily deposit, leaving dollars and cents unaccounted for, even when funding upfront for surcharges, causing delays and frustration.
4. Higher Processing Fees
- Lack of Competitive Rates: DMS payment processing often locks you into higher processing fees since you have limited ability to negotiate or shop around for better rates.
- Hidden Fees & Markups: Some DMS providers bundle processing fees into their pricing model, making it difficult to see exactly what you’re paying.
5. Vendor Lock-In & Lack of Control
- Restricted Choice: Using DMS processing means you’re locked into their ecosystem, preventing you from choosing best-in-class payment solutions.
- Difficult to Switch: If you ever want to change your DMS, migrating payment data and history can be a nightmare.
- Support/Specificity: Many DMS providers rely on their 3rd parties to support the payments portion of their systems. These 3rd parties are not dealer-specific and don’t understand the landscape as it relates to risk and overall support, leaving dealers again at the mercy of an all-in-one exclusive agreement.
Better Alternatives?
Instead of relying on your DMS, consider using independent payment processors like Dealer Pay. Dealer Pay seamlessly connects to most DMS’s and is fully secure and compliant and offers the most innovative payments services made specifically for dealers.