What is a credit card company but a lender? We don’t really think of them that way, we think of a credit card account as something like a debit account, just one that we pay later, after we’ve made our purchases. Or like delayed spending, we pay an extra little fee so that we don’t have to pay for what we’re buying right away. But ultimately a credit card company is just a consumer lending program, right?
They send a little money your way, and then they collect it with interest a few weeks later.
Well it seems like a few credit card companies, namely Mastercard, are actually embracing that. Mastercard offers a consumer loan program for merchants to help cut costs on interchange.
If you don’t know about Mastercard’s consumer lending program, it actually started back in 2014, and aims to make transactions a little more flexible for merchants in the fields of auto and mortgage, installment loans, student loans and credit card repayment programs, and their customers.
Essentially this allows you to do in-house financing programs without having to go seeking a third party company or financiers to support you in this effort coupled with lower interchange to cut costs on eligible transactions.
Who Is Eligible for Mastercards Consumer Loans Program?
The consumer loan program is, of course, not suitable for every business type.
There’s not much reason for a gas station to run a consumer loan program, for instance. Anybody who needs to take out a consumer loan just to put some gas in their tank and pick up a few Cokes is… not to be callous, but that’s someone who’s probably never going to repay their debts. The consumer loan program is particularly focused on industries where loans are already a part of the business landscape. Mortgages, auto financing, student loans, installment loans – things of that nature.
Of course just offering large transaction items like home loans and so on does not immediately make you eligible.
There are several requirements that must be met before you can sign up for Mastercard’s consumer loan program.
- Merchants must have MCC 6051
- For unregulated Consumer Signature Debit and Consumer Signature Prepaid, the program is implemented as an MCC override for Merit 1 IRD’s 78, 88, and 98.
- Merit 1 interchange rate requirements will apply
- Merchants will need to provide a Merchant ID, registering with MasterCard and Acquirer and passing the ID with each transaction. Maverick has a MAID, which is a processor-level ID to automatically utilize for merchants qualifying.
- A maximum convenience fee of four ninety five will be charged to the cardholder with each transaction
- No payday lending
As you can see, the eligibility requirements are not excessively strict. If you’re working in an industry where you might need to make a loan to your customers, then there’s a good chance that you already meet these requirements, or can adjust your business practices accordingly without much difficulty.
Signing Up for Mastercard’s Consumer Loans Program
Just being signed up for Mastercard transactions does not automatically make you capable of offering MasterCard consumer loans. Due to Maverick being a full-service provider, this program is already setup at a processor-level so once you are approved with us and you meet Mastercard’s criteria, we can immediately enable the program for you in our backend.
What’s In It For You?
If you offer loans and financing programs to your customers, there are a lot of options that you have before you. Accepting Mastercard debit cards as re-payments is a more convenient way for your customers to pay and with Mastercard’s Consumer Loans Program, you get savings on interchange due to lower rates.
So why would you sign with Mastercard?
What’s in it for you?
As with any business decision, it comes down to what’s right for you.
But there are a number of benefits to signing with Maverick to accept Mastercard that you might want to go over before making your decision:
- Mastercard’s loan program for customers offers a simple option for taking out a loan. Basically they just run their debit card, and they’re good to go. It’s streamlined, fast and easy.
- Mastercard’s program offers an approach that is mostly digital, without the paper check processing. This means that you’re reducing some of the space for human error that you have with conventional lending programs.
- You’ll get immediate confirmation for funding when your customer makes payments through the Mastercard Consumer Signature Debit program, or the Mastercard Consumer Prepaid card. This means a little less guesswork when you’re adding up the numbers and doing the books at the end of the week.
- It can be integral to a “drive to web” strategy, optimizing customer contact center processing and allowing customers to make payments via IVR and other online solutions.
- The platform is still evolving with new technology like Mobile Wallets and apps, meaning that when Mastercard is rolling out new tech, you’ll be among the first who get a chance to try it out.
- Accepting (debit) cards in today’s digital world is key for a easy and frictionless environment to both improve customer satisfaction and increase re-payments due to easiness.
Have questions about Mastercard’s Consumer Loan Program? We have staff waiting by to answer any questions or concerns!
Streamlining The Lending Process
The lending process can be very time-consuming, and it can be very taxing in terms of the effort and energy expended to close the deal. This is true not only for merchants, but for customers, as well.
In lending, as in every other field of financial and commerce transactions, the future lies in streamlining.
As an industry, our job is ultimately going to be to make things easier, simpler, without losing anything on the fronts of security, safety and flexibility. Sometimes this is easier said than done.
As the technology continues to improve and becomes more readily available to merchants, transactions will continue to get easier, simpler and more streamlined. The changes to the industry may lag behind the changes to the technology, but an industry-wide change takes some time to roll out, and it takes some time to get used to.
In any event, it is exciting to see the streamlined, simplified approach to transactions finally hitting the lending sphere.
Lending In Good Faith
In some circles there may be some concern that simplified lending programs will only make it easier for bad-faith lenders to do their work.
However, we would have to argue that these concerns are well-intentioned, but not entirely well-founded. The truth is that the maximum fee limit and oversight by Mastercard will actually create more obstacles for companies like, for instance, a payday lender who charges excessive interest rates.
The program only makes lending easier, it doesn’t make lending anymore dishonest.
In any event, bad faith lenders seems to be doing just fine without Mastercard’s help. Every consumer has a responsibility to do their research and make sure that they are not taking out loans under unfair terms and conditions.
Those who are not doing that research with conventional, traditional lending programs won’t do the research with a more streamlined, technologically advanced lending program.
It is not inconceivable that a bad faith lender might be able to skirt Mastercard’s regulations and manage to take advantage of consumers using the program, but it is more trouble than it’s worth for most of the people in this area of the lending industry.
Embracing New Technology And New Ideas
In any field, it is generally important to embrace new technology and new ideas as they come along. There are some exceptions. If you run an antique store, for instance, people come to you for beautifully restored, traditional artifacts of earlier eras. But that doesn’t mean that you can’t be up to date in how you process payments and finance big purchases.
Customers in 2018 demand convenience.
Or rather, they take it for granted. It’s hard to find a business that is so good at offering what it offers that customers will put up with limited payment methods and long lines at the checkout.
Ease and speed in every transaction used to be a competitive advantage, now it simply allows you to compete in the first place. This applies to simple checkouts at the cash register, and it applies more and more every year to things like lending and registration and automatic billing and so on.
What we’re leaning towards is a kind of one-click approach to every area of a customer’s financial life. They don’t want to sit there and fill out a form every single time they pay a bill or take out a loan, they want to push a button and be done with it.
It is important to help customers to achieve this end in any area of your work, whatever you do.
In a physical retail setting this can help to move lines along quickly and make more transactions in a day, and it can keep customers coming back, they won’t decide to go to the competitor across the street just because it’s easier to make a payment over there. But it applies to all transactions, not just the small ones that take place at the checkout line.
Mastercard’s consumer lending program backed by Maverick’s payment processing for lenders is a simplified, streamlined approach to managing customer loans for merchants and frictionless consumer re-payments. It makes things easier for everyone involved, and it’s been setting a trend that’s been rippling out throughout the rest of the industry.
If you’re a lender and not happy with your current payment processor, or you feel your re-payment environment could be improved, then reach out to Maverick for more information.