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How many times have you heard the expression you have only have shot to make a great first impression? It is no different in your online business my friends and truly you want to make sure as an online service provider that impression is truly exceptional, especially when it comes to your payment system.
Before we begin you’re likely wondering, why is a business and intellectual property lawyer writing about payment system pitfalls? Well I’m writing about this because often the issues that I see online service providers face the most are chargeback issues and chargeback issues lead to the uncovering of more issues such as the failure to have a contract and the like. If you would like to have some ideas of what to include in your contract I invite you to check out the post What Are Some Key Things To Put In A Contract?
A great payment system is where you’re collecting payments in a systemized fashion that communicates what the customer is purchasing, the item and the forms of payment you accept. It makes the process as frictionless as possible for the customer.
I get it, they make is so very easy to collect payments, right? Well not exactly! You see Venmo, PayPal and CashApp are what call peer-to-peer payment apps and they are not banks. If they were in fact traditional bank accounts they would be protected by the Federal Deposit Insurance Corporation, which insures bank accounts up to $250,000. This means your money that digital wallet is not protected.
The Consumer Financial Protection Bureau has been consistently warning consumers to not store their money in these apps for long term because in the event of a crisis or theft, the money is not protected. I mean the data on this is very clear – ….stored funds can be at risk of loss in the event of a financial distress or failure of the entity operating the nonbank platform…” You can read more about it by clicking here.
I don’t really have an issue with CashApp per se, but I definitely do not recommend that an online service provider that desires the respect of their customers and peers to utilize this as their primary payment system. CashApp is riddled with issues and here are a few of them:
You know, I could keep going here, but I think you get what I’m trying to tell you no? But just in case, utiliziing CashApp or the like just doesn’t set the right tone of engagement for consultant.
Money should be collected in a method that is easy and seamless for your services. This means you may have to connect your payment links to via a service provider like PayPal or Stripe but once the transaction is complete, transfer the money into your business banking account as soon as possible. You want to transfer the money out so that way it is inside of a FDIC protected account as quickly as possible.
This also helps you establish business relationships with your bank as they will see the volume of the transactions your business completes. This will could open the door for more capital opportunities. I mean when was the last time you saw a business owner get approved for a business loan simply should CashApp records? Yup, me neither!
Take it from me, utilizing these providers to be your payment system may seem super easy but it will definitely leave you exposed legally and create more headaches in the operations of your business and you already have a lot to deal with.
Now if you would like to learn more about shaping up the foundation of your client experience beyond payments, I invite you to check out my post about the 5 Key Things To Address In Your Contract, because you do have a services agreement right?
If you’re interested in having a conversation about your payment system or if you are unsure of the the terms of agreement are solid for your service business, then we invite you to set up a time to chat about a Document Review. Let’s make sure you’re empowered in your operations by understanding what things mean from a legal perspective – take the next step to ensure you’re doing things in the best interest of your business.
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