These days, you can use a credit or debit card to pay for just about anything from almost anywhere. Whether it's a lunchtime sandwich or a new sofa, cards are an indispensable part of day-to-day modern living. In 2009, there were 162.6 million cards in issue UK-wide (UK Cards Association figures) and anecdotal evidence suggests that many people are more likely to be carrying cards than cash.
Increasing card use is causing a large-scale sea change for driving instructors. Pupils (and their parents) now expect to be able to pay for lessons conveniently by card, just as they are accustomed to do with almost any other purchase. Instructors and schools who are unable to accept this type of payment are losing pupils as a result. This is particularly galling for those who see their rivals taking higher value block bookings in advance (as gifts from parents and grandparents, for example) which are far more likely to be paid by card since customers often simply don't have the appropriate cash for such large transactions.
If you're looking to join the revolution by taking cards, there are various solutions available for you, but all the jargon is often confusing for someone unacquainted with the intricacies of card payments. We've outlined some of the options here, and highlighted some of the major pitfalls to watch out for when getting started.
Going it Alone: Stuck in the MIDdle
One possibility for instructors is to ask a bank whether they'll issue you with a Merchant ID (MID) and the appropriate hardware to take payments yourself. For most instructors though, this isn't really a serious option due to: the complexity of the application process; the requirement for bank-approved merchant status; high minimum weekly transaction volumes; expensive bank fees; liability for fraudulent transactions and often the need to purchase the costly hardware from your bank. The vast majority of drivers need turn to a card payment service provider instead. Handily, there are a few of these services around, and some of them are tailored specifically to cater for the unique requirements of driving instructors.
Before Moving Off: finding the right provider
Choosing the best service provider for your needs is extremely important. There are lots of companies in the UK who provide a generic card payments service, and whose clients range from pubs to ice cream salesmen. Many of these firms operate across lots of separate industries, and can inevitably treat driving instructors as a “tacked-on” additional offering. Instructors often find these providers inadequate for their needs, since their line of work demands a constantly mobile, instant payment solution, and frequently an instructor's cashflow situation doesn't allow for the same flexibility (of time from the moment of a lesson being paid for to the moment that money arrives in the instructor's account) as a larger business would. In short, instructors tend to need cards to behave just like cash. Look for providers who specialise in the driving instructor market and related industries, since these operations will usually be geared-up for the specific needs of instructors.
One such firm is LCard Services, for instance, a highly-tailored card payment solution for driving instructors, which operates as a division of CabCard Services. Established in 2006, CabCard initially operated in the taxi industry and has gone from strength to strength. Today the company provides a first-rate card payment solution to thousands of taxi drivers and private hire fleets across the UK and Ireland. After being approached by a number of driving instructors who had seen CabCard's low cost Chip & PIN terminals in taxis and saw how the system could benefit them for taking lesson payments, the firm decided to put together a unique service and offer it to driving instructors, calling it LCard.
Uphill Start: merchant account misery
One of the biggest barriers to entry for instructors looking to take cards is that most service providers require you to have a merchant bank account as well as your regular account. While a larger business would encounter no problems with this type of account, instructors often find it causes lots of trouble: aside from the difficulty of comparing account offerings from different banks, the complicated application process and sometimes the need to set up several different merchant accounts for different types of transaction (Chip & PIN transactions carry a lower risk of fraud than, for instance, those made online, so banks sometimes have different account types for each type of transaction), having a merchant account can also attract a lot of other fees: statement fees, monthly minimum fees, chargeback fees and early termination fees. Not only that, most merchant account contracts last for between 3 and 5 years.
Fortunately, while most card payment providers require you to have a merchant account in order to use their services, some providers (like LCard Services) allow you to simply use your existing bank account, with no additional charges or stipulations, which certainly simplifies matters for those who can't face the hassle of months talking to their bank.
Beware Congestion: look under the bonnet
One of the crucial factors to watch out for is how taking cards could adversely effect your cashflow. Since card payments require authorisation by the cardholder's bank, these transactions lack the immediacy of cash, so could change your cashflow situation quite drastically. Make sure you check when and how often a card payment provider will pay your transactions into your bank account. Some will only pay you monthly or fortnightly, while others (including providers like LCard) will pay weekly, every Friday.
If you can, try to scrutinise the payment model your provider will use. You want to make sure they have the experience and professionalism to handle your payments securely and efficiently. Richard Akitt, LCard's financial director, explained a little about why his company's business model works so well for their customers:
“Because our system operates on a centralised basis, our service is totally scalable. All our financial, accounting and customer service expertise acts as a cohesive unit from one place, and paying directly to our customers' bank accounts has allowed us to provide our service throughout the length and breadth of the UK and in Ireland too. We've had a great deal of experience in the taxi industry as well as the driving instructor market, so we know what our customers want: a low-cost solution with minimum hassle, fast payments and top quality support.
“That's what we're striving to deliver all the time; a new customer can register with us on Monday and be taking secure Chip & PIN payments by Tuesday, with money straight into an existing bank account every Friday. We don't apply any additional or hidden charges, and if a customer has any questions, they can just pick up the phone. We're proud that our up-to-date approach to card payments has earned us plaudits from across the taxi industry, and now it's time for driving instructors to benefit from that high level of service.”
Terminal Velocity: hard-wearing hardware
When it comes to taking cards, the most important issue on most people's minds is security. It's in everybody's interests to protect card payments against fraud, from the cardholder (customer) and the merchant (instructor) to the bank. Card fraud is a serious crime in the UK, with card fraud losses in 2009 totalling £440.3m in 2009 (UK Cards Association figures). You need to make sure that you're using a secure card payment method, because if you don't you might find you're liable for the costs of fraudulent transactions.
As explained on ChipAndPin.co.uk, “Since January 1 2005, if a retailer does not have a Chip and PIN acceptance device, and the use of such a device could have prevented the fraud from occurring, the retailer may bear the cost of a fraudulent transaction.” It's worth bearing in mind that in 2009, according to the UK Cards Association, “the two main areas of fraud were on transactions not protected by Chip and PIN” and furthermore, “the introduction of Chip and PIN means that lost and stolen card fraud is now at its lowest level since the collation of industry fraud losses began in 1991.”
Again, there are various hardware options available, and some are far more secure than others. As a general rule of thumb, if it isn't Chip & PIN you could be liable for fraudulent transactions.
Beware Smartphones
The increasing popularity of smartphones has led to the introduction of various payment 'apps' which at first glance seem to be a cheap solution to taking mobile card payments. Unfortunately, it is very difficult to assess to what extent these devices are PCI compliant, since a mobile phone can easily be compromised by hackers, and these 'apps' invariably have no Chip & PIN facility, which again could leave you vulnerable to fraud. But perhaps more importantly, instructors often note that customers simply feel uncomfortable putting their card details into an instructor's mobile phone, and the whole process (usually slow, as dictated by mobile phone reception) smacks of an unprofessional approach – not least because the device can't even print them a receipt.
Undoubtedly the best solution on the market today in terms of hardware comes from those firms who provide a secure mobile Chip & PIN terminal, of the sort used in most shops. These wireless devices are secure and PCI-compliant, they take payment in seconds and provide receipts for both passenger and driver. The terminal can be linked (as is the case with LCard's hardware) to an individual bank account, making their operation fast and simple. Significantly, the fact that this type of card terminal is already commonplace, with almost everyone already accustomed to using them in shops, pubs and other businesses, means that they're already comfortable with the technology and know that it's secure. This has the added bonus of enhancing an instructor's professional image.
Dual Carriageway: more than one way to pay
While an in-car terminal is all well and good, any driving instructor knows that face-to-face transactions aren't always ideal. Sometimes pupils want to pay online or over the phone (known as a Customer Not Present transaction), and you should be sure to check that your provider can offer you this facility. Many charge extra for these services, and (as discussed earlier) if you're going to attempt to process cards without a service provider, you may need a separate bank account for this type of transaction.
Many instructors prefer to opt for an all-inclusive “one-stop shop” solution of the sort offered by LCard – they provide Customer Not Present processing at no additional charge, with all funds paid into your existing bank account as normal. The firm is currently further advancing their CNP offering, with the introduction of an online “Virtual Terminal” for their customers.
A Roundabout Conclusion: get out of the slow lane
The truth is, wherever you drive and however you teach, at some point soon you're going to have to start taking cards. Chip & PIN isn't tomorrow's technology: it's here today and it's here to stay. Customers already expect to be able to pay by card and are often drawn to the larger schools and franchises because they can conveniently do so there. If you want to seriously compete with the franchises, you should consider a card payment solution, since such a facility really will give you a competitive edge.
If you're looking for an easy, low-cost, simple solution with an excellent pedigree, we believe that the offering from LCard Services is by far the most elegant, robust and secure solution to taking card payments for today's driving instructor. Remember that above all, security and protection against card fraud should be your paramount concerns when choosing a card provider; as APACS spokeswoman Jemma Smith points out, “History shows that fraudsters target the weakest link in the chain.” Those who do not adopt the Chip & PIN system are likely to attract card criminals who will target the weakest links.
Overall, instructors seem to be very impressed with the service provided by LCard Services, and their innovative payment system and high quality customer service certainly seems to have a good deal of mileage. The firm encourages customers to shop around because they know their offering is absolutely first-rate, and their fees and pricing structure are very easy to understand and completely transparent – they're certainly not playing their cards close to their chest. For more information on their services, visit www.lcard.co.uk or call LCard on 0845 491 8410.
