Beyond Checks: Alternative Methods of Payment are Gaining Ground
Jacqueline N. Janczewski
Paper checks are on the road to becoming obsolete in today’s digital-dominated world. For both personal and professional matters, consumers are more likely to turn to other methods of payment, including credit cards and various payment apps. Although law firms have long relied on checks, in part for reasons related to ethics rules, it may be time to consider the alternatives that clients will probably eventually demand.
The Credit Card Option
When is the last time you chose to write a check to pay a bill? Credit card payments — whether in-person or online — are much more common these days, and your clients likely would welcome the same ease when paying their legal fees.
Credit card payments offer additional advantages over checks. With their immediate processing, as opposed to the days of delay that often plague check payments, credit cards can improve a firm’s cash flow. They also preclude the risk of lost or bounced payments. Further, accepting significant upfront payments via credit card reduces the need for discounting down the road when clients drag their feet on paying invoices.
Attorneys have historically declined to accept credit cards, though, largely out of concerns of violating professional conduct rules prohibiting the commingling of client funds with attorney funds. Credit card companies usually charge processing fees that could require firms to tap either trust or operating account funds.
But new businesses such as LawPay have emerged to facilitate credit card payments for law firms. These businesses can deposit funds into trust accounts (for non-earned fees such as retainers and advance payments) or operating accounts (for earned fees) as appropriate and debit operating accounts for the processing fees so firms don’t have to worry about commingling.
Of course the cost of credit fees is also a consideration. However, the other advantages of accepting credit card payments will typically outweigh the small fees.
Payment App Possibilities
Many people, particularly Millennials, have taken to using smartphone apps to transfer money to friends and businesses with the touch of just a few buttons. Several options for making these peer-to-peer payments are available, and more are likely to arrive soon.
PayPal, which has been facilitating online payments from credit cards or bank accounts since the late 1990s, also owns Venmo, a popular social payments app. Consumers use Venmo through a phone app or Web interface to request and send payments. Once payment is received, the funds are transferred to the recipient’s bank account.
Square also allows money transfers between users. In addition, it provides credit card readers that attach to a smartphone to process credit card payments.
Apple and Google offer so-called digital wallets, too. Apple Pay links to users’ credit card or bank accounts and can be used for store and online purchases; it’s available only for iPhones. Google Wallet lets both Android and iPhone users who have Google accounts make purchases in stores and on websites that accept Mastercard and to send money to other users.
If these options seem like a bridge too far at this point, you might want to ease into things by accepting digital bank transfers. Most major national banks have apps that provide a direct connection to the institutions, cutting out the middleman and reducing the privacy and security risks that come with every type of online transaction.
Those risks are not the only potential drawbacks to consider. Many of the apps have low transfer limits, as well as limits on the amounts being transferred by recipients to their bank accounts. Some may also impose transaction fees.
The days of clients having to mail or drop off checks for your services are waning. Position yourself for the inevitable shift to alternative payment methods by looking for providers that are familiar with the ethical obligations surrounding trust accounts. Read and understand their terms and conditions (including the fees and privacy policies), and review your jurisdiction’s rule of ethics concerning this issue.
For more information on alternative payment methods, contact Jacqueline Janczewski at [email protected], or call her at 312.670.7444. Visit ORBA.com to learn more about our Law Firm Group.