Since the advent of the global pandemic, a number of businesses have started offering methods of contactless payments to the customers. This tends to typically include all types of firms -right from hair salons to gas stations. COF or Card-on-File on credit cards are transactions that serve as the convenient solution for saving ample energy, time, and money -both for customers and businesses alike.
The best part is that this form of payment does not require its customers to touch the POS or Point of Sale system or even manually enter debit or credit card information for every repeat orders.
What are Credit Card-on-File COF Transactions?
Card-on-File or COF transactions take place when cardholders go ahead with authorizing merchants to store the respective payment information in a secure fashion. The transactions also allow merchants to bill the stored accounts of cardholders for ensuring future purchases. One of the most common instance of this type of transaction is when your entire family will join a local gym.
As you fill out paperwork, there are chances that you will be asked to provide the respective debit or credit card information in case of recurring monthly payments. Upon authorization, the gym is capable of automatically billing the customers with the stored payment details on the given file. Definitely, it turns out to be a highly cost-effective and less time-consuming process in comparison to the manual entry of card-specific details or request for the information for subsequent billing cycles. At the same time, COF or Card-on-File transactions can also be utilized for other types of transactions -including top-ups, upgrades in specific products or services, and one-time payments.
What is the Working of Card-on-File or COF Transactions?
Typically, there are two methods for the implementation of COF or Card-on-File transactions -through merchants or customers. The billing process that is used will ultimately depend on the subsequent agreements set up between the customers and merchants. Businesses can continue receiving the consent of the customers to the specific COF terms, like asking customers for the following information:
- Filling out the online form
- Providing the card details over the phone
- Entering their card at the POS terminal and signing a receipt
- Consumer-Initiated Transactions (CIT): This type of transaction takes place when the customer is available and delivers access to specific payment information to the respective merchant -like at a Point-of-sale or POS terminal within a store or on the online checkout page.
CITs are helpful in offering proof that the valid cardholder was present during the transaction while authorizing the transaction -including chip data with card verification values like CVV2, CVV, or CVC for ensuring online purchases and chip data featuring cryptograms in-store.
- Merchant-initiated Transactions (MIT): The given type of transaction will require some previous customer-initiated transaction or CIT to occur. This helps in authorizing the merchant to go ahead with authorizing the particular transaction without even the presence of the cardholder. At the same time, there is no more requirement of additional card validation as well.
This type of COF transaction will ultimately depend on prior agreement between the merchant and customers. the agreement states that the stored information of both consumers and merchants will be utilized for tasks like unscheduled transactions, automated billing, or recurring subscriptions.
What are the Types of COF Transactions?
- Incremental: This takes place when additional products or services are added at the time of a contract period -like adding a new like to the existing phone plan.
- Delayed: It is the transaction taking place upon the processing of the initial transaction for specific products or services -like service upgrades, vehicle damages, or fines.
- No-show: This type of transaction takes place when the customer remains a no-show for scheduled services at any business. In this case, the customer was not able to follow the respective cancelation policies according to the agreement. Therefore, the customer was charged a proper no-show fee.
For instance, if a patient is not able to offer at least 24 hours of notice rescheduling or canceling the dental appointment, the dentist can go ahead with charging additional for services according to the agreed terms with the respective patient.
- Installments: This type of transaction features a deferred form of payment for ensuring an individual purchase. In this type of transaction, multiple fixed transactions are scheduled for a particular period of time.
- Reauthorization: This usually occurs before the partial order gets shipped to the end customers or the customer thinks of extending the respective services -like paid parking, hotel stay, or vehicle rental.
- Resubmission: As the first attempt of payment might be declined due to the presence of a low balance, a resubmission form of payment can be executed for completing the purchase. Every card brand will have specific rules with respect to how the mechanism functions and how many days from the first transaction attempt it can be executed.
- Recurring: This form of payment can be either flexible or fixed while featuring a particular time period -monthly, every 2 weeks, quarterly, every 6 months, or even every year. Some of the common instances of this form of payment include weekly healthy meal deliveries, snack or beauty subscriptions, and gym memberships.
What are the Benefits of COF Or Credit Card-on-File Transactions?
- Optimization of Business Efficiency and Cash Flow: Irrespective of the type of business you are running, it is important to generate a constant cash flow out of the respective products or services. The procedure utilized for collecting funds will directly affect the inflow and outflow of money from the business.
When you make use of COF payments, you can leverage the stored payment information of the customers upon filing up recurring forms of payments, updating subscriptions, creating flexible payment tiers, and so more.
- Saving Ample Time: Management of multiple payments is one of the core tasks required for running a successful business. When your business offers access to a wide range of products or services while featuring thousands of customers, it can easily become overwhelming for businesses to obtain credit or debit card information. It also turns out to be frustrating for end customers -particularly when they are using the method of payment.
To assist businesses in saving ample time, they can go ahead with offering Card-on-File or COF transactions. In this method, there is no more requirement of chasing end customers to ensure the payments. With savings of extra time, businesses are able to focus the overall energy and time on the respective goals -like developing new services or products, gaining new customers, and ensuring sustainable growth.
- Improving Customer Checkouts & Payment Experiences: When you ensure the delivery of a seamless, frictionless, and consistent payment process, it serves as the core service for both existing as well as new customers in the modern digital age. Once the payment cards of the customer is on file, businesses can go ahead with automatically charging the stored debit or credit card credentials while processing the transaction without extra steps for verification.
This implies that the customers are not expected to be present physically at the store, on the online checkout page of the merchant, or on the phone, for ensuring future purchases. With the help of Card-on-File transactions, companies are capable of sending out personalized invoices through text or email. This allows customers to choose the preferred mode of payment for ensuring purchases.
- Maximizing the Revenue Opportunities for Businesses: Along with leveraging Card-on-File transactions, it is also vital to keep the details of the card of your customers up-to-date. When the card of the customers will expire, it will help in preventing businesses from effectively charging the stored card while also receiving the right amounts of funds for the services and products being utilized.
While it might not be a major issue, it can instantly become a major one when this will happen to cards of thousands of customers across your business. To address the given issue, you can think of leveraging a reliable account updater service.
Conclusion
With Card-on-File transactions, a business is not only able to maintain the respective debit and credit cards on file, but also benefit from the capability of managing, monitoring, and streamlining every type of payment -irrespective of how customers wish to pay.
Card-on-File transactions serve as a great way for retailers to go ahead with earning consistent and predictable revenue. Whether you are enabling customers to pay through installments or providing subscription services, ensure that you have access to explicit permission for charging credit cards and storing customer-centric data in a secure fashion.
