At Forward, we work with software companies to help them integrate payments across a number of verticals, today we will deep dive into the Government sector.
Government organizations –
Whether national, state, and local, these institutions are responsible for collecting a wide variety of fees, fines, and taxes from their citizens. At the federal level, 95% of the $3.29T collected by the U.S government came from income, social security/medicare and corporate taxes. However, when you look across state and local governments the sources of income broaden – with more than $275B annually derived from a mix of activities. Examples include water bills, electric bills, recreation fees, parking/traffic fines, court fees, licenses, registrations and more.
Software helps governments collect, track, and allocate these funds to the correct department. This requires the payment technology to flexibly settle funds to numerous different parties. For example, a citizen is presented with their monthly utility bill from the local government which includes a charge for electricity, water, and sewer. SaaS companies are leveraging Forward to allow the citizen to make a single payment using their credit or debit card, bank, or a host of alternative payment methods, apply the correct fees, and then settle that single transaction to multiple parties. Game changer for governments.
Fees
Let’s double click on fees. Here, there are card brand rules specific to the category that impact how a software company designs and implements their payments program. Governments have much broader flexibility in charging convenience fees to citizens for making their payments online or using a credit card. It is quite common to pay $103.95 for a $100 utility bill, with the $3.95 ensuring the government receives the full $100. The cost of collecting the payment is effectively passed along to the payer rather than being borne by the government.
However, many government departments are eligible for discounted interchange – less than what a private business would be assessed. Here is where it gets tricky – you can’t do both – that is an important design decision to take into account early, before rolling your payments offering out to a competitive market.
Above we used a very simple example of a flat $3.95 convenience fee being applied to a government utility transaction. In practice, these fee programs are far more complex – varying by the size of the transaction and which government agency is receiving the funds. Because Forward owns the “back-end” or settlement function entirely, our ability to support and adapt to new, creative billing formats is almost unlimited.
Payment rails
As one might guess, a large percentage of these transactions are done using PaybyBank or ACH. On these types of payments, our PayEngine technology really shines. Not only do we charge a low flat rate to process an ACH transaction from a consumer to a government (or company), our customizable/intelligent risk engine factors in to risk scoring both the history of the software company and the local government in evaluating risk of the transaction being reversed. The net effect, a better customer experience for the software company – fewer holds, faster releases, and better communication.
We process an impressive amount of payment volume in the government space, but this is just an example of the level of detail we get to in helping our software partners design and implement a payments product that has the potential to double or even triple their revenue.
