3 Factors to Weigh Before Adopting a Rule-Based Payment Approach

A term like rule-based payments sounds so strict. Doesn’t it make you picture a pinched schoolmarm standing over her student with her ruler, waiting for an infraction so that she can rap his knuckles? I’m not talking about those kinds of rules. Instead, these rules will set you free.

Rule-based payments are defined as those made between businesses and employees, or businesses and customers, triggered by parameters such as transaction values, events, or reports.

A rule is basically a routine or regular occurrence for a business. For example, if a customer booked a $100 hotel room, a rules-based payment would reward him a cash kickback equivalent to a percentage of his bill.

Why are these rules so great? Because with them in place, your business can use data to “automagically” execute features of your service. Rule-based payments allow your business to operate in ways that align with the preferences and needs of your customers and employees.

The Value of Rule-Based Payments

Because rule-based payments are data-driven, they are regimented, highly scalable, and adaptable to different kinds of transactions. They can be issued in real time (as if your business is putting cash right into your customers’ hands), or as an equivalent that customers can redeem through whatever method suits them.

In short, the payment is functionally a gift card (though with none of that format’s drawbacks), allowing you to set an expiration date or other rules to qualify the transaction. Let’s say you’re an airline and one crucial aspect of your payments system is customer recovery: You need to be able to offer compensation in the event of a flight disruption, but only if certain conditions are met.

Many airlines issue gift cards or vouchers as restitution, but rules-based payments are infinitely more effective. Imagine a disgruntled customer calling you because his flight was canceled and a member of your ground staff offended him. He doesn’t want miles or airport food vouchers; he wants cash.

On top of offering the kind of compensation customers desire, a rule-based platform helps you organize a system around that compensation. Problem resolution can be indexed in a way that satisfies the customer and keeps you within your agreed-upon budget, which everyone on your team can get behind.

When Rules Become Restrictive

Not every system is perfect, and you should be aware of the concerns that could arise as you adopt a rule-based method.

One potential barrier that early adopters might encounter is that consumers are pretty well trained to accept a piece of plastic. Though they’ve been using credit cards for decades, this barrier is being broken down all the time in today’s digital marketplace. Consumers are getting used to the idea that they’re holding a digital wallet — one that doesn’t fall apart or get lost like their old leather ones.

Back in mobile banking’s infancy, people said, “Consumers will never put financial data on a cellphone.” People were so accustomed to in-person bank visits that adoption seemed unlikely. But the upside of online banking was so huge that it took off quickly. Now people can’t imagine a world without fixing their finances on their phones.

Whether you decide to adopt rule-based payments may depend on whether you have the capacity and inclination to be on the cutting edge of change. Not every small business can disrupt the status quo like Uber. But if your payments system is reasonably complex and your customers would benefit from better, quicker payments, you have to decide whether it’s worth taking that leap into the unknown to see the potential rewards.

Getting a Payment System in Order

A rules-based payment approach won’t work for every company. It might not be the best move for yours. But if you decide that making the switch could benefit your company, keep these three things in mind:

1. Figure out the “rules” of your business. As you begin planning to switch, you’ll need to figure out what rules your business has that the system should accommodate. How will you ensure that value is delivered in a way that satisfies these conditions, arrives at the recipient securely, doesn’t impede your progress, and doesn’t increase your cost?

Darden Restaurants had to solve this problem — along with others — when it committed to a rule-based payment plan. One service it offers is corporate catering, and it used to give corporate customers gift cards (sometimes multiple cards to different employees), which became understandably confusing. What if one employee used his card as a consumer rather than for a business event? There was no way to track corporate and consumer traffic to make sense of trends.

Adding more security to the rule-based payments process protects your employees from making costly mistakes. It’ll allow them to function without adding steps or risk and to deliver the most value to your customers.

2. Map out your customers’ favorite end points. Next, make sure that you can deliver the value in a fashion that meets the needs of your client, customer, or employee. Consider where your recipients spend and bank their money. What cards do they use? What tools (Mastercard, American Express, Amazon, PayPal, etc.) does your service need to be compatible with?

Taking this step allowed Darden to give corporate gift credit tied to an employee’s particular card. The balance is linked, which allows both the restaurant and the company to see which corporate catering transactions occur. What’s more, when a customer uses a gift card, Darden’s rule-based platform ensures that the customer is thanked for the transaction and is reminded to put any remaining credit toward a future event.

3. Prioritize compliance so you can prioritize satisfaction. Every payment made must be PCI-compliant, but that doesn’t have to hold you back. The answer to success is a sort of Venn diagram. Put your compliance duties in one bubble, your customer happiness duties in another, your employee satisfaction in another. The crossover is the sweet spot for ensuring your business and your customers simultaneously thrive.

After weighing the pros and cons, decide whether your business would benefit from a rule-based payment system. Then take the fear out of following the rules, and start managing your unique payment routines in a smarter way.

Keith Smith is the CEO of Wonder Technologies, one of the fastest-growing digital gifting, incentive, and voucher platforms in the industry. Keith has spent the past two decades building and leading innovative businesses in the mobile, financial technology, payments, and transaction processing industries. At Wonder, Keith is driving the movement to take the friction out of gift cards, rewards, and incentive marketing programs while empowering businesses to personalize engagement with their customers at scale.