Streamlining Legal Billing: An overview of online payment-processing tools
Updated: This article is the third in a series that explores legal tools for law firms to increase profitability. Previously, we discussed time-tracking software for lawyers and legal billing software.
Today, we’ll focus on the final part of that process: getting paid using online payment-processing software. We’ll cover the advantages of accepting online payments from clients, along with important factors to consider when selecting a solution, and will also provide insights into the top tools in this category.
By the end, you’ll have a good understanding of the benefits of online payment-processing software, including insights into how to choose the right payment tool for your firm’s needs.
Online payment-processing benefits
Payment-processing software acts as a digital financial middleman, making it easier for your firm’s clients to complete transactions using Automated Clearing House services or credit card payments. Because of the effects of the pandemic and the changing preferences of legal consumers, electronic payments have become the norm, with firms increasingly adopting online payment options to meet client expectations.
According to the 2022 Legal Industry Trends Report by MyCase and LawPay, online payment-processing usage is on the rise, with 84% of respondents reporting that their firms accepted online payments, up from 77% in 2021. The reason so many firms accept online payments is that doing so offers significant benefits for firms and legal clients, including:
- Efficiency and accuracy: Payment-processing tools streamline the payment collection process by eliminating manual payment reconciliation, increasing efficiency and accuracy, and enabling firms to accept multiple forms of payment swiftly and securely, especially when integrated with other legal software.
- Enhanced cash flow: Accepting electronic payments accelerates cash flow, ensuring accurate and timely receipt of funds. In fact, according to the 2023 Benchmark Report by LawPay and MyCase, firms collected 33% more from their clients who paid using online payments vs. cash or checks and were paid more than three times faster.
- Client convenience: Payment-processing tools offer legal clients flexibility by offering multiple payment options, including credit cards; debit cards online payment interfaces; and convenient payment options, such as legal fee financing.
- Secure transactions: Payment-processing tools employ robust security measures, including encryption technology; secure payment gateways; and compliance with industry standards, which protect firms and their clients.
These many advantages contribute to more streamlined payment operations, enhanced client experiences, and improved overall financial management for firms.
Choosing payment-processing software
When researching payment-processing systems for your firm, it’s important to have a comprehensive understanding of applicable ethical rules because each jurisdiction may have slightly different regulations.
Carefully vet providers to determine whether their services conform to jurisdiction-specific ethical guidelines, and opt for solutions designed for legal professionals. This specialized software ensures ethical compliance by, among other things, deducting fees from a firm’s operating account instead of its trust account.
When vetting legal payment-processing providers, ask many questions, including:
- How are surcharge fees handled, and does the process comply with card brand regulations and your ethical obligations?
- Are bank login credentials required when clients pay by ACH?
- Was the payment-processing technology built specifically for the legal profession, or is consumer-based technology being used to handle legal payments?
- How are chargebacks handled, and is there a fee?
- Are options available that make it easier for potential clients to retain your firm, such as the ability to set up payment plans or take advantage of legal fee financing?
Another important consideration is whether the payments provider integrates with software platforms that your firm already uses. Integrations enable automatic payment information updates in the firm’s billing or practice management system, streamlining administrative tasks, and reducing or eliminating manual data entry errors.
Next, don’t overlook the possibility that the software that your firm already uses may include online payment functionality. When I covered online payments in May 2020, only a few law practice management and legal billing software programs had online payment-processing functionality built into their platforms.
These days, however, the vast majority of programs offer online payment-processing either through integration or built into the platform. So make sure to check whether the software tools that your firm already uses include this functionality. If they do, you may not have to look further.
Finally, don’t overlook the financial implications that result from varied payment-processing cost structures, and pay careful attention to the pricing structures for subscription-based and transactional fee models. Additionally, if the payments system integrates with your firm’s existing software tools, such as practice management or legal billing platforms, determine whether there are additional (or reduced) subscription costs before making a decision.
Legal payment-processing options
Since I last wrote about this category of software, there have been changes in the space. Companies were acquired, and others revised their pricing. So let’s consider some of the current, stand-alone online payment options available to lawyers.
Over the past three years, some companies have been acquired. For example, Headnote was acquired by ASG LegalTech in September 2020. There are no integrations listed on its website. Headnote will be a stand-alone payment-processing tool through December, at which point it will only be available for PracticePanther users. Pricing is 1.9% for ACH and 2.9% for credit cards, along with applicable card network fees.
Next, there’s Lex/Actum, which does not integrate with other software. Its pricing structure hasn’t changed since 2020. It is tier-based, depending on the amount charged each month, with a range of $29 per month (up to $10,000 of transactions per month) to $99 per month ($60,001 or more in transactions per month). The processing fees for each transaction decrease as you move up to the higher tiers. At the lowest tier, the fees are 25 cents per credit card transaction and $2 per ACH transaction. At the highest tier, the credit card transaction fee is 10 cents per transaction, while the ACH fee is $1.50 per transaction.
Another product is LawPay, an AffiniPay company (note that I am employed by AffiniPay). It is one of the most established legal payment-processing products and was founded nearly two decades ago in 2005. It integrates with more than 70 software tools and has partnerships with over 100 state and local bar associations.
The cost is $19 per month unless you use it with MyCase, PracticePanther, Clio or other law practice management or legal platforms, in which case there is typically no monthly fee. In addition to transaction fees—which are 2.95% and 20 cents for standard cards, 3.75% and 20 cents for specialty cards, such as American Express, and 1% for ACH transactions with a $10 maximum per transaction—card brand pass-through fees may also apply to some transactions. Also, Pay Later, a legal fee lending solution is available, so that your clients can more easily pay you upfront by obtaining loans for legal fees through a third-party lender.
Gravity Legal is another option. It has an application programming interface available for developers, so that firms can integrate it into their firm’s systems. It also offers 14 integrations with different types of software—legal tools and consumer offerings. There is no monthly fee, and there is a $25 fee for chargebacks. Gravity Legal’s website indicates that it charges 2.95% for all credit and debit card transactions. There is a 1% fee for all same-day transfers to firm bank accounts, with the per-transaction transfer cost capped at $30.
The process of vetting and choosing a legal payment-processing system requires careful consideration, and ensuring compliance with ethical and regulatory standards is essential. By thoroughly assessing the features, security measures, integration capabilities and pricing structures of various payment-processing systems, you can make informed decisions that align with your firm’s unique needs and priorities and ultimately contribute to your firm’s future success and profitability.
Updated Oct. 24 at 12:48 p.m. to clarify that Headnote will be a stand-alone payment-processing tool through December.
Nicole Black is a Rochester, New York-based attorney, author and journalist, and she is senior director of subject matter expertise and external education at MyCase, a company that offers legal practice management software for small firms. She is the nationally recognized author of Cloud Computing for Lawyers and is co-author of Social Media for Lawyers: The Next Frontier, both published by the American Bar Association. She writes regular columns for ABAJournal.com and Above the Law; has authored hundreds of articles for other publications; and regularly speaks at conferences regarding the intersection of law and emerging technologies. Follow her on X (formerly Twitter) @nikiblack, or she can be reached at [email protected].
This column reflects the opinions of the author and not necessarily the views of the ABA Journal—or the American Bar Association.