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3 ways to improve payment success rate with GoCardless

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Last editedJun 20236 min read

GoCardless boosts payment success rates by leveraging the Direct Debit system. With features like automated collection, retries, and merchant notifications, businesses can significantly reduce payment failures and the associated time-consuming manual admin by automating payment collection with GoCardless 

Ensuring your customers pay on time is one of the reasons why more and more businesses are turning to Direct Debit as their preferred payment method. Because Direct Debit is a ‘pull’ payment method, you control when your customers pay you. But this is only half the story. 

Payment success – in other words, if the payment successfully goes through once it’s been actioned – needs to be considered as well. When a payment fails, it’s not just the immediate loss of revenue that hurts your business. A failed payment will need to be chased up, adding administrative costs to your business. And if that still proves unsuccessful and your customer churns, you’re hit with a double whammy – the loss of future revenue and the cost of replacing them with a new customer. 

In this article, we look at three common reasons why a customer payment fails and how GoCardless helps fix this.

1. Failed payments: my customer’s card details are wrong

If your customers are paying you on a recurring basis – for example, a monthly subscription, a quarterly bill, a regular invoice or an annual membership fee – they probably want to set up the payment once and then forget about it. Because cards expire, this is impossible if they pay by credit or debit card. New credit and debit cards are typically reissued every two to three years. And in the meantime, cards can get lost, damaged or even stolen. 

It’s unrealistic to rely on your customers to provide their new card details whenever they are issued a new one. Consequently, debit and credit card payments have some of the highest failure rates of any payment method. On average, card payments fail 10-15% of the time.

How Direct Debit with GoCardless fixes the pain

GoCardless uses the Direct Debit system to collect payments for you. That means we pull money directly from your customer’s bank account with their permission.  Once they have created their Direct Debit Mandate, there’s nothing more for them to do, even if the amount of the recurring payment changes. If your customer moves to a new bank, their Direct Debits will usually automatically transfer.

2. Direct Debit: my customer has insufficient funds

One of the most common reasons a Direct Debit payment fails is because your customer doesn’t have sufficient funds in their account. In truth, this is not an inherent issue with Direct Debit (or any other payment method) but is caused by your customer not having enough money in their account. However, some Payment Service Providers (PSPs) have taken on this responsibility. 

How GoCardless's Notification and Retry features fix the pain

The first way to fix a failed payment is to know it’s happened. If your customer’s payment fails, GoCardless will notify you within one working day. You can then use the ‘Retry’ function to re-submit your payment request immediately. Using GoCardless, you can retry a payment up to three times, helping you improve your payment success rate significantly. 

GoCardless will also automatically notify you if your customer cancels a Direct Debit Mandate, another major cause of failed payments. Cancelled mandates account for around 15% of all failed Direct Debit payments. So once again, it’s better to know it’s happened so you have time to act. 

3. Payment Preference: my PSP’s platform lacks the right options

If your business model is based on taking recurring payments, then growth will usually result in you needing to process more payments. Or perhaps you are moving existing customers from card to Direct Debit. 

In both cases, the robustness of your Direct Debit PSPs infrastructure is crucial. If they’re not set up to scale with you, then the technology that underpins their payment process may fail, with your payments failing alongside.

How GoCardless’s international payments network fixes the pain

GoCardless is a tried and tested platform for taking recurring payments at scale. We collect more than £13 billion per year of payments for over 70,000 businesses worldwide. Our international payments network covers over 30 countries and eight bank payment schemes:

And we work with more than 350 leading financial and business software providers to make GoCardless available through them.

Our technology infrastructure and processes are routinely reviewed and updated where and when necessary. The recovery procedures for the most essential components of the GoCardless platform are shaped around best-in-class solutions from multiple cloud providers and best practice protocols. This protects our systems from failures affecting our users and ensures the reliability of our service.

Read how our partners are scaling their business with GoCardless.

Bonus: How GoCardless Increases Payment Success Rates with Success+

The points above address why payments fail and what GoCardless can do to minimise the percentage of failures. But despite everyone’s best attempts, some payments will still fail. However, with GoCardless, only approximately 2.5% of payments fail on the first attempt.

But what can you do when a payment does fail? To help address that question, we built Success+. Success+ uses recurring payment intelligence to predict and manage payment failures, including automatically scheduling retries on an optimal day for each customer.

Features like automatic payment retries and notifications for failed or cancelled payments allow businesses to address payment issues proactively.

A streamlined approach unburdens businesses from costly and time-consuming manual admin, freeing up valuable resources that can be allocated to what truly matters: better customer service and growth. Automating payment collection processes with GoCardless eliminates the need for manual invoicing, chasing payments and reconciliation. 

Success+ helps businesses to efficiently recover, on average, 76% of payments that initially fail*.

Find out more about Success+ and how it can reduce the admin burden of chasing failed payments while helping you create a more customer-centric approach to collections. 

*76% figure is an average based on 3 retries during a 4-week period, as per a sample of 1000+ in November 2019. **Based on a November 2019 survey of 30 Success+ alpha testers.

Key takeaways

Wise business owners know that bank payments are the way to go if they want more control, lower failure rates, and augmented efficiency in managing recurring transactions.

Payment success

Direct Debit was designed to offer more accuracy and success in collecting payments directly from customers’ bank accounts. While payment failure rates with card payments are around a frustrating 10-15% across the board, Direct Debit with GoCardless has an average success rate of 97.3% on the first collection attempt. This means just 2.7% of payments fail.

Manual admin

Card payments also generate considerable amounts of manual admin, especially when they fail. Direct Debit’s higher success rates combined with GoCardless features like automatic notifications and payment retries allow you to stop chasing payments. GoCardless also integrates with over 350 accounting software packages for a higher level of automation – saving everyone time and money. 

Transaction fees

When it comes to fees, nothing beats Direct Debit. Card payments levy hefty fees, while Direct Debit through GoCardless is a much more cost-effective solution. Here is a practical example: merchants will pay between £7.50 and £15 in fees when accepting a £500 payment via credit or debit card. With GoCardless, the same transaction is much cheaper. Click here for full pricing information.

International payments

GoCardless also offers multiple payment options, enabling consistent cross-border payments in over 30 countries using local payment schemes, including the US, the EU, the Nordics, Australia, and New Zealand. Independent research shows that helping customers pay with familiar and trusted local payment methods increases sales, reduces friction and improves user experience. 

Security

Card payments are additionally more susceptible to fraud and abuse. Credit card users can request chargebacks, but those who pay with debit cards have limited protection, as funds are withdrawn directly from their accounts. The Direct Debit Guarantee, on the other hand, is very consumer-oriented – any unauthorised withdrawal is refundable, giving customers the peace of mind they desire.

Direct Debit in 60 seconds

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Case Study: Deputy

Deputy is a global SaaS platform designed to simplify shift work for the world's 2.7 billion shift workers. Previously, Deputy only offered payment options through credit cards or PayPal. However, in their drive to simplify every aspect of customer engagements, including payments, Deputy introduced bank payment options to offer customers their preferred payment methods.

Seeking a global payments partner that could provide payment gateway capabilities across all their operational regions, Deputy found an ideal fit in GoCardless, enabling collection and control over recurring payments across more than 30 countries and integrating with Deputy's existing subscription billing platform, Zuora. Within three months, Deputy had implemented a fully functional and automated Direct Debit system worldwide. Scott Westbrook, Director of Business Systems at Deputy, noted:

The implementation team was fantastic at talking us through what the customer journey looks like, what the different schemes’ requirements are as well as the mandate information we need to be supplying to the customer upon sign up.

GoCardless' support has helped Deputy increase the number of customers shifting from credit card or bank transfers to Direct Debit, with GoCardless fees calculated to be around 45% lower per transaction than Visa/Mastercard and 80% lower per transaction than AMEX. This reduction in fees directly benefits Deputy's bottom line.

Scott also noted that bank debit's first-time payment success rate is around 92% compared to 80% with credit cards. Scott explained:

GoCardless has a massive impact on the business because it helps us improve cash flow. We're also not having to chase down debt, meaning our finance team can spend time on more beneficial things for the business.

Get paid on time, every time with GoCardless Direct Debit. Fewer late & failed payments reduces tiresome manual admin.

We can help

Setting up Direct Debit payments is fast and efficient with GoCardless. By automating the payment collection process, GoCardless drastically cuts down the administrative responsibilities of managing and tracking invoices for your team. 

GoCardless makes it quick and easy to get started, and with no contracts or long-term commitment required, there’s no risk. You can set up instant, one-off, or recurring payments in the merchant dashboard in just a few clicks, and GoCardless automatically creates and sends all the necessary forms, doing all the heavy lifting for you. You can also connect to GoCardless via over  350 partner apps, such as Xero and Quickbooks.

Discover how GoCardless can automate and streamline your payments process, making it easier for you to concentrate on what matters most - your business growth.

Get paid on time every time. Reduce transaction fees, late and failed payments and tiresome manual admin by automating payment collection with GoCardless.

Interested in automating the way you get paid? GoCardless can help
Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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