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5 ways GoCardless reduces the cost of collecting payments

Andy Tweddle
Written by

Last editedJul 20237 min read

Reducing the cost of collecting payments can be achieved with automation, promoting cost-effective methods like bank payments, embracing innovative technologies, and continuously streamlining payment workflows. These strategies simplify operations and reduce manual admin costs, transaction fees, and physical infrastructure expenses. Implementing these approaches enhances profitability and customer satisfaction while ensuring long-term cost reduction.

Collecting recurring payments from your customers, whether it’s for a subscription, invoice or instalment, can be done with an array of different payment methods. But choosing your payment method is just the first step. For every method, there is a wide selection of payment service providers (PSPs). Each provider comes with its own set of direct and indirect costs.

In this article, we’ll explain exactly what payment problems are causing your costs to increase and how GoCardless can minimise these costs.

“Automating payments and all their related workflows, for a fraction of the per-payment cost of card payments, is a massive win for us.” – Lee Mellon, Head of IT, Cripps & Co

1. My current provider charges set-up costs and has hidden fees

In addition to the cost of processing individual transactions, your payment provider may include a number of other charges. 

For example, when processing card payments, you will be charged up to 3% for each transaction, plus fees for setup, monthly administration, chargeback and authorisation. Direct Debit typically has lower transaction costs than cards or PayPal. 

But your PSP may impose its own fees that start to outweigh this benefit:

  • Are you charged extra for failed payments? 

  • What about adding new customers? 

  • And do you pay for cancellations? 

These are all features that can see your costs start to increase.

How GoCardless fixes the problem

Not only is GoCardless a cheaper option – credit card transaction fees can be over 3x more expensive – but it also provides total pricing transparency. There are no setup costs or hidden fees. See our full pricing here.

2. I’m losing customers to involuntary churn

Did you know that 30% of all customer churn is involuntary? One of the main causes is failed payments. And the number one offender is credit and debit cards. Cards get lost, stolen, cancelled and eventually expire. Every time this happens, that’s a customer you can’t collect payments from. 

On average, card payments fail 10-15% of the time. Just think about how frustrating that is – a customer who loves what you do but whose latest payment has failed because they forgot to update their card details with you. That’s customer churn that was totally preventable.

Combine that with the cost of acquiring a new customer – typically 5 to 25 times more expensive than retaining an existing one – and it’s easy to see why involuntary churn is such a big issue for businesses. 

How GoCardless fixes the problem

Because GoCardless is built on the UK’s bank payment network, we have a lower payment failure rate than cards. On average the GoCardless payment collection success rate at the first attempt is 97.3%. With the ability to retry a payment up to three times when using GoCardless, you can reduce payment failure rates to as low as 0.5%.

High payment success rates mean two things for your business. Firstly, involuntary churn caused by failed payments has the potential to reduce dramatically, meaning you keep hold of more customers. Secondly, you save the resource and cost of chasing up those failed payments. And that all means less time and money spent chasing new customers to fill the void.

3. Integrating my recurring payments to other software is costly and time intensive

Adopting any new technology comes at a cost. So the easier and faster you get a new solution up and running, the less you’re going to spend. 

How GoCardless fixes the problem

GoCardless currently integrates with over 350 of the best CRMs, subscription billing platforms, and invoicing software providers. If you’re already using one of our partners, it is really easy to add GoCardless to your technology stack.

If you’re looking to integrate GoCardless directly into your systems using an API, we’ve got you covered as well with our RESTful API which has been designed to integrate GoCardless into your business quickly and easily.

Both our API and partner integrations have been designed to increase your speed-to-market. This reduces the costs of development time, meaning you’re collecting payments faster instead of working on complex integrations and deployments.

“If you need a modern, API-connected Direct Debit integration, go with GoCardless. It’s as simple as that.” – Marc Hartog, CEO, British Journal of Photography.

4. I waste a lot of time and money chasing late payments

A sub-optimal payment solution will include a lot of manual processes and human intervention. And that can mean your payment process is slow, costly, and prone to human error. Whether it’s a failed payment that needs someone on your team to chase up, a lack of integration between systems that requires the manual transfer of data, or trying to reconcile payments by hand, the more automation you can bring to your processes, the better. And if your business collects payments on a recurring basis, the benefits of automation are multiplied. 

How GoCardless fixes the problem

With GoCardless, automation is baked-in, so the vast majority of your current pains will be significantly reduced or completely gone.

Lower payment failure rates mean less time chasing customers, and with no manual processes, there’s no need to worry about human error. 

“GoCardless saves us about three FTE per year, which equates to around £100,000 worth of overhead. It's been really, really valuable for our business.” James Symes, Bike Club.

5. The cost of collecting international payments is stopping my company from growing

If you need to take payments from customers outside of your home market, a significant portion of your revenue can be eaten up by foreign exchange (FX) fees. Plus, PayPal and many banks charge cross-border fees before any transaction fee is applied.

The pain of taking international payments can be so stifling for growing businesses that many are put off by the idea of scaling abroad. This is particularly relevant at a time when the global economy is heavily reliant on cross-border payments, with its value estimated to grow to over £182.5 trillion by 2027 – a huge opportunity that several businesses are being driven to neglect.

How GoCardless fixes the problem

GoCardless partners with Wise, the money transfer experts, which means we use the real exchange rate to ensure you get the best FX rate when you’re collecting payments in foreign currencies.

Furthermore, with GoCardless, there is no need to open a foreign currency bank account if you don’t already have one. GoCardless will collect in your customer’s local currency and convert to Sterling at the real exchange rate and deposit the funds into your UK bank account.

Find out more about our global payment network here.

We can help

If you are looking to minimise the cost of collecting payments for your business, GoCardless offers a simple way of collecting one-off, recurring and invoice payments through automated “pull payments”.

Cards can be lost, stolen or replaced, resulting in high payment failure rates. But “pull” payments like Direct Debit allow the payee to take funds directly from the customer’s bank account, so you never have to chase payments again – eliminating late or failed payments and saving time and money on manual admin.

  • No contract or long-term commitment is required – try GoCardless risk-free and simply pay-as-you-go.

  • Easy to set up and manage – create instant and one-off payments as well as recurring payments in just a few clicks.

  • Award-winning support and user-friendly dashboard.

  • Take control of your payments, and determine amounts, collection dates and frequency – and you only need to obtain customer authorisation once. 

  • GoCardless seamlessly integrates with over 350 software partners – such as Xero, Quickbooks and Sage.

  • Offer cross-border, direct account-to-account bank payment options in over 30 territories with low transaction fees and favourable FX rates.

Find out how Instant Bank Pay and Direct Debit improve your businesses' payment processes, promoting financial efficiency and a superior customer experience.

Case Study: Bike Club

Bike Club, the world's largest kids' bike rental network, has experienced significant benefits by using GoCardless Direct Debit bank payments for their pay-monthly service. CEO James Symes highlights the importance of hassle-free and efficient payment solutions for both the company and its customers.

Initially attracted by GoCardless' cost-effectiveness, ease of use, and seamless integration into the customer journey, Bike Club chose GoCardless over a mainstream bank's Direct Debit system. 

"GoCardless won hands down. It was cheaper, easy to use and plug in, and super easy to build into our customer journey. Through multiple funding rounds, no one questioned GoCardless as a payments provider."

With a majority of customers opting for GoCardless, Bike Club saves on overhead costs: 

"We're collecting tens of thousands of payments a month and 90% of our revenue goes through GoCardless, which saves us about three FTE per year, equating to around £100,000 worth of overhead. It's been really, really valuable for our business – if we don't have GoCardless, we barely have a business."

Bike Club utilises GoCardless' Success+ feature to minimise failed payments and support customers struggling with payments, James says’

"The intelligent retries in Success+ allow people who have missed a payment to catch up naturally, while the solution’s data allows us to identify the ones who might be struggling so we can proactively help them get to the right place," 

James notes that GoCardless' international payment capabilities have also been advantageous for Bike Club's expansion plans. 

"We're excited that GoCardless takes international payments in multiple currencies, because as we expand abroad, that’s a whole problem dealt with already," 

The partnership with GoCardless provides Bike Club with a secure and reliable payment system. 

"As a business owner, GoCardless makes me feel secure. I never wake up in the middle of the night worrying about payments."

Find out more about GoCardless!

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FAQ: Cost of collecting payments

What is the cost of payment processing?

The cost of payment processing refers to the fees associated with facilitating financial transactions between businesses and their customers through various payment methods, including card payments, direct debit, and bank payments. It encompasses several factors, such as transaction fees, interchange fees, processing charges, and any additional costs levied by payment service providers. The cost of payment processing varies depending on factors such as transaction volume, payment method, merchant type, and the specific payment service provider chosen.

Why is there a payment processing fee?

Payment processing fees are charged to cover the costs incurred by businesses when processing various payment methods like card payments, direct debit, and bank payments. These fees contribute to the infrastructure, technology, security, and operational support required for secure and efficient transactions. Payment service providers levy these fees to sustain their operations and provide businesses with reliable payment processing services, ensuring a seamless payment experience for customers.

What are different types of card fees?

Different types of card fees associated with UK payments include interchange fees, assessment fees, and processing fees. Interchange fees are charged by the card networks for transaction processing, assessment fees cover operational costs, and processing fees are charged by payment processors for facilitating card transactions. These fees vary based on factors like card type, transaction volume, and merchant category. Understanding these fee structures helps businesses optimise their payment processing costs while ensuring efficient transactions for customers.

How do you calculate cost of payment collection?

Calculating the cost of payment collection involves considering multiple factors. Start by evaluating transaction fees, interchange fees, and processing charges imposed by payment service providers. Assess the transaction volume, payment method, and merchant type to determine the overall cost. Additionally, consider any additional costs like equipment, software, and security measures. By carefully analysing these elements, businesses can accurately calculate the cost of collecting payments and optimise their financial operations.

Can you pass payment processing fees to customers?

In the UK, businesses have the option to pass payment processing fees to customers. However, it is essential to comply with applicable laws and regulations. Transparency is key, as businesses should clearly communicate these fees to customers before the purchase. Some payment methods have specific rules regarding surcharging, so it is crucial to understand and adhere to the guidelines to ensure a fair and compliant approach when passing payment processing fees to customers.

Over 85,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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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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