Last editedJan 20224 min read
Leveraging cloud based tools can bring boundless business benefits.
Not only does it mean you can automate your processes and benefit from external expertise, it also means you can focus on the more important aspects of your business.
Research by Raconteur found that 70% of businesses that use three or four cloud tools have seen significant business growth in the last three years. Of those that use 10 or more cloud based tools, 91% have seen business growth in the last three years.
These benefits don’t stop when it comes to your payments process. In this article, we look at 6 ways that automation through cloud-based payments applications can optimise your process:
Automation for you and your customer
Automating your payments process isn’t just about your backend, it’s also about the front end and the experience for your customers.
If you’re collecting your payments via debit or credit card, that becomes a manual process for your customers where they have to update their payment details every time their card expires, is lost or stolen. For this reason, credit and debit card payments have a failure rate as high as 7.9%. If you’re collecting payments via digital wallets the failure rate is even higher at 11.5%.
A cloud-based, account-to-account solution can automate the process for customers making recurring payments. Once a customer has created their payment mandate there’s nothing more for them to do, even if the payment changes in amount.
In fact, according to research from YouGov, across the UK, France, Germany, New Zealand and Australia, consumers prefer to pay by bank debit in most payment circumstances.
Ultimately, payers want quick, easy and simple payment experiences that they can set and forget. By offering that, you’re only going to increase the number of customers and cash flow coming into your business.
It’s almost impossible to eradicate all payment failures. Being smart about how you reconcile those failed payments can do a lot to minimise their impact on the wider business however.
If you’re reconciling your payments manually, you’re spending time and money chasing payers, taking focus away from scaling your business.
According to research from Accuity, across Europe and North America, the cost of labour for recovering failed payments makes up 24-27% of the overall cost of collecting payments. Customer attrition or churn represents around 10% and payment fees make up the majority at around 60%. Even if you do manage to recover the payment, the cost of doing so is still considerable and shouldn’t be ignored.
What can be done about this?
Intelligent payment collection services that use machine learning, like Success+ from GoCardless, can look at recurring payment data, to select the day when there’s the highest chance of success of recollecting a payment.
Customers using the service have reduced failure rates to as low as 0.5% on the second try. 59% of customers using the service have reduced admin costs, which has led to cost per transaction dropping by 56%. 89% have saved time spent on payments.
Every payment that doesn’t require chasing down is time given back to bringing in new investment and scaling your business.
Harness the power of open banking
Open banking presents a whole host of opportunities and benefits for businesses trying to scale. It gives customers and businesses better access to financial data and ultimately facilitates faster and more intelligent payments.
Some of the key benefits include:
A frictionless payment process for a better customer experience
Using open-banking powered account-to-account payments could make the payment process smoother and frictionless for consumers compared to current payment methods, like credit and debit cards.
Getting paid faster through faster authentication and intelligent recollection of payments
A better flow of data through open banking means that any checks or authentication required becomes almost instantaneous.
Payment cost savings due to less failures and fees
Businesses stand to save considerably with open banking as these new payment methods have the potential to rival card payments. Account-to-account payments are faster, more flexible and avoid the expensive transaction fees associated with cards with less potential for failure.
Fraud prevention and security
McKinsey & company state that open banking can drive enhancements in security in multiple ways, including; know-your-customer capabilities, identity validation and fraud detection. Using AISPs, you can identify bad actors before they do damage to your business, saving you time and money.
Keeping up with the competition
Creating a better payment experience for customers, and improving operational efficiency to reduce the overall cost of managing payments, gives businesses a competitive advantage.
Read our guide to open banking to find out more about some of the business efficiencies it can provide.
Increase visibility and predictability
Earlier we discussed the issue of payment failures. A lack of visibility over payments has the potential to worsen the impact of failures and result in churn and bad debt.
With many traditional direct debit bureaus, visibility is low and infrequent, with payment failures only reported on a weekly or monthly basis.
By automating your payments process in the cloud you can automate notifications and understand instantly when a payment has been accepted, failed or been held up.
GoCardless provides a range of automatic notifications, to both your business and your customers, on all aspects of the recurring payment collection process, including mandate setup, payment failures, payment retries and more. This ensures that you know right away, why and when a payment has failed and can act on it accordingly. Without this level of visibility, the recollection process can lack focus and ultimately be unsuccessful.
The full list of GoCardless notifications can be found here.
“With previous providers, I only found out that a member had left me once I did a monthly audit, 2 months after the fact. I was the last person to know if a payment date had changed or if a member had left me!” - Lee Drayton, Managing Director, LD Fitness
Churn is a concern for any business with a recurring payments model. Every subscriber that churns is a source of revenue lost and the potential for bad debt. 11-15 of churn is completely involuntary however, and typically due to card expiration or loss. This means you could be losing customers who still want to use your services.
Churn can be, in the most part, avoided by using an intelligent, cloud-based payment method such as account-to-account. The pull-based payment method means you can directly pull the payment from the customers bank account and not have to rely on temperamental cards and on customers to update their details.
Merchants working with GoCardless have a payment failure rate as low as 2.5% at the first attempt. When the payment is retried through the Success+ feature, which uses machine learning to intelligently retry failed payments, that failure rate falls to as low as 0.5%.
When you’re trying to scale, you’ll have ambitious goals and need to channel all your resources into making them happen. Optimising your payments strategy is a key piece of the puzzle to help you get there. Not only will it save you time and money, it can help you to bring new products to market quicker and capitalise on new consumer demands.
Take a look at 5 emerging businesses who have invested in cloud-based payments to help grow their business and product offering.