Maximising payment success
Along with speed and ease, its low cost, improved sales conversions and better customer relationships, a key benefit of using ACH payments with GoCardless is that it helps businesses maximise payment success.
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 cost 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 them. We also discuss the benefits of ACH payments for customers and how to encourage them to make the switch.
Common reasons a customer payment fails
1. 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 - then they probably want to set up the payment once, and then forget about it. But this is impossible if they’re paying by credit or debit card, because cards expire. Typically, new credit and debit cards are reissued every two to three years. And in the meantime, cards can get lost, damaged or stolen.
It’s unrealistic to rely on your customers to provide their new card details every time they are issued with one. As a consequence, payments made by debit and credit card have some of the highest failure rates of any payment method. On average card payments fail 5-15% of the time.
How GoCardless fixes the pain
GoCardless uses the Direct Debit system to collect payments for you. That means we pull money directly out of 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 recurring payment changes in amount. If your customer moves to a new bank, their Direct Debits will usually automatically transfer with them.
2. My customer has insufficient funds
One of the most common reasons why 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 fixes the pain
The first way to fix a failed payment is to know it’s happened. If your customer’s payment has failed to go through, 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 upto three times, helping you to significantly improve your payment success rate.
GoCardless will also send you an automatic notification 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. My PSP’s platform is not robust enough
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 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 50,000 businesses around the world. Our international payments network connects eight Direct Debit schemes, covering 30 countries; Bacs (UK), ACH (USA), SEPA (Eurozone), BECS (Australia), Autogiro (Sweden), Betalingsservice (Denmark), PaymentsNZ (New Zealand), and PAD (Canada). And we work with more than 200 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.
Predict and manage failed payments with Success+
The above points address why payments fail and what GoCardless can do to minimize the percentage of failures. But some payments will still fail. For GoCardless, approximately 2.5% of payments fail at 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 by automatically scheduling retries on the optimal day for each customer.
Success+ helps businesses to efficiently recover, on average, 76% of payments that initially fail*.
Find out more about Success+ here, 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.
Made for payment success
Success+ uses recurring payment intelligence to predict and manage payment failures. Recover, on average, 76% of failed payments.
Additional benefits of ACH payments for businesses
1. Speed and ease
Electronic payments, like an ACH transfer, are faster and easier to handle compared to the traditional method of paying by check. Unlike checks, ACH transfers:
Are not held up by the time it takes for a check to be mailed
Cannot be lost
Do not have to be manually entered
2. Low cost
Many businesses accept payment by credit card, but the processing fees tend to be high - often in the realm of 2-4% per transaction (and that doesn’t include setup and operational fees).
It costs a lot less to take payment by ACH transfer, and those savings add up significantly when you’re taking recurring payments from customers.
3. Improved sales conversion / customer relationships
ACH payments make the payment process easier for potential customers compared to writing a check, increasing chances of converting them to a sale.
And, in the case of recurring purchases, payments via ACH can be automatic - meaning the customer doesn’t need to worry about receiving and paying a bill, removing that element of friction in their relationship with your business.
4. Pay remotely
Although credit cards also offer customers the ability to pay online or over the phone, ACH provides a helpful alternative for those customers who prefer not to give out their credit card information, or do not have one.
Benefits of ACH payments for Customers
In addition to being beneficial for businesses, ACH payments also offer benefits for your customers.
1. They’re simple
Paying via ACH removes any burden on the customer to order and write checks, mail them out, and cross their fingers and wait for delivery. And, by paying the funds directly from their bank account, they don’t risk racking up stressful credit card debt.
2. They only need to be set up once
Complete an online form and, unlike with a bank transfer, cash, cheque or card payment, you won’t have to remember to pay next time. Which means no accidental disruptions to your service, subscription or membership.
3. They can be automatic
For recurring purchases, paying via ACH allows customers to have the funds debited from their bank account automatically each time the payment is due. This removes any hassle involved in keeping an eye out for bills to arrive, and following the payment instructions contained within.
4. You won't ever need to update payment details
Unless your customer changes bank accounts, they won’t have to worry about updating their payment details either (unlike if a debit card expires, or is lost or stolen).
5. Paying through GoCardless gives customers certainty
Paying through GoCardless gives customers certainty – they know exactly how much they’re paying and when it will come out, which can help with budgeting.
We make it easy to move your customers over to Direct Debit payments. Find out more about how to talk to your customers about switching to ACH Direct Debit and how this process will look for you.
Who is GoCardless?
GoCardless is the simplest way to collect payments via ACH debit. We can help your business automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.