The hidden dangers of a DIY approach to Direct Debit

If it isn’t broke, don’t fix it! Your DIY Direct Debit solution works as far as you’re concerned, and your membership team seems content to keep using it. So why bother switching to a managed solution if there’s nothing wrong with the existing version?

But even if your DIY approach does the job (and it's a big if), it doesn’t mean it will still do so in 5-10 years time. With the digital transformation well underway, or at least on the near horizon for all kinds of membership organisations, you need to carefully consider whether sticking with the status quo is a viable medium to long-term solution.

This guide will look at some of the ways your membership will evolve over the next few years, and how your Direct Debit solution will handle (or not handle, as the case may be) these changes.

1. Scalability

Alongside retaining existing members, the lifeblood of any membership organisation is to attract new members. If you can achieve success with both of these, then your member organisation will continue to grow. In short, it’s the most obvious sign your organisation is in a healthy position.

Where’s the problem?

As your membership numbers grow, each new member needs onboarding and part of that is the setup of subscription payments. DIY solutions tend to be admin heavy as the processes are siloed, requiring large amounts of human intervention. If each new member needs one hour of admin to arrange payments, your admin capabilities will soon hit capacity, putting the brakes on any further growth.

Ask your membership team:

“How long does a Direct Debit mandate typically take from sending to the member, to having it setup in your system?”

How can GoCardless help?

GoCardless offers an online alternative to the admin-heavy paper mandate process to create a Direct Debit agreement. Rather than waiting days or weeks, you will be able to send mandates out instantly and receive them back as soon as the member completes it. In addition, much of the process is automated, reducing the need for human intervention dramatically.

2. Changing member preferences

In a recent GoCardless survey of 500 organisation members, we discovered that 75% of respondents agreed that they would pay membership fees on a monthly basis if offered. This shows the clear demand for monthly billing as a payment option. Many membership organisations have begun a digital transformation to meet the changing requirements of their ever-evolving membership demographics, but this transformation has to happen with payments and billing as well.

Where’s the problem?

Knowing there’s a need for change and having the ability to change are two very different things. Can your DIY solution actually handle a change of this kind? If the reluctance to change is purely a technical problem, then your DIY solution does not meet the needs of the members in your organisation.

Ask your membership team:

“If a member wanted to sign up, but demanded to pay on a monthly basis, could our organisation accommodate them? If not, why not?”

How can GoCardless help?

In addition to being able to offer multiple flexible billing options through Direct Debit, there are further potential benefits in carrying out this type of change. For example, the College of Paramedics used the change to monthly billing to extend its member offering and increase the monthly fee.

“When we first switched to GoCardless we had over 5,000 members paying by Direct Debit,” says Head of Administrative Services Penny Jones. “We now have almost 13,000 members paying their monthly membership fees via Direct Debit with GoCardless.”

3. Security and compliance

The dreaded buzzword at present is GDPR. We all know it’s vital to member security, and you’ve probably gone through a lot of pain to ensure your organisation meets its requirements as either a data controller or data processor. In addition to GDPR, payments have a multitude of other security requirements, each adding a layer of complexity.

Where’s the problem?

The potential problems are clearly numerous and have far-reaching consequences for your membership organisation. But in terms of payments, it’s the idea that your organisation is liable for any data breaches or security failings that's really scary. Even with the best of intentions, does your organisation have the knowledge and time to look after every element of security and compliance? Our recent survey revealed that 88% of respondents said knowing their details are being held securely is important to their membership.

The Chartered Institute of Environmental Health faced this very dilemma with its previous Direct Debit solution. As Head of IT Justin Turner explains: “We weren’t comfortable relying on the application security to protect this sensitive data, but our old solution meant we had to handle it this way to keep everything running.” CIEH made the switch to GoCardless, recognising the benefit of having member data stored in a secure and compliant way.

Ask your membership team:

“Where are all the places sensitive member data is stored?”

How can GoCardless help?

GoCardless takes security very seriously and is authorised by the Financial Conduct Authority to provide payment services. Data is treated in accordance with European Data Protection Laws and client-server communication is encrypted to standards above even what is required in banking systems.

With GDPR a concern for many businesses, we’ve spoken at length about our role as a Data Controller, giving us an even greater responsibility for data protection.

4. Late or missed payments

Steady growth and high member retention create a predictable stream of revenue that allows you to focus your attention on member experience and engagement. However, if that promised revenue never reaches you, for whatever reason, your membership organisation first needs to address that before anything else.

Where’s the problem?

There are two main concerns with a DIY payments solution: the failure rate, and the follow-up process. A DIY system often hinders the discovery process, as payment visibility tends to be poor. And even if you can identify why the payment failed - the next step is most likely an awkward conversation with a member.

Ask your membership team:

“What percentage of payments fail every month? And how many of those ever get rectified?

How can GoCardless help?

In addition to very low failure rates of as little as 0.5%, GoCardless offers extensive visibility across the status of Direct Debit payments. You can easily identify the reason for failure, as given by the customer’s bank. From there, you can retry a failed payment up to three times, increasing the likelihood of eventually receiving the payment.

5. Additional revenue streams

Our recent survey also discovered that 74% of organisation members said it was important to be able to easily add extra services to their membership. Following this strategy gives you both an opportunity to further engage your members and add further revenue streams into the business. In short, it’s a win-win.

Where’s the problem?

The problem simply boils down to whether your organisation has the ability to take extra ad hoc payments in an efficient way. Paying for these events by credit or debit card offers a partial solution but with failure rates as high as 10%, it also creates a higher risk of frustrating members if they can’t take advantage of what’s on offer.

Ask your membership team:

“If we added a new paid-for event into our membership offering, how would we take payment for it?”

How can GoCardless help?

Using Direct Debit as a primary payment method offers a great deal of flexibility when it comes to subscription payments, and GoCardless allows you to make the most of this through its online dashboard or through one of its many partner integrations (more on that in part 6). One upside of this flexibility is the ability to easily add in one-off ad hoc payments, and your members are automatically notified of the change.

6. CRM integrations

In an age where member engagement is key to the success of any membership organisation, the data you have available is the best way to inform the decisions on exactly how you try to engage them. A CRM is necessary for this as it becomes the hub of your membership engagement platform, connecting up each separate system and automating a large part of the process.

Where's the problem?

While CRMs can handle integrations for various membership solutions, these are often created in partnership with the solution in question. A DIY Direct Debit solution will not be able to integrate in this way, and even with a CRM in place, it will remain siloed from Direct Debit.

The Chartered Institute of Library and Information Professionals Head of Memberships, Sharon Bacon, explains the downsides of a CRM that doesn’t integrate well with payments: “Our previous CRM and Direct Debit systems were very fragmented. It caused a lot of errors, like claiming the wrong amount and failing to cancel payments. This definitely impacted member experience.”

Ask your membership team:

“In how many different systems is our member data stored? And how de we move the data between each system?”

How can GoCardless help?

GoCardless integrates with a large number of CRMs, including many of those made specifically for membership organisations.

CILIP head of IT Chris Bacon explains what life is like with a CRM and Direct Debit provider that does integrate well: “Using GoCardless in an integrated way with our CRM and accounting systems provides a really powerful platform.”

To find out more about GoCardless and how we can help your organisation, fill in this form to speak to one of our Direct Debit experts.