Recurring Payment Churn Rates: Credit Card vs Direct Debit

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Churn refers to the number of payments lost each month through payments failing. For recurring payments, a churn rate of 5% means annoying, or even losing, 50 out of 1000 customers every month.

Failure rates
Support

Credit cards
Do it yourself Setting everything up yourself from scratch +	5-10%	Do it yourself Direct Access: If you manage Direct Debit payments in-house you are likely to have issues with unnecessarily high failure rates. This is because it can take a while to get processes for generating payment submissions and handling failures set up for all potential outcomes. Direct Debit bureau: With a bureau, failure rates are usually around 1%. What's more, some bureaus like FastPay and Smartdebit may offer some help dealing with payment failures. 1-3%	Do it yourself Managing everything yourself through a bank or a bureau +
Payments service provider A full service payment provider +	5-10%	2-3%	Management software A full featured software suite +
Payment processor A combined merchant account and payment gateway +	5-10%	0.5%	The UK's leading Direct Debit provider +

Payment failures mean a poor experience for all affected users and increase the likelihood of customers churning.

You've worked hard to get customers and you don't want to lose them due to expired cards. Look for a provider who can help you keep payment failures and churn to a minimum.

Direct Debit is the clear winner with failure rates of
1-3% vs 5-10% for cards; with GoCardless the industry leader on 0.5%

Credit cards
Do it yourself Setting everything up yourself from scratch +	Do it yourself If you set everything up yourself, you will need to keep on top of payment failures and chargebacks yourself. However, some payment gateways do offer services to help reduce or manage churn: Authorize.net: Authorize.net lets you choose whether to receive e-mail notifications of failed payments and upcoming credit card and/or subscription expirations. None Authorize.net offer some support	Do it yourself If you set everything up yourself, you will also need to keep on top of payment failures and chargebacks. However, Direct Debit bureaus like FastPay and Smartdebit help you manage payment failures by: Forwarding any Bacs failure reports to you (these can be difficult to interpret and action). FastPay send these same day. Be aware that they also charge you 75p for any payment failures Retrying payments (at an extra cost) None Bureaus offer some support	Do it yourself Managing everything yourself through a bank or a bureau +
Payments service provider A full service payment provider +	Payment Service Providers Most PSPs offer broadly similar services for payment failures: PayPal will: Send automated emails asking to retry payments Cancel a subscription following repeated failures AdYen will: Send automated email notifications of failures Limited	Direct Debit Management Software Management software providers will usually notify you of any payment failures and ask to retry payments. Bottomline: Bottomline provides you with any Bacs failure reports (although these can be difficult to interpret and action). Fundtech: Fundtech offer modules with varying levels of support for payment failures. Their Direct Debit Manager module lets you generate reports on successful collections, failed collections and exception conditions. Varies Depending on provider	Management software A full featured software suite +
Payment processor A combined merchant account and payment gateway +	Payment Processors Payment processors usually offer some support for payment failures: Stripe automatically: Notifies you about any failures Retries any failed payments Updates customer card details when they're about to expire Braintree automatically: Notifies you about any failures Cancels a subscription following repeated failures Updates customer card details when they're about to expire Varies Depending on provider	GoCardless GoCardless will: Provide instant email notifications of any failures Automatically retry any failed payments if appropriate Provide support to understand the reason and retake the payment if appropriate Full	The UK's leading Direct Debit provider +

Dealing with churn requires you to spend time chasing customers, updating details and resubmitting failed payments.

Stripe, Braintree and GoCardless offer automatic notifications of failures so you'll always know exactly what has and hasn't been paid.

The Account Updater offered by Stripe and Braintree mitigates the high failure rates of card expiry by updating card details with no effort - or cost - for you or your customer.

Experience

Customer support varies hugely between providers particularly in terms of contact options, responsiveness and how they handle chargebacks and dispute resolution.

GoCardless makes it quick and easy to use Direct Debit

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