Direct Debit is the easiest and most reliable way to collect recurring payments.
Automated subscription renewals can fail for many reasons - over-enthusiastic fraud filters by the banks, spending limits or other temporary blocks, credit cards reaching their expiry dates and more. For many businesses, late payments or payment failures are a regular occurrence. But they don't have to be.
Optimising your business' payment methods with the right solutions can reduce friction and increase the rate of successful renewals ensuring you get paid faster and for longer.
How Direct Debit gets you paid on time Direct Debit
is a payment method
that allows you to collect funds owed by your customers on-demand, directly from their bank account to yours, without them needing to initiate the payment. This type of payment method is known as 'pull-based', as you are able to initiate the transfer of the funds from their account (as opposed to a 'push-based' payment method).
The distinction between push payment methods and pull payment methods is valuable to know. Push payment methods rely on the customer taking physical action to pay you, and as such are always at higher risk of not being paid on time.
Push payment methods include cash, cheque, one-time card, mobile, or digital wallet payments, and bank transfers.
Pull payment methods, like Direct Debit, enable you to take the payment you're owed from your customer without manually seeking their approval and action every time, ensuring swift, on-time payment.
How Direct Debit minimises your payment failures
Every month, subscription businesses needlessly lose revenue to payment failures that result in customer churn. To put it in perspective, for a business doing 100 transactions a month, with an average transaction value of £10, losing even just a few percent of customers due to payment failure equates to a loss of thousands in just a few short years.
Subscription metrics and growth software provider ProfitWell have found that up to 40% of churn in subscriptions is involuntary - that is, it's only happening because an administrative payment issue is not addressed, causing a subscription to elapse. It doesn't mean the customer is unhappy with your product or service.
So why do these failures due to "administrative payment issues" occur? The number one reason is due to card network infrastructure.
With their global reach and ubiquity, it's easy to see why credit and debit cards have become the de facto default payment method for subscription businesses. But cards weren't designed for recurring payments. They operate on a complex infrastructure with multiple entities, with high opportunity for failure. Plus, over time, card details become outdated as cards expire (typically every three years) or are cancelled after being lost or stolen. They can also fail when a customer hits their spending limit, among other reasons.
Addressing the root cause of involuntary churn is to reduce your reliance on cards. Direct Debit, a bank-to-bank payment method that doesn't rely on the complex card networks to operate, and is unaffected by "loss" or "theft" in the way that cards are, can reduce the failure rate when it comes to collecting subscription payments significantly.
Not only is Direct Debit more reliable, it's also often cheaper than many card based payment solutions. With GoCardless, rates start at just 1% of the transaction amount + 20p, offering a considerable saving over many digital wallets and credit card gateway processors.
How to get started with Direct Debit the easy way - with GoCardless GoCardless
enables your business to automatically collect payments from your customers via Direct Debit without any fuss and comes pre-integrated with WHMCS.
To get started, simply login to your WHMCS admin area, navigate to Setup > Payment Gateways, find GoCardless, and click the Activate button. You'll be guided through the process of configuring GoCardless for use with WHMCS and will be ready to start accepting payments by Direct Debit in minutes.
To pay by Direct Debit, your customers will need to complete a one-time, online Direct Debit mandate form. Customers can do this easily from the WHMCS client area. Once they've done this, all future payments can be collected from them automatically and will be handled by WHMCS for you.
GoCardless is trusted by over 50,000 businesses to power their payments. Automate your billing and reduce your payment failures by getting started with GoCardless today.
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