Direct Bank to Bank Transfers (Direct Debit) the Way Forward for Consumers and All Scales on Online Merchants
Have you ever thought about how your customers like to pay? A customer’s payment preference should be an important consideration in any business strategy, but payment systems are often not a priority or come after the fact. Too often companies spend time and resources on everything from product perfection to exceptional customer service, but forget to consider what happens when it’s time for the money to change hands.
Failure to consider customer payment preferences results in friction in the purchase journey. Knowing how your customers prefer to pay can lead to increased conversion, better customer retention, and reduced churn, which ultimately boosts bottom lines and facilitates local and international scalability.
The payment method used is assumed to be the credit card, but research suggests that this assumption is less and less valid. Some companies are taking advantage of this change in attitude to reassess payment options at all levels; and the emergence of open banking will accelerate the adoption of faster, smarter and more secure card alternatives.
Preference is for a more secure and less expensive way of accepting payments
A recent YouGov and GoCardless survey of more than 15,000 consumers in Australia, Canada, Germany, France, the United Kingdom and the United States have found that bank debit – direct bank-to-bank debit – is the first choice for recurring payments (2nd only in the US).
Consumer preference for direct debit stems from better security, as bank accounts are not lost or stolen, free of charge or at low cost with often no extra charge, as well as the convenience of being able to pay them off and forget about them.
For merchants, direct debit is automated, cheaper and not very tactile for paying customers. This is a drawdown payment method, so that payments, once authorized, are taken from the customer’s bank account as they are due.
Direct debit is particularly effective for recurring payments, but it is also flexible enough for variable and one-off payments and has higher payment success rates and lower fees than cards.
Credit cards are still widely used, despite the downsides
Credit cards have been the default payment method for most businesses due to high acceptance rates and global issuer networks. However, they have real shortcomings and are among the least popular payment methods for consumers, even in North America.
For traders, the major problem is the cost. Card networks can charge up to 2% per uncapped domestic transaction. For comparison, an account-to-account platform like GoCardless charges 1% + $ 0.40, capped at $ 4 per bank debit transaction (with scale pricing available for large organizations).
About 10-15% of card payments fail because cards are lost, expire, or are rejected by issuing banks. And every failed payment must be retried and rectified, adding to the administrative burden of trying to recover those failed payments. Small businesses risk losing $ 10,500 each year in uncollected payments, while midsize businesses stand to lose $ 38,000 and that’s without factoring in administration and recovery costs. Payment failures can lead to huge cash flow bottlenecks that hamper growth. Direct debit uses a customer’s bank details which rarely change. GoCardless customers can expect failure rates as low as 3% and even lower when using Smart Retries.
The statistics beg the question: why are companies slow to adopt direct debit?
Perhaps the fears of installation costs are the source of a general reluctance? But Luke Fossett, ANZ director of sales at GoCardless, says transforming your company’s payments strategy to leverage bank debit demand doesn’t mean completely remove the existing technology stack. The technology now exists to integrate a bank account solution into a business ecosystem.
âWe were able to insert our solution on top of an existing architecture in 30 countries around the world. As a result, we’ve helped merchants access the payment methods their customers own and want to use, âhe added.
London-based Fintech works with more than 70,000 companies, processing $ 30 billion in payments globally each year. Business technology easily integrates into the systems that businesses rely on to operate. It offers excellent support to traders who wish to do so and offers a choice of approaches.
âWe have two ways of being able to work with traders. One is through direct API integration. The other is through over 350 partner integrations, âsaid Tanya Martin, Head of Partnerships at GoCardless. âIn the case of these partner integrations, the beauty is that if you as a merchant are already using one of these platforms to manage your billing, then you can access GoCardless through that platform without any additional development work required. [â¦] âWe also have an onboarding team of Customer Success and Solution engineers to help you through this process, as you build or start using GoCardless, to make sure the process runs smoothly. clashes. “
GoCardless Partners include Xero and Zoho for accounting and invoicing; Salesforce and Asperato for CRM; Martialytics and TeamUp for health and fitness; Chargebee, Recurly and Zuora for billing subscriptions; and much more. Plus, it offers any level of DIY for sellers, making adoption as easy as possible for traders.
Is payment automation useful?
Automating recurring payments is convenient and saves time for both the customer and the business. Simpler workflows mean less time spent trying to resolve payment issues and more time doing what you do best.
âBefore GoCardless, our payment process was slow and expensive,â said Sam Caulton, CFO of Re-Leased, a cloud-based management platform for commercial real estate. “Corn now it’s streamlined and profitable – we saved $ 10,000 per month on wire transfer fees. And rather than having to collect recurring payments through manual methods like a wire transfer or check, GoCardless enables Re-Leased to collect automated international payments through direct debit.
The Kiwi company now has more than 1,200 customers in Australia, Canada, the United Kingdom and the United States.
Direct debit also appears to be the key to international growth
Suppliers today trade internationally, but the payments landscape has become so complex to navigate that more often than not, companies end up falling back on the two most expensive forms of payment collection; credit card and bank transfer. It is according to a YouGov survey commissioned by Wise among 4,835 micro and small businesses in 11 countries. It found that 54% of Australian businesses said the cost and complexity of handling international payments undermined their international expansion plans, preventing businesses from entering a new market (25%), increasing their customer base. (26%) and buying new inventory (23%).
To remedy this, GoCardless has partnered with Wise to make payments as efficiently as possible without borders. âWe see a huge appetite for small and medium-sized businesses to grow and expand internationally, but accepting payments for most clients has been one of the obstacles for them to dip their toes in international markets. or to maximize the potential of these global markets, âLuke Fosset mentioned.
Wise and GoCardless have created the world’s first multi-currency bank debit network. Previously, companies could only collect bank debit payments from abroad if they had a local currency bank account or took high credit card charges on the chin.
âWhat we have been able to do with Wise is enable, for example, an Australian company to collect payment from a UK based customer in pounds sterling. Then take the payment out of their UK bank account, convert those funds to Australian dollars using Wise, and return the funds to the merchant, âhe explained.
“With International payments, We solve two problems: first, to enable businesses to offer the payment methods that their customers prefer, regardless of their geography. And second, provide payment methods for setting up overseas entities or bank accounts to accept international currencies and then having to pay for them in their local currency. ”
By leveraging Wise’s multi-currency infrastructure, businesses of any size can collect one-off or recurring direct debits from over 30 countries in eight currencies (GBP, USD, EUR, SEK, DKK, CAD, AUD, and NZD).
But what about taxes and red tape when money crosses borders? âThe beauty of using a service like GoCardless is that we take care of all that kind of regulatory side for you,â said Martin. âYou can rest easy knowing that if you are using GoCardless to collect payment, for example, from the US and satellite in Australia, that compliance and regulatory work has been done for you. And all you have to worry about is your business and collecting your payments.
Future of payments
Soon Australia and New Zealand will see even more GoCardless offers as they venture into open banking and instant debit via PayTo, PayID and the new payment platform.
GoCardless continues its mission of making payments painless for businesses by making account-to-account payments easy – and making the ability as easy as possible. Whether it’s for recurring subscription payments, borderless transactions, one-off payments, or open banking, the easiest way to do it is GoCardless.