How the Wrong Payment Method Could Affect Your Business

Recent data shows that businesses with the wrong payment method are seeing almost 4x more payment failures.

Wrong Payment Method

Failed payments hurt your business in seriously damaging ways. High failure rates mean more involuntary churn, bad debt, and a poor customer experience. While every business will see some payments fail, it’s previously been unclear what the true scale of the problem is. To find out, GoCardless analysed the payment data of 55,000 customers, along with extensive surveys of external businesses using different payment methods.

Your payment method could result in 400% more payment failures

Comparing GoCardless data to a survey of external businesses, digital wallets have an average failure rate of 11.5%. Even the ubiquitous credit card has an average failure rate of 7.9%. By contrast, GoCardless payments (collected using ACH debit) have a failure rate of just 2.9%.

Big businesses are losing over $1million every year (even with low failure rates)

Enterprise businesses using GoCardless have average failure rates of just 2.1%, but high payment volumes mean they still stand to lose nearly $1.2million in yearly uncollected revenue.

Apply those same revenue numbers to businesses using digital wallets for collection and the average failure rate of 11.5% would cost an enterprise business $6.3 million annually. If an enterprise business primarily collects with credit cards and experiences the average failure rate of 7.9%, it would lose approximately $4.3 million. Furthermore, that does not even take into account the cost of attempted recovery.

A single payment retry can recover 32% of payments that fail

There are many ways to recover a failed payment. Some are time-intensive (e.g. reminding customers by phone), and others are bad for customer relationships (e.g. debt collectors). But a single payment retry on each failed payment will see your business recover, on average, 32% of those that originally fail. Apply that to the $6.3million figure mentioned above. That single retry would result in $2.1million recovered.

Payment failure rates went down during the height of COVID-19

The original GoCardless payment success index analysed payments from January to March 2020. But in response to the growing COVID-19 outbreak, many stay-at-home orders came into effect in the US from the 22nd March onwards. In the UK, a countrywide lockdown began on the 23rd March. Despite the global turmoil, global failure rates of GoCardless merchants fell to just 2.3% between April and June 2020.