A bent credit card, symbolising the benefits of WPdirectdebit over payments by card.

Cards or Direct Debit? There's only one winner long term.

Another card bites the dust - don't let your recurring payment die along with it.

Never mind Christmas – it could be time to start thinking about New Year’s resolutions – especially if you market subscriptions. That’s when many folk decide to shed those pounds and sign up to the gym, or subscribe to a course to learn a skill they realise they desperately need.

The New Year is a popular time to take out a new subscription and, with online subscriptions, it’s easy to set one up. But if it’s your job to maximise revenue through subscriptions, then you should be thinking not just of ways to encourage sign ups – you should also be looking into the most effective payment method. Perhaps you offer a continuous payment authority (CPA) as one way. That’s when the customer grants a company permission to take one or more payments from their debit card or credit card. CPAs are not the same as a direct debit or standing order because your contract is directly with the merchant, as opposed to instructing your bank. For the merchant, offering CPAs may not be the best idea.

The cost of card churn

This is because, once you’ve gone to the trouble and expense of acquiring a new customer, you want to ensure their regular payments continue long, long into the future. But put yourself into the shoes of the customer. Let’s say that at the time you set up your recurring payment, you have every intention of keeping your payment going indefinitely. Maybe it’s a donation to a good cause, dear to your heart. But a few months later, your card is replaced. Why? Perhaps it expired, or you lost it, or you were tempted to swap to a different credit card with a sparkling introductory offer, so the card is no longer active.

As a consequence of this ‘card churn’, the recurring payment terminates. With a continuous payment authority – the card-based equivalent of a direct debit subcription – the details supplied to the bank must match the card details, not the bank account details. If they do not, payment is likely to be declined. It’s then up to the merchant to get in touch with the customer and request a new continuous payment authority.

What happens then? Enthusiasm wanes for something that brings no regular reward. In tough financial times, it’s so tempting to let that subscription or donation lapse. Especially if, some months down the road, your new year’s resolution has already gone by the wayside.

The solution is not to offer CPAs for subscriptions or donations in the first place, when there is no need to.  A regular direct debit payment can be just as easy to set up online (see below for more on this), is likely to have lower transaction fees, and as bank account details very rarely change, churn is also very low.

But if you feel you must offer cards, then make it the less desirable alternative. Ensure it’s the second choice. This can be achieved by giving some thought to the design of your sign-up form.

If you are interested in accepting online Direct Debit subscriptions, and your website is built with WordPress, WPdirectdebit Ltd has the solution. WPdirectdebit connects your site to your GoCardless account. It will work alongside other payment methods, or on its own. It can be used for one-off payments as well. And GoCardless handles the mundane processes of setting up and taking the payments – and the best part, sending you the money!