This is one of the biggest surprises when you build SaaS. Delinquent customers average 25% of churn rates.
Banks must be rolling in lost/new card fees.
The first time it happened, I didn't notice for 3 years. Ended up costing the station (um, $5 * 36...) an absolute fortune. Still, I'm sure I'm not the only one whose donations have slipped through the cracks. And to renew, I basically had to sign up again as a new subscriber.
So anyway, I'm not surprised to hear this is a major factor for online payment processing. I'm just surprised it isn't something that can be handled more seamlessly on the consumer side.
And if anyone associated with KCRW is on this board: this is something you should look into fixing. Maybe it's not costing you millions of dollars, but I imagine it would pay back the dev team's cost to fix it relatively quickly.
It's not like that at all. There are tons of exceptions that can occur when charging a card. Yes, cards get lost but more often than that, cards will get canceled or closed for various reason. Also, there many people who actually max their credit limits out regularly and therefore a credit limit is hit and the card can no longer be charged any further. Card accounts can be temporarily locked down due to fraud or irregular account activity. Charges can be blocked due to certain characteristics of the charge or the merchant. And yes, of course people do lose cards and get ones, with new numbers, etc. Cards also regularly expire, too, and the expiration number will change even if the card number does not and they must match in order to charge the card.
My comment was mostly in jest.
Different from a debit card which is a debit from an expiring card.
It's only really good for subscriptions rather than one off payments though. Not knowing if the payment was successful for 5 days is probably the biggest downside. Very low fees and low churn is the upside.
In this situation direct debit gives the vendor the comfort of delivering goods without payment, and it gives the customer the flexibility of ordering without having to go through a purchasing process.
First of all, we had lots of issues with Direct Debit. And it takes a good few days (1-2 weeks) until things authorize. In the meanwhile, you have to provide free service in the hopes that it does.
Second, we had a potential gap with the equivalent of chargebacks. A customer could contact us for a refund, and we issued it. Then their bank (or them?) blocked the payment, which results in another refund + chargeback fees. So we can actually lose money...
Third, and take this with a grain of salt, because it could be specific to our audience, but we actually A/B tested it, and with/without Direct Debit option, our revenue was more or less the same. Some complained, but lots accepted using Paypal / CC.
We're still relatively small, so perhaps your comment applies and we're simply not big enough, but I'm really unsure how much of a big win this is. YMMV.
I was shocked to see a monthly payment hit on my new card, and I called the credit card company to find out how this was possible. They said that big merchants/processors have an agreement with them to automatically get the new numbers for subscribed customers. Also, Stripe recently made it very easy to have the system automatically email customers whose cards were declined. I turned this on for our account and have seen much better retention. I am not a huge fan of Stripe in general—mainly due to issues with their process for handling challenged transactions—but they do make it easier to retain customers.