Payment processing and payment collection rate are immensely important for subscription/recurring billing merchants. In today’s environment, credit card decline rates are a massive challenge. Fraud, reissued cards, EMV cards, along with lost and stolen cards, all present multiple problems for billers.
Some statistics on credit card decline rates:*
- On average, 15% of recurring credit card payments decline with some industries exceeding 30%
- 30% of all credit cards are reissued each year
- 1.5 billion EMV chip cards were issued in 2015-2016
- The likelihood of obtaining new information from the customer on the first attempt after their card has been declined is just 5%
Offering an ACH processing option is becoming mandatory for recurring payments. Credit card payment processing offers an authorization component that is not present in the ACH batch environment. That means you don’t know with certainty that a payment debit will be successful. When credit card decline rates were much lower this “certainty” of being paid could make the credit card fees (which are much higher than ACH fees) worth paying. This is no longer the case, especially for recurring payments.
There are 2 BIG reasons you must take a closer look at the ACH integration option for recurring billing:
Reason #1 – Decline rates are significantly less on recurring billing accounts. Depending on the industry, they are usually 1-2%, compared to 15% or more — that’s a HUGE difference. In the credit card world you have expiration dates, data breaches, EMV cards etc. A customer’s bank account, on the other hand, is only changing if they switch banks (and think about the last time you did that.)
Reason #2 – Reduced payment fees. On an average credit card sale of $100, you would expect $2.50 or more in processing fees. Compared to a flat 30-cent processing fee with ACH, it doesn’t take many transactions to realize substantial savings. If you process 1,000 payments per month and used the ACH option for half of them, that’s over $12,000 per year in savings. That savings impacts the bottom line to help businesses improve their profit margin.
And there are additional benefits as well
Besides savings, implementing ACH allows you to add a payment option for your customers. People like to have options, and some don’t like using a credit card. ACH also provides you with a back-up payment option in the event that a credit card is declined, and vice versa.
By adding the ACH option you are further improving collection rates and making your users’ lives easier.
You should always be on the lookout for an edge your competition does not offer, and leverage that in your client acquisition strategy.
If you would like more information get our 7 Step BluePrint to Maximizing Approval Rate HERE.