Enterprise businesses could lose almost £1m annually in failed payments, with mid-market businesses making losses of £200k+ and small businesses £6k+, according to a new study by GoCardless, the leading fintech for recurring payments.
The GoCardless Payment Success Index launched today, analyses payment data from over 55,000 customers and 900 external businesses as a way to benchmark and compare payment success. It highlights the savings businesses can make by adopting payments intelligence technology like its April-launched Success+ – which can help reduce costly failed payments by two thirds.
GoCardless is used as part of the overall payment mix. It’s important to look at uncollected revenue across all payment methods. For example, a business with £250m in annual revenue, with a 2.1% failure rate across all payment methods, will lose £5.25m each year in uncollected payments.’
With the number of failed payments increasing each year, those businesses that do not retry failed payments or use manual, labour-intensive methods to collect them, will continue to see a negative impact on cash flow. Earlier this year GoCardless also found businesses are spending thousands of pounds to recover failed payments, costing financial services (£140,400), IT (£136,800), business services (£103,200), health and wellbeing (£86,400), and utilities (£85,200) per annum2.
Duncan Barrigan, Chief Product Officer, GoCardless, said: “Payment failures are widely accepted as an inevitability. We don’t believe this should be the case. They can seriously hurt a business – they are costly and can damage reputation and customer relationships. That’s why we developed Success+ to help our customers tackle the issue of failed payments and, as we know from these findings, help reduce the cost burden they cause.”
Charlie Francis, Founder and Director at Equation Training, an online fitness coaching and personal training business using Success+, said: “When I was first starting out, I used to have to manually chase payments that failed. Now that I have Success+ in place, it means a process that used to take 2-3 hours a week now doesn’t take me any time at all. The whole process is more professional and it’s easier for clients as well – we never have any issues getting people set up and we never get complaints about the payment process.”
The report also highlights that failure rates vary significantly across different payment methods. Key stats include:
- A business that primarily collects payments with digital wallets has the highest average failure rate at 12%.
- Payments collected by credit/debit cards have a failure rate of 8.2% – 2.9 times more failures than a GoCardless merchant with greater failure rates being seen within B2C than B2B.
- The average instalments business will also lose more than eight times more revenue in uncollected payments than the average subscription business. However, SaaS companies are not immune.
In addition to the UK, GoCardless is now rolling out Success+ in the Single Euro Payments Area (SEPA). GoCardless customers processing payments in SEPA can request early access to the payments intelligence tool to help them combat the issue of failed payments.