5 ms·

> I knew that people’s credit cards failed and changed, but from my own anecdotal experience I considered this a rare edge case. Wrong. This is one of the bigg

> I knew that people’s credit cards failed and changed, but from my own anecdotal experience I considered this a rare edge case. Wrong. 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.

greysteil 9y ago
If you're in the UK / Europe, using Direct Debit is a big win here - bank accounts don't expire. Something to optimise once you're big, rather than as a startup, though.
- kowdermeister 9y ago
  Bank accounts don't, but debit cards do have an expiry date, same as credit cards.
  - epanchin 9y ago
    Direct debit is a debit direct from your bank account, using your non-expiring account number. Different from a debit card which is a debit from an expiring card.
    - nicky0 9y ago
      I don't think Direct Debit is a thing in the US.
      - joncrocks 9y ago
        The nearest equivalent in the US is ACH - https://en.wikipedia.org/wiki/Automated_Clearing_House https://en.wikipedia.org/wiki/Automated_Clearing_House
      - adventured 9y ago
        I pay several persistent monthly bills using the equivalent of direct debit in the US, which is ACH. My electricity, natural gas, and auto insurance bills all pull out of my checking account via that. It's pretty common.
        nicky0 9y ago
        Cunningham's Law in action. Thank you.
- londons_explore 9y ago
  Gocardless has an API to make direct debit fairly easy for most of europe. 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.
  - aswerty 9y ago
    If you're talking about B2B it's not just subscriptions - any continuous relationship can be a good fit for direct debits. For example many breweries in Ireland will sign up their clients (i.e. pubs and off-licenses) via direct debit. Then if they make a delivery the payment collection will be automated at the end of the month. 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.
- blattimwind 9y ago
  For European customers, you can make quick friends by offering payment via invoice and wire transfer. E v er y company is equipped to handle that efficiently; if you only offer credit cards, someone needs to get up and find "that guy with the company credit card for AWS".
- gingerlime 9y ago
  We had a very different experience. 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.
pjc50 9y ago
Your bank charges you a fee for lost/stolen cards?
- runeb 9y ago
  There is usually a fee to receive a new card
speby 9y ago
> Banks must be rolling in lost/new card fees. 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.
- welanes 9y ago
  I get it, and agree with everything you said. My comment was mostly in jest.
gnicholas 9y ago
Interestingly, banks offer a way for merchants/payment processors to roll subscriptions onto new cards issued to replace a fraud-affected card. Stripe apparently has this feature; my card was recently compromised, and I updated my subscriptions for most services, but not for my own account with my startup (which I used just for testing to make sure payments went through appropriately). 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.
klenwell 9y ago
I'm a monthly subscriber to my local NPR station and I've had this happen twice when my card reached its expiration date. I got mailed a new card but the online subscriptions didn't automatically roll over (or some did? I don't know how this works. In any event, this subscription definitely didn't roll over.) 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.

greysteil 9y ago

If you're in the UK / Europe, using Direct Debit is a big win here - bank accounts don't expire. Something to optimise once you're big, rather than as a startup, though.

kowdermeister 9y ago
Bank accounts don't, but debit cards do have an expiry date, same as credit cards.
- epanchin 9y ago
  Direct debit is a debit direct from your bank account, using your non-expiring account number. Different from a debit card which is a debit from an expiring card.
  - nicky0 9y ago
    I don't think Direct Debit is a thing in the US.
    - joncrocks 9y ago
      The nearest equivalent in the US is ACH - https://en.wikipedia.org/wiki/Automated_Clearing_House https://en.wikipedia.org/wiki/Automated_Clearing_House
    - adventured 9y ago
      I pay several persistent monthly bills using the equivalent of direct debit in the US, which is ACH. My electricity, natural gas, and auto insurance bills all pull out of my checking account via that. It's pretty common.
      - nicky0 9y ago
        Cunningham's Law in action. Thank you.
londons_explore 9y ago
Gocardless has an API to make direct debit fairly easy for most of europe. 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.
- aswerty 9y ago
  If you're talking about B2B it's not just subscriptions - any continuous relationship can be a good fit for direct debits. For example many breweries in Ireland will sign up their clients (i.e. pubs and off-licenses) via direct debit. Then if they make a delivery the payment collection will be automated at the end of the month. 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.
blattimwind 9y ago
For European customers, you can make quick friends by offering payment via invoice and wire transfer. E v er y company is equipped to handle that efficiently; if you only offer credit cards, someone needs to get up and find "that guy with the company credit card for AWS".
gingerlime 9y ago
We had a very different experience. 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.

pjc50 9y ago

Your bank charges you a fee for lost/stolen cards?

runeb 9y ago
There is usually a fee to receive a new card

speby 9y ago

> Banks must be rolling in lost/new card fees. 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.

welanes 9y ago
I get it, and agree with everything you said. My comment was mostly in jest.

gnicholas 9y ago

Interestingly, banks offer a way for merchants/payment processors to roll subscriptions onto new cards issued to replace a fraud-affected card. Stripe apparently has this feature; my card was recently compromised, and I updated my subscriptions for most services, but not for my own account with my startup (which I used just for testing to make sure payments went through appropriately). 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.

klenwell 9y ago

I'm a monthly subscriber to my local NPR station and I've had this happen twice when my card reached its expiration date. I got mailed a new card but the online subscriptions didn't automatically roll over (or some did? I don't know how this works. In any event, this subscription definitely didn't roll over.) 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.