For websites that sell products or services that are of a subscription nature and involve recurring payments, adding functionality for ACH website payments can be extremely beneficial. The primary reason being that ACH payments are far less expensive in processing costs than credit cards.
Subscription based products and services are generally valued and relied upon by the subscribers and expect delivery. Those subscribers are usually well known to the merchant provider, unlike a one-time visitor to a website selling a one-off product. Moreover, many subscriptions are not a deliverable hard good and delivery of the service can be suspended should a payment fail. These contributing factors add up to making the ACH payment rail a viable option.
When you dive into the numbers for processing costs savings, they can paint of much healthier bottom-line for a merchant with slim margins. We also need to recognize that credit card payments in the subscription sector has a high decline rate that averages around 15%. The fact is that credit cards expire, get compromised and are reissues for reasons such as EMV.
If we take a merchant who is selling a digital service that has 1,500 monthly subscriptions at a per item price of $60 and 100% of the payments are being made via credit cards, the monthly processing costs alone exceed $2,500. If it were possible to convert 100% of those transactions to ACH payments, the cost savings on a monthly basis would be over $2,000. There aren’t many merchants who provide a subscription based product or service that couldn’t use an extra $24,000 added to their annual bottom-line. Of course the percentage of conversions to ACH will vary from merchant to merchant, and this can largely be determined by management’s mindset of the merchant organization.
One course of action to increase conversions is to incentivize subscribers for switching from using a credit card to using their bank checking or savings account. It’s in the area where a good ACH payment facilitator can be valuable. It’s likely that they have experience in dealing with precisely this conversion issue. A good one will have various marketing tools that can be tailored specifically towards a given merchant’s organization to assist in conversion from credit cards to ACH.
ACH Payments has been facilitating merchant organization website payments needs for more than 19 years. Contact us to figure out the best ways to add ACH processing to your subscription based website needs.