eCommerce Business - Regular card payments VS Direct Debits

[ChrisPackit]

Hi

Im trying to do some research for my partner who is starting a new eCommerice business which will be taking monthly subscriptions, and I am trying to work out the most cost effective and simplest way to do this. She has approached a couple of online payment companies and they charge around 70p to 90p per transaction. She is hopefully aiming for 1000 subscribers to the site so using this on a monthly basis is fairly expensive. I was wondering whether you could take a payment for the first installment and then setup a Direct Debit for future ones, as I don't believe there's a cost associated with this, but happy to be proven wrong. How does it work with the banks etc to set up a DD online?

Any of you had any similar experience with this and any tips?

Thanks

Chris

[CzechItOut]

It has been a while since I was involved in this, but typically you need to be approved by your bank, which requires a minimum turnover, bureau software to make BACS submission (licence costs around £1k per year), BACS file charges (used to be £5 per file) and then about 10p per payment.

In turn, you have to sign up to the Direct Debit guarantee which means you have to refund payments without question.

Therefore, with 1000 payments per month you are probably better off using a payment gateway which provides regular payments. PayPal charge 2.90% + £0.30 for small businesses.

Alternatively, you could ask customers to set up standing orders. These are pushed to your account, rather than pulled by you as per Direct Debits, so there is potentially more management at your end, but this is reflected in the charges.

As I said, it has been a while since I was involved in payments. If your friend has a business bank account (or a bank they are looking at) I'd suggest they are the first port of call.

[DSLiverpool]

Check out recharge - it’s the one we use the most.

[anonymous-user]

Gocardless is another one I’ve heard of

[The Moose]

What is the value of the monthly payment going to be?

[ChrisPackit]

The Moose said:

What is the value of the monthly payment going to be?

Possibly 50 to 60k I would guess.

Thanks

[The Moose]

If your revenue is £50k per month, then £900 is 1.8%. That’s not a lot in the grand scheme of credit card processing and I’d concentrate on building the £600k/pa revenue stream and then refine the £10,800 cost.

[wheelerc]

Gocardless do DD for 1% +20p (max £4). Stripe do recurring card payments for 1.4% + 20p.

Both have details of pricing available on their websites.

I think you'll get more people willing to sign up to recurring card payments but it probably depends on the business. Perhaps offer both?