Currently, we use Stripe to accept credit/debit card payments. Some of our customers have asked about an option to pay via “bank money transfer”. Is it practical to do “bank money transfers” for monthly or annual recurring payments?
We use it as a benefit for our top tier plans, and only allow it for yearly payments. If you are signing contracts with your customers and they are bringing in significant money, then it’s worth doing. Keep in mind you’ll have to have a system (humans, automation, or a combination) to ensure invoices are issued and payments are made.
I agree with @aeden’s answer.
Paying by invoice complicates your systems. Paying by invoice and bank transfer is something you should consider restricting to yearly payment plans only, and even then, it should only be available on your premium plan.
I know this is mad but I wrote a small script for this for when users want to pay via bank transfer.
- Send invoice with bank details and unique invoice number (manual)
- Add invoice number to my script
- Script polls bank feed waiting for bank transfer to arrive
- Marks Invoice in stripe as paid
I considered this carefully, weighing pros and cons, and decided that bank transfers are acceptable for annual billing.
- you get the full amount, no fees
- you have a source of revenue that does not depend on payment processors (which can decide to do a “risk review” any time and freeze your account for weeks)
- you accept money from a customer that could otherwise walk away
- manual work (but not that much)
I’d say for plans where annual charge is more than $250, it’s worth doing the additional work.
I would not agree to bank transfers for monthly billing.
Small nitpick. There could be a fee, at least with international bank transfers. Anyway, if fee exists, sender chooses whether they’ll pay it or leave that to the recipient. And in my experience sometimes they pay it, sometimes they don’t. You can demand that they cover that fee as well, but it could be a huge hassle, on top of already huge hassle which are invoices, reminders, and bank transfers in the first place. I never made a fuss when that fee came out of our pocket, it’s usually not a big amount.
I agree with other points. Also, one warning about taxes. It’s very country dependent, but in some cases you owe a VAT/sales tax to government as soon as you issue an invoice, regardless of whether payment is received! Even if payment never comes. You should check with an accountant whether that’s the case. If so, workaround is to send proforma invoice (or official quote) first, and final invoice once payment is received.
@grujicd: both are good points. I didn’t get the missing bank fees problem, mostly because my customers were doing transfers within the EU SEPA system. I considered the risk, and also figured that it doesn’t really matter if I get slightly less. It’s not worth the effort to rectify this.
As for VAT, that is definitely the case, so I do not issue an invoice unless I am fairly certain that the customer really wants to buy (e.g. it certainly isn’t automated). But I’d rather take the risk than do the pro-forma invoice dance.
As a side note, I am looking at auto-generating quotes right now, as there are plenty of companies with bizarre purchasing procedures out of the 1970s, where they need an “official quote” to move forward. If I can automate this, I’d rather not leave money on the table.
I move all money out of PayPal once a week to avoid this risk. PayPal is not my bank, they’re just my payment processor. Don’t know why people leave all their money in it.
Good point. Note to self, transfer money out of PayPal.
PayPal doesn’t pay interest on your balance either, so it makes better financial sense to transfer it out for that reason, too.
I use Braintree for credit card processing (they are owned by PayPal, BTW) and while they do not hold any balance, they can freeze my ongoing revenue. I already had this happen once and I was told that this is “the procedure”: once your exceed certain revenue thresholds (which they won’t tell you about), you get flagged for risk review, and they stop sending you money that gets collected from customers. The review takes anywhere from a single week to months, and during that time your ongoing revenue is 0: they hold your money.
I found this unfair and I’m really disappointed with the procedure, but that’s the way they operate. Stripe is not yet available in my country, from what I’ve heard from them they at least do not freeze your account unless there is suspicious activity involved. At least that’s what I’m told.
Because of this, I do want to have a revenue stream that is independent of payment processor companies. In general, at this point I consider them to be bullies that strong-hand me and my business.
International transfers often cost significant fees. I found TransferWise to be the most cost-effective way, cheaper than most banks. From Perth, Western Australia, I’ve had to transfer mostly to the UK, USA and Czech Republic.
Remember it’s not just about the fees but also the exchange rates being offered.
Although I’m based in Australia and the PayPal account is in USD and the USD has strengthened against the AUD…so did OK on the currency movement