Payment Failures Are Bad For Business
A smooth checkout is essential for a great online shopping experience. And to keep your customers coming back for more. But failed payments can seriously impact this experience, causing involuntary churn and denting your brand reputation. Because, to be honest, failed payments are annoying – for the customer as well as for you, the merchant.
Payment failures can happen for various reasons from both the merchant’s side and the customer’s side. Some common ones are:
- Insufficient funds in the customers’ account
- Entering incorrect account details
- Expired card or bank account
- Weak or faulty internet connection
- Bank reversal owing to failed authorization
Payment failures can have a damaging impact on your business in the long term. Data shows that online merchants lose 62% of customers who experience a failed transaction. Customers get frustrated when payments fail for no fault of theirs’s or when they are unaware that a payment has failed. They expect the merchant to reduce failed payments before they occur.
Payment failures lead to involuntary churn that is damaging for businesses, especially ones that are subscription-based. When involuntary churn piles up, your unit economics takes a hit, leading to higher customer acquisition costs. It also impacts customer trust in your brand and long-term loyalty.
This highlights just how important it is for e-commerce businesses, both big and small, to have an efficient payment system in place to minimize payment failures. Businesses that can reduce the number of failed payments will see increased sales and higher customer satisfaction.
6 Tips on How to Reduce Payment Failures
Achieving zero payment failure might not be realistic. But there is still a lot you can do to reduce failures and improve your engagement. Here are five steps you can take to reduce and mitigate payment failures:
1. Pre-empt Churn Before It Happens
One of the best ways to reduce payment failures is to pre-empt churn before it happens. Track all due payments and ensure all customer card details are up to date so that payments don’t fail at the time of processing. Some payment service providers keep in touch with card issuer banks to update users’ card details automatically before they expire. But not all do. Keeping an eye on your customers’ credit cards before payment is due can help you anticipate any credit card-related churn before it happens.
2. Keep in touch with customers
To pre-empt churn, you have to stay in close touch with your customers on their billing and card details. If your business has an app, you can reach out to them through in-app notifications and pre-dunning emails. When your customers receive an in-app message or notification about updating their card details, they are more likely to act on it immediately. Just ensure you give them the option to update their details in-app rather than redirecting them to external pages.
If your business does not have an app, you can send notifications straight to customers’ account dashboards to update their payment details. You can also send pre-dunning emails to remind customers of due payments and any required updates.
3. Automate Your Dunning Process
Using automation in your dunning process can help you to reduce failed payments. You can use dunning software to set up automatic retries whenever a payment fails. This way, when a payment fails the first time, the software automatically triggers retries based on different settings that you can choose yourself.
You can also set up your system to send out automatic payment reminders to customers to recover failed payments. Automating your dunning process helps you to reach out to your customers intuitively and sensitively. This ensures that your customers do not find the process invasive or unpleasant, thus significantly improving their experience.
4. Set up dedicated team/ staff to monitor failed payments
You could dismiss a failed payment. But the compound losses that build up month-on-month from failed payments could put a dent in your bottom line. Hence, having dedicated support staff to monitor failed payments is important. Your payment service provider can help you to monitor and mitigate failed payments through qualified support assistance. If you are a smaller company, you can assign a dedicated staff member responsible for recovering failed payments.
5. Use highly personalized communication
Customers value a personal touch. Using personalization can help you to greatly improve your relationship with your customers. Build a human connect and be sensitive in your communication. Connect with your customers on a personal level through telephone, SMS, and email to engage with them. Speak with your payment service provider on how you can use end-user support to reduce payment failures.
6. Work with a specialized payment service provider
A specialized PSP can help you to reduce your payment failures and significantly improve your customer experience. They can help you automate your payments, process transactions securely, and provide you with rich insights based on analytics.
When you work with an international payment service provider like Novalnet, you can manage your payments from one user-friendly payment dashboard. Our highly intuitive UI and analytics ensure a smooth payment process for your customers. You can also access troubleshooting and dedicated end-user support in our customer portal.
Offering the best payment experience to your customers is key to keeping them happy, engaged, and loyal. Reducing payment failures can significantly improve your relationship with your customers and cement your brand value in the long term. Ensure you take positive steps today to reduce and mitigate payment failures and ensure your customers have a smooth shopping experience.
Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.