Subscriptions and Payment Declines
Consumers love their subscriptions. And the convenience and control they offer. But a seamless payment process lies at the heart of a great subscription experience. Payment declines in subscriptions cost you valuable revenue, create an unpleasant experience for your customers, and affect their confidence in your brand.
Recent research from PYMNTS drives this point home succinctly. In the last 18 months, 27% of consumers in the US who subscribed to multiple services experienced declined payment for at least one subscription. 27% of those customers either terminated their subscriptions or switched services to a competitor brand.
Payment declines can seriously hurt subscription and e-commerce businesses processing recurring payments. Data shows merchants could lose up to 5% of all potential sales from card payment declines. Reasons for declines could be many – from insufficient funds in the cardholder’s account to payment details changing or a new card issued.
Whichever way you look at it, payment declines are more than a mere annoyance to subscription businesses. Since customers rarely pay close attention to their recurring payments, merchants have to take proactive steps to minimize payment declines and reduce friction while collecting these payments.
In this blog, we have outlined a few strategies that will help you reduce payment declines while processing recurring payments.
5 Strategies To Reduce Payment Declines
1. Offer Customers With Fallback Options & Alternate Payment Methods
It is not unusual for a small percentage of payments to get declined in the first attempt. Customers usually give it a second try, and some might even make a third attempt. But hereafter, most will abandon the cart and never return to complete the sale.
Hence, you have to offer customers a reliable fallback option in case the primary payment method fails, such as the option to use another card or alternate third-party payment methods. These could include PayPal, digital wallets like Apple Pay and Google Pay, Direct Debit, bank transfer, invoice payments, etc. The main goal is to minimize friction and eliminate a single point of failure in your online store. When you use a suitable fallback option, you can, at any time, instantly switch the primary checkout option and continue accepting orders.
2. Use Automatic Retries
Use automatic retries for payments that fail. You can set multiple retries for subscriptions that fail to bill successfully. You can define if you wish to cancel the account after the last attempt. You can also schedule discounts or partial payments.
Your payment service provider can help you to automate your payment retries. They can help you analyze payments data history to understand when a payment retry might be most successful. They can also help you choose the appropriate settings that work best for your business.
3. Use Recurring Indicators To Mitigate Recurring Payment Declines
Using a Recurring Indicator tool can help you to mitigate recurring payment declines. These tools help you to flag a regular subscription payment to the customer’s card-issuing bank so that the bank knows that this transaction is part of a regular billing. The bank can decline or approve the transaction, though this process varies from issuing bank to bank. Some issuers can be much stricter in their approval process.
As an example, consider a customer’s card expires within a month. One issuing bank could decline it immediately, whereas another bank could approve it until the last day of the month. In some cases, other banks might allow transactions on the outdated card until 3-4 months past the expiration date.
Using a Recurring Indicator helps the bank to “see” past transactions that have happened at regular periods. If the issuer has seen this transaction every month for the past seven months, they can be more lenient and approve the transaction.
4. Use Automatic Updater Programs like Visa Account Updater or MasterCard ABU
Many recurring payments get declined because of expired or reissued cards. Using automatic updater programs such as MasterCard Automatic Billing Updater or Visa Account Updater helps you to automatically update payment details for expired or reissued cards each month.
Updater tools enable the secure exchange of account details updates between merchants, payment service providers, card issuers, and acquirers. This ensures all parties have access to the most updated payment info for future card-not-present transactions.
5. Communicate With Your Customers
Use targeted communications to keep in touch with your customers and alert them about payment details that need updating, along with instructions on how to do it. Keeping an eye on your customers’ credit cards can help you anticipate any payment declines before they happen.
You can reach out to your customers through in-app notifications and pre-dunning emails. If your business does not have an app, you can send notifications straight to customers’ account dashboards to update their payment details or send payment reminders.
How Can Novalnet Help?
Our subscription management service will help you process recurring payments smoothly. It is a fully automated service that kicks in from the time a customer signs up for the service. It tracks and manages the subscription through its lifetime and ensures hassle-free billing and payments. Our services are fully compliant with PCI DSS security standards and local laws.
Novalnet can help you to reduce your payment failures and significantly improve your customer experience. We can help you automate your payments, process transactions securely, and provide you with rich insights based on analytics. You can manage all your payments from one user-friendly payment dashboard and access troubleshooting and dedicated end-user support in our customer portal.
Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.