With the rise of the "subscription economy,” auto-charging customers regularly in exchange for goods and services has become a popular business model. Of course, this is old news for publishers, who have been making use of renewals and recurring payments longer than most other industries. However, auto-charges come with their own challenges---recurring credit card payments have much higher decline rates than stand-alone payments, for example. Here are five tips to improve your subscription payment success rate:
1. Optimizing retries
The most common reason for failed credit card payments is that the credit line on the account has been exceeded. For this 'insufficient funds' scenario, as well as in the case of technical errors, you will likely want to retry the payment before taking any other action. By analyzing the payment processor's response codes, you will be able to discern patterns and optimize how often, at what intervals and on which days of the month to retry payment collection. For example, payment success may vary over the course of the month, and understanding this pattern allows you to retry when success rates are highest. Setting up automated retry rules is one of the most effective practices in improving payment success rates.
2. Keeping credit card data up to date
An estimated 3% of credit cards expire every month, resulting in declined payments. Integration with an account updating service can help mitigate this issue, but not all payment processors offer account update functionality (and updated account information is not always available). Alternative actions for expired cards might include following up with the customer by phone or email, and suspending subscriptions until new payment information has been received. Just like for retries, the ability to automate a rule-based follow-up can greatly improve efficiencies in this area.
3. Preventing chargebacks
Chargebacks are disputed credit card payments---for example, because the customer doesn't recognize the charge, hasn't received the expected goods or is suspecting fraud. Chargebacks are on the rise and account for lost revenue, chargeback fees and higher transaction fees for the merchant. Clear customer communication is key in preventing chargebacks; to this end, avoid vague or confusing billing descriptors on the card statement so that customer can easily identify the source of the charge. To prevent fraudulent charges, it is important to implement a fraud-prevention tool kit with measures such as authorizing credit cards upfront, blocking fraudulent customers and analyzing fraud patterns. These types of best practices can help minimize the number of chargebacks.
4. Customer self-service
The convenience of an online self-service portal makes it more likely for customers to keep their payment data current. For example, you may want to allow customers to update credit cards that are about to expire, or to switch their auto-charge to use a new preferred payment method. At a minimum, customer self-service should allow customers to review what auto-charges they have and what payment method will be used for the next charge, so that they can be proactive in updating payment information when necessary. You may also want to allow customers to easily cancel their auto-charges, which can help lower the number of chargebacks.
5. Direct debit vs. credit cards
What about your international business? Depending on the country, payments by direct debit may be more popular than credit card payments. Direct debit can be beneficial for merchants; while credit cards expire regularly, direct debit agreements are valid until the customer actively revokes them, and processing fees for direct debit payments are usually lower than for credit card transactions. When direct debit payments fail, the same follow-up as for credit card payments applies: re-trying the payment if possible, contacting or invoicing the customer and, if all else fails, suspending or cancelling the subscription.
How can we help?
Have you explored all the options Advantage offers to optimize recurring payments? Advantage integrates with multiple domestic and international credit card processors, as well as direct debit systems such as BACS and SEPA. We keep track of the number of collection attempts and support automated follow-up for unsuccessful payments. Rule-based actions such as sending an invoice, adding customers to call lists, updating and cancelling subscriptions are available, as are several different options for billing descriptors.