How to Handle Failed Recurring Payments
In today's economy, the subscription-based business model is a popular way of ensuring steady cash flow for your business. In fact, 70% of business leaders believe that subscriptions are the key to their future success.
The recurring revenue model creates a more predictable and consistent stream of income while providing your customers with the convenience of a hands-off approach to paying for recurring goods or services.
However, this model is not without its challenges. Businesses that rely on recurring payments can find themselves in hot water when a customer's payment fails. It's a nightmare scenario for business owners as it can quickly lead to lost revenue and frustrated customers.
Fortunately, there are various ways to recover a failed payment and prevent payment failures from occurring in the first place. If you're struggling to manage failed recurring payments, this guide is for you. We will discuss how to handle a customer's failed payment and explore some of the best methods to prevent future payment failures.
Why Do Recurring Payment Failures Occur?
Understanding why a customer's payment has failed is the first step to recovering the lost revenue and preventing future failures. There are a number of reasons why a recurring payment may fail, and it's important to be aware of them so you can take the appropriate steps to prevent or resolve the issue.
THREE of the most common reasons for recurring payment failures are:
The customer has insufficient funds: Unfortunately, some payments simply fail because the account being charged has insufficient funds or the customer has exceeded their credit limit.
The customer can usually rectify this by transferring funds into their account or by providing new card information.
The customer's credit card information has changed: If a customer's credit card expires or is lost, stolen, replaced, or otherwise compromised, their account information will need to be updated. A failure will also occur if a customer's billing address changes and their account information is not updated to reflect the new address.
An automatic account updater service can help prevent failed payments by automatically updating your customer's account information for you whenever a change in their card information is detected.
The customer's bank suspects fraud: In some cases, a customer's bank may flag a payment as fraud and decline the transaction. This is usually done for the customer's protection but can occasionally result in a declined payment for a legitimate transaction.
If this is the case, notify your customer so they can contact their bank to resolve the issue.
How to Handle a Failed Recurring Payment
Failed payments are frustrating but can be easily resolved if you have the proper systems in place.
Communicate the Failure to Your Customer
The first step is understanding why the payment failed. If you're unable to determine the reason for the failed payment, kindly reach out to your customer through your dunning email sequence to make them aware of the situation.
In many instances, your customer may not even be aware that their payment has failed and will still expect to receive the goods or services they've paid for. Ensure that your payment failed message is friendly, clear, and concise so that your customer understands the situation and knows how to rectify it.
In most cases, they will likely be able to update their account with the correct information or provide you with an alternate payment method. To retain your customers, give them a few days to update their information before taking further action regarding their account.
Schedule Automated Payment Retry Cycles
If you're using a recurring billing system, you likely have the option to schedule automatic payment retries. This beneficial feature allows you to automatically retry failed payments at regular intervals without having to manually intervene.
We recommend setting up a payment retry cycle of at least 3 attempts over the course of 1 to 2 weeks if possible. This gives your customer enough time to update their account information or for any deposited funds to become available in their account.
How to Prevent Recurring Payment Failures
Preventative measures can minimize the number of failed payments you experience and help keep your customers happy.
There are 3 key things that you can do to prevent recurring payment failures, such as:
Send Payment Due Reminders
Payment due notifications give your customers a gentle reminder that their payment is coming up and helps ensure that they have the funds available when the time comes.
We recommend sending out payment due reminders at least a few days in advance of the scheduled payment date. This will allow your customers to make any necessary arrangements to ensure that their payment goes through successfully.
You can also help your customers by sending them a notification when their card on file is nearing expiration.
Simplify Account Updates
If your customer is struggling to update their payment details, they may just give up and cancel their subscription altogether. To prevent this situation from happening, make it easy for your customers to update their account information in just a few simple clicks.
Providing them with an intuitive self-service portal where they can manage their account information themselves ensures that they can always have the most up-to-date information on file.
Include links to the account management page in your payment due and payment failed reminders to customers, so they're just a click away. You should also make it easy for them to access the page on your website.
Use an Account Updater Service
Account updater services help to keep your customer's account information up-to-date, so you don't have to. They regularly check for changes in your customer's credit card account information and update your records accordingly.
This helps ensure that you always have the most up-to-date information on file and reduces the chances of a failed payment due to outdated account information. It also helps reduce the time, money, and resources dedicated to reaching out to customers and ensures that they continue receiving your goods or services without interruption.
Meet Fluidpay's Account Updater Solution
Fluidpay's Automatic Account Updater is the perfect payment updating solution for businesses of all sizes. We offer a simple, convenient, and affordable way to keep your customer's credit card account information up-to-date without any hassle.
Our Pay-Per-Update model means that you only pay once we've successfully updated a customer's account, so there is no harm in checking for updates or long-term contracts. We know that no two businesses are alike, which is why our flexible account updater solution can be customized to fit your unique needs and scale with you as your business grows.
Contact Fluid Pay today to learn more about our account updater services.