Agile Payments Blog

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Credit Card Declines

Credit Card Declines:  A  Massive Threat to all recurring and subscription billers and billing platforms

Imagine you are a business owner with 500 customers that you bill $100 per month on a recurring basis. Your business runs and plans based on $50,000 per month coming in the door on a regular basis. It took a long time and a lot of work to get to the point where your business generates the reliable predictable income. You pay salaries, rent, plan development and marketing campaigns ALL around that recurring revenue.

Now imagine that 15% of that revenue or $7500/month goes uncollected and NOT because your clients don’t WANT to pay you.

What’s the BIG problem? Credit card billing declines

Payment processing and the collection rate are immensely important for subscription/recurring billing merchants. In today’s environment credit card decline rates are a massive challenge. Fraud, reissued cards, EMV cards as well lost and stolen cards present multiple problems for billers.

Some statistics*:

  • On average 15% of recurring credit card payments decline with some industries exceeding 30%
  • 30% of all credit cards are reissued each year
  • 1.5 billion EMV chip cards issues in 2015-6
  • 5% success rates in obtaining new info from customer on 1st attempt after decline

*Information based on Visa | MasterCard publications and PLC

Recurring monthly revenue based businesses have been around for many years. Alarm, cable, phone, gym memberships have all depended on recurring or subscription billing.

The power of reliable predictable income is immense and many new subscription based businesses have sprung up eg NetFlix, Dollar Shave, Birchbox etc that leverage the recurring revenue model.  Fueled by venture capital many of these businesses started with “what we can provide that people will pay us monthly for?” Powered by new and more sophisticated advertising mediums the ability to rapidly acquiring new customers has never been more attainable.

Retaining these customers and the ability to count on that revenue has led to a new industry. Subscription billing management has become big business. The ability to provide multiple options to maintain and retain clients and maximize profitability is essential.  Prorating, metered billing, trial periods, anniversary billing and more all play roles in the success of the subscription business.

There are many solutions today:  Zuora, Vindicia,  Avangate, Recurly, Chargify, ChargeBee, FuseBill and more. Businesses have many options and they know that if one platform falls short they have options.

15% of your monthly revenue uncollected is a big problem. Couple that with the amount of work the business owner must now do to get new information and hopefully be able to bill. On top of that they are losing a % of clients every month that they now must replace.

As a billing platform they certainly will look for your application to help mitigate these issues.

So what can be done?

Here are a few strategies:

  • Use the Recurring Indicator when sending transactions. Use of this indicator can improve decline rates and in certain locations reduce processing rates
  • Use Updater programs from MasterCard and Visa that allow for the automated updating of expired and reissued cards
  • Proactively and Reactively reach out to users whose card is going to or has expired
  • Strategically resubmit declined cards due to soft decline reasons eg NSF card
  • For bad expiration date declines resubmit with strategic expiration date logic
  • Consider adding an ACH Payment option - declines rates are significantly lower

Simply using the updater program is not going to provide recurring billers with a comprehensive solution. Being out 15% or more of their expected revenue is a BIG problem.

They are facing a massive challenge.

If you are able to implement the majority of the steps above you will have a competitive advantage. Your users will be much more satisfied and likely to refer.  And by education your current users and prospects you will win more business and have better retention rates.

If you would like more information get our 7 Step BluePrint to Maximizing Approval Rate HERE

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