What is Payment Automation?
When we think about payment automation, the temptation is to think only...
In any subscription business, there is inevitably churn - subscribers who end their contract and move on. There is, however, a difference between those who choose to end their relationship (voluntary churn) from those who stumble into it (involuntary churn). The involuntary churn demographic generally slip out of the merchant’s grasp for maddeningly simple reasons - often a problem with payment, like an expired card, an exceeded card maximum, or hard declines following fraud attempts on a card that the customer may not even know about yet.
Subscribers who opt to leave their subscription can be won back with promotional offers, higher engagement, or other sales techniques (assuming their business is valuable enough to rescue). Involuntary churns, however, having not made an active decision to leave, can be particularly hard to recover because, often through no active fault of their own, they can feel as though they have been thrown out of the service.
Even worse, involuntary churns can play havoc with the fundamental models that make subscription offerings work. Given that credit cards generally have a three year lifespan between renewals, fully one third of all subscribers may need to update their details each year - and failing to do so can result in failed payments, and, if the correct processes aren’t in place on the merchant’s side, canceled subscriptions. And in a business environment increasingly dominated by credit card-paid subscriptions, the regularity with which corporate cards accidentally exceed their limits is increasing, once again driving the possibility of a failed payment.
Fortunately, many of the direct causes of involuntary churn can be predicted and prevented. Three of the most prevalent - and most easily prevented - reasons for involuntary churn are
With a well-executed payment automation system, merchants can offset these risks by:
While it is arguable that the customer is to blame for involuntary churn as often as not (it’s their credit card that is failing, after all), the reality is that it is generally the customer who feels the pain when their subscription is canceled - and therefore the customer who feels somehow wronged. This means that the immediate negative of an involuntary churn (loss of revenue) can quickly compound into the negative of an unhappy customer who will share their frustration with other, potential, customers.
Customer experience, therefore, is key to not only recapturing potentially lost revenue, but also to preserving positive customer satisfaction. Subscription systems should be designed to give involuntary churns a real opportunity to solve their payment issues prior to jeopardizing the continuity of the subscription. Examples include
Whichever tactics a merchant intends to deploy to prevent and remediate involuntary churn owing to payment processing failures, it’s vital to ensure strong control over the payment process. This means having access to things like
Choosing a partner like Basis theory can help merchants outsource card data management and reduce involuntary churn. Collect card data, send it to processors or partners, and store it as if it's in your own database while satisfying up to 95% of the compliance requirements that come with PCI.
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