4 Ways to Recover Failed Credit Card Payments

Whether you’re new to the subscription and membership model or you’ve been running this type of business for some time, one thing is true: Failed credit card payments are par for the course and a pain to deal with. But, with the right strategies in mind and in place, that doesn’t always have to be the case.

4 Ways to Recover Failed Credit Card Payments in Your Subscription or Membership Business


How about this for a statistic to knock your socks off? Did you know that there has been an 800% increase in visitors to subscription company websites from 2014 to 2017?

If you have a subscription-based or membership-based business that feeling you get when someone signs up to your service is simply unmistakable. You’ve just increased your recurring income while helping your customer. But it can feel like your business bliss is put on pause when you receive a failed transaction notice for the first time.

Questions can start swirling around in your head: “What’s wrong with my payment processor?” and “Has my customer had a change of heart?” Whether you’re new to the subscription and membership model or you’ve been running this type of business for some time, failed credit card payments are par for the course (approximately 10% fail), but they’re also a pain to deal with.


Although failed payments can have a disastrous effect on your bottom line, a bit of preparation to prevent them (plus a few handy recovery plans) can not only limit the negative impact on your business, but can even serve to retain the customer and their LTV as well.

Reasons for credit card failures

There are many different reasons why a credit card payment can fail. But the three most common are as follows:


  1. Card details have expired.
  2. The bank suspects fraudulent activity, so they refuse the charge.
  3. The customer has insufficient funds.


To make things a bit more confusing, different payment processors provide different levels of details about why a credit card payment failed. For example, information from PayPal in relation to failed payments is on the light side at best. On the other hand, Stripe will give full details about the reason(s) for the failed payment.


Since the reasons for failed credit card payments vary, sending the traditional dunning messages to customers no longer cuts it.


The Oxford dictionary describes the verb ‘dun’ as to: “Make persistent demands on (someone), especially for payment of a debt.” Dunning is the slang term for referring to repeated messages that are sent to customers to recover failed payments. Even if your customers don’t know that the root of the word dunning means to practically pester for payment, let’s face it, the last thing they need is another automated email.


However, doing nothing to stop involuntary churn (churn from failed payments instead of direct cancellations) isn’t an option. Sending emails yourself when payments are missed may work for a while when you have very few subscribers. However, this can become a huge time-suck as you grow, especially as you need to focus on developing the front end of your business.

If you aren’t keen on using automated messaging that can turn your customers off, and reach the point where you or a team member can’t afford the time to take on that job — or simply don’t want to use your valuable time to do so — what are the options for recovering failed credit card payments?


4 Ways to Recover Failed Credit Card Payments

Of course, the first step in dealing with failed credit card payments is to think about how to prevent it in the first place — after all, prevention is better than cure.


Tackling failed payments before they rear their ugly heads will help you to do two things:

  1. Improve the relationship with your customers (since you’ll be known for running a slick and efficient operation); and
  2. Increase your bottom line.

Avoid false credit card blocks

Here’s another fascinating fact for you: Did you know that a massive $40 billion is lost every single year due to pointless red flags that block transactions? Take steps to reduce your membership or subscription business losing revenue (due to unnecessary blocked payments) by:


Customizing your gateway’s rules

You’re normally given the power to modify the rules to identify dubious transactions. For example, you can flag, block or ignore payments that fail checks relating to the three-digit code (CVC) printed on the reverse of a credit card.


Keep your payment processor informed

Part of your payment processor’s job is to protect your business. This is the reason why payments could fail when they pass through your payment processor’s fraud checks. To avoid genuine payments falling, give your payment processor as much customer information as possible to help sort out legit payments from fraudulent ones.


Revenue recovery tactics

Even if you’ve tightened up the net that labels authentic purchases as fraudulent, it’s likely that you will still experience failed credit card payments. Recovering your revenue should be a top priority for your business and shouldn’t be left to fully automated systems.  (Retweet / Share this)


Although it may not feel like it, recovering failed credit card payments is an opportunity to have a positive interaction with a customer. No one likes to be chased for debt, but how your company handles this can either gain you new fans or turn your customers off.


Here are four tips to help you and your customers live your best lives

(You: Get paid. Your customers: Get your valuable product/content):

1. Be ready to recharge

Your customers are the bread and butter of your business, and keeping an eye on their behavior is the starting point of recovering failed credit card payments. According to Ethoca, the global network of merchants and card issuers that combat fraud, 44% of card declines are because of insufficient funds. Not having enough money in the bank is considered to be a ‘hard’ decline whereas ‘soft’ declines are payment failures that result from problems with payment processors, your network or your gateway. You need to decide whether you’ll treat hard and soft declines in the same way.


One avenue you could take is that as soon as a payment fails you should get in touch with the customer to let them know. You need to ask the customer to give their payment details a once-over to make sure that everything is in order.


The best position to be in is one where you’re ready to charge the credit card the moment the details have been updated.


Retrying a card without delay:


Putting this credit card recovery service in place should be simple. Your billing system should be able to handle retrying payments the moment details are updated.


2. Focus on personalization

Automation works when collecting payment for your subscription or membership business. However, payment failure calls for more of a human touch. The usual dunning emails may offer convenience, but they don’t offer the best customer experience. Asking for money is a delicate balance. Your customers shouldn’t suspect for a moment that you only see them as a dollar sign. You’ve managed to convince a customer to sign up for your product or service, so you don’t want the relationship to fall flat when there’s a problem with their payment.


Given that personalization boosts customer loyalty and your revenue, the recovery of failed credit card payments should go beyond generic emails. Segmentation of dunning emails may not be enough. Research has found that basic personalization no longer cuts it since only 8% of people surveyed said that they would be willing to engage with a brand that uses their first name.


Using a payment recovery service, like Gravy, adds the human touch to an aspect of business that has a reputation for being impersonal. By ensuring that you’re the first person a customer hears from when a payment fails, your customer will feel like you’re attentive to their needs – in short, they will feel special – all this while projecting your brand as one that cares and is willing to assist your customers to get back on track.


3. Break free from dunning

Dunning software has been regularly used to recover payments, but with limited success. Here’s a fact that might just make you weep. We’ve found that dunning software only recovers around 15% of all billing failures. “Why do businesses keep using this software?” is clearly the question. A simple answer is that dunning is the way it’s always been done. However, just because something has always been done a certain way doesn’t mean is should continue to be done that way, especially when that way just isn’t working anymore and a ton of money is being left on the table month in and month out. The bottom line is people just can’t relate to automation, and even the most sophisticated and fancy automated emails won’t convince a customer to continue with their subscription. As we say at Gravy, “Dunning software just can’t care.” (Retweet / Share this)


Another eye-opening fact about dunning software emails is that 85% of them go unread. Unfortunately, most businesses give up on recovering payment when the dunning software emails fail. Sadly, believing the myth that dunning software is the most efficient way to collect failed payments can sink your business.


If your dunning email software fails to do the job, pump the breaks on cancelling your customer’s subscription. Go beyond dunning to boost your recovery of failed credit card payments by using Gravy’s services.


4. Focus on failed credit card payments full-time

It’s easy to brush off a small percentage of failed credit card payments because, let’s face it, a 2% monthly failure rate may not have the biggest impact on your revenue.


But, the sneaky part of just looking at your failed credit card payment rates on a monthly basis is that it doesn’t tell the whole story. Your monthly failed credit card payments rates are compounded over a year and, suddenly, that 2% loss snowballs into a 22% annual loss in revenue.


The compound loss of revenue is why you need to dedicate full-time resources to dealing with failed credit card payments. In an ideal world, you’ll have one fully trained and full-time team member who will ensure that all failed payments are dealt with in the most efficient way. It makes total sense to have a dedicated person to recover failed payments, but this could be difficult – especially for small businesses.


This is where Gravy comes in. We are your full-time staff equivalent to recover failed payments. All you need to do is focus on things to dominate your year and your business, while we recover your hard-earned cash. You get the equivalent of a full-time payment recovery service at a fraction of the cost.


An important aspect of recovering failed credit card payments is understanding the real cost to your business. You might be surprised to find out how you can boost your revenue by implementing a proven strategy to recover payments.


Let’s connect to crunch the numbers and see how much you can recoup from tackling failed credit cards. Grab some time with our Gravy team to learn more!


Gravy Book a Call Button

Click to schedule your free call today.