Like many subscription companies, you’ve probably seen an increase in credit-card declines, processing costs, and online fraud. These are just a few of the trends we’ve identified in 2015 that are having a significant impact on your bottom line. When you consider some of the trends in 2015 that are expected to continue causing problems for subscription companies in the new year, you will need to more closely manage your payment-processing operations to avoid revenue loss.
In this on-demand version of “Five Payment-Processing Challenges in 2016: How to Reduce Their Impact and Keep More of Your Recurring Revenue” you’ll get details on the five biggest subscription payment-processing challenges and the strategies you can use to reduce their effects. Our resident expert on subscription payment processing, Paul Larsen, will outline key payment-processing trends for subscription company executives. You’ll gain a more in-depth understanding of the five trends from 2015, what to watch for in 2016, and the latest strategies and best practices you can use to mitigate the negative impact these trends could have on your bottom line.
Here’s just some of what you’ll learn during this on-demand 60-minute webinar:
- How payment-decline trends and rising payment costs can significantly reduce your revenue – and what you can do to turn things around.
- New methods you can use to recover declined charges.
- The rise in online fraud and chargebacks due to EMV “chip” cards and how to avoid becoming a victim.
- The latest Account Updater trends and how this will help you protect recurring revenue.
- The increase in the use of prepaid cards and what that could mean for your business.
- How to establish a recurring-revenue system that works.
Transcript
Below is the full transcript from our webinar: Five Payment-Processing Challenges in 2016: How to Reduce Their Impact and Keep More of Your Recurring Revenue, held January 21, 2016.
Tammy: Welcome to the subscription insider webinar. I’d like to introduce you to your moderator for today’s event, CEO and publisher Kathleen Greenler Sexton. Kathy, please go ahead.
Kathy G. Sexton: Thank you Tammy. I’d like to welcome everybody to today’s insider webinar, Five Payment-Processing Challenges in 2016: How to Reduce Their Impact and Keep More of Your Recurring Revenue. My name’s Kathy Greenler Sexton, and I’m the CEO and Publisher of Subscription Insider and your host for today’s event. Our speaker today is Paul Larsen. Paul is our insider guide to subscription payment processing and a managing partner of Paul Larsen Consulting, a consulting company focused exclusively on payment processing. Paul’s expertise is helping [inaudible 00:01:14] present businesses, significantly improve their bottom line, by both reducing cost and increasing customer retention through a number of tactics and strategies, including survey and audit; process [inaudible 00:01:26]; best practices application; decline, prevention, and recovery; chargeback, prevention, and resolution; processor selection, and contractor negotiation. Paul, welcome.
Our webinar today is 60 minutes. Paul will present, and at the end of the presentation we’ll open up questions from the audience. You’ll be able to ask questions live via the phone, or send them in the chat box in the lower left hand corner of your screen. If you don’t have to wait to ask a chat question, just send it in any time during the event and when we get to the Q&A at the end of Paul’s presentation, we will ask your question. I expect we will have a lot of questions on today’s topic. If you think about it just send it right in.
I would also like to acknowledge our sponsor, Recurly, for their support of this event and of Subscription Insider. Trusted by thousands of businesses worldwide, Recurly is the leader in agile enterprise class subscription management. To learn about Recurly, their billing management solutions, or recurring revenue best practices, please visit recurly.com.
Before we begin, I’d like to highlight some of our upcoming payment processing focus events here at Subscription Insider. Subscription Insider is the original independent resource dedicated to accelerating your success in the subscription economy. We deliver unique news, insight, and practical information, like this webinar today, to help you smoothly operate and grow more possible subscription business. As you can see, we have a number of events coming up, and currently available, at subscriptioninsider.com focused on payment processing. With that, I would like to turn it over to Paul Larsen. Paul, please go ahead.
Paul Larsen: Kathy, thank you so much. We are truly grateful for the opportunity all the time, and any time, to collaborate with Subscription Insider on behalf of the merchant community, the recurring community. To those of you from that community who have joined us today, it’s a privilege to engage you.
In our day long Boston seminar last November, we looked in arrears to confirm the trends that were impacting us in 2015. Trends that either caused these headlines, or were a result of issues that were in these headlines. You saw some of these yourself. Netflix flips on Q3 involuntary churn, shares take hit. “Why own anything anymore?” Zuora founder explains rise of subscription economy. Your data at risk, the year of EMV, EMV doesn’t stop anytime soon. US migration of EMV chip cards garnered most of the spotlight in 2015, but the October liability shift was just the start. Back in that day-long seminar, we looked at a lot of the data that confirmed the headlines. They were really true. As a refresher, and because they contribute knowledge to what will effect us in 2016, we will review those data again today. We especially want to capitalize on this brief allotment of time to prognosticate the key trends we’ll see develop and/or continue over the course of the next year or so. Why don’t we dive right in?
Number one, I think we’re going to see the full realization and ramifications of EMV. The general e-commerce community will feel the pressure of fraud driven from point of sale to online. Everyone is going to feel that. I think, more importantly even to those of us on the call today, we have to remember that there’s still hundreds of millions, probably 700 million cards still needing to be reissued with chips, and we all know, or we should know, what re-issuance does to the lifetime value of subscriptions and memberships. That’s kind of EMVs double whammy; fraud and re-issuance. We see that as a big, big ongoing issue for 2016.
There’s no reason to believe, number two, that data breaches will abate. Indeed, they’re becoming more personal. The major breaches in the US last year were actually not of credit card information, but of drivers license information, medical records information, proving that there’s still vulnerability, and really, all information is up for grabs. It was just announced over the weekend that 250 Hyatt Hotels had been breached in late 2015, and that all cards used there over a four month period have likely been compromised. We see that this is a trend that will continue to be a problem.
Prepaid. We think that those cards will remain invasive to subscriptions, and we’ll show you a little bit later, Ron, how that impacts bottom line results.
Number four, alternative payment methods and wallet [00:08:49]. They’ll continue to be all the rage as consumers and merchants seek smoother and more seamless experiences.
Number five, and this is the one we love the most, well we actually love them all and don’t know what we would do without them. We don’t see a faltering of the subscription economy. Indeed, we see the recurring model expanding around the world and becoming more accepted in places that never accepted it in the past. We see an explosion of subscriptions around the world.
Think about how you’ll be impacted as a subscription merchant, if you’re a subscription merchant, listen you’re going to see data in a minute that confirms what you probably already know. That is that 2015s churn was truly epic. It appears that that level of fallout will continue through 2016. Again, as we said, around half of the 1.5 billion US cards that are being issued with chips have yet to be reissued. The breakage caused by re-issuance will continue to be significant. Fraud and charge backs will rise. That’s something we need to prepare for, for sure. Prepaid cards will erode lifetime value. You’ll need to think through and evaluate the burgeoning new payment methods and finally consider going global, especially if you are serving digital goods.
Here’s the thing, prognostications for 2016 are not unrelated to the event of 15. With that in mind, let’s review some historic data. First of all, let’s look at approval rates. Now here’s a slide that shows approval rate over the past two years. This represents the composite of all 70 of our active customers. As you can see, approval rates moved significantly southward for each of the four major card types. You see the Discover trough, the red line is Discover. That’s the Home Depot breach, and that’s where Discover basically en masse reissued all of their cards, because they’re a totally closed-loop system. They just did it, we’re done with it, it had to have significant impact right then and there. That’s what happened there.
When we look more closely at specific merchants, let’s do that now. Here you see the five year trend for three of our largest customers. These are customers whose business models were virtually unchanged over the course of this time frame. As you view these results, it’s important to understand that there’s more here than meets the eye. More here that’s driving these approval rates. These are gross in more ways than one. These are gross approval rates, and they encompass new business, recurring transactions, and even recycled transactions. What we really show here is a combination of descending raw approval rates with more intense recovery methods, yielding a much greater effort to secure the best possible net approval rates.
You see the blue line there? That represents a large monthly biller, very large. The red line is a large annual biller. The green represents a biller with an equal mix of monthly, quarterly, and annually billed subscriptions. No matter how you look at it, approval rates attained, if you want to use that term, all-time lows in 2015.
Of course, the flip-side of approval is declines. Some types of declines, like insufficient funds, haven’t faded away at all. Look at these studies of three of our merchants, and you’ll see the ubiquity of NSF declines over time. I’ll kind of stay in the same region and realm. We think that there’s no reason to believe that they will ever away [00:14:55], because this is America, this is our culture. As a people we do debt. That’s what we do. We still have a lot of folks who play it very fast and loose with their credit, and are close to their limits, causing insufficient funds declines. I’m just calling this out old school to remind us that we still need to actively monitor and enhance the way we use best practices to overcome this problem that’s not going away. It’s the most recoverable of all the declines.
Thinking back to the quote from Reed Hastings, the Netflix CEO, and taking it at face value, he indicated that there were new barbarians, not only at, but perhaps even through our gates. Barbarians in the form of invalid account number declines, which as you can see from this slide, has doubled. More than doubled in the past five years. This, of course, is associated with the large scale re-issuance caused by the Heartland breach, the Target breach, the Home Depot breach, and support [00:16:37], not to mention all the other smaller breaches. They are responsible for the rise in the invalid account number declines. We can confirm that this is true when we look at Account Updater results … Excuse me one second.
Let’s take a look at corroborating evidence that shows the impact of reissued cards, and the new account numbers that are often associated with those. While these are all volumes of particular merchants, and each of these merchants has grown steadily over the years, the rise in new account numbers that they receive back from Account Updater is way beyond their growth track. Hearkening back to Mr. Hastings statement, he alluded specifically to collection difficulties associated with EMV chip card re-issuance. Indeed, we can see from updater results, the uniform uptick of new expiration dates from Account Updater in 2015. If we were to show this for all 70 of our merchants, you would see the exact same rise in 2015. As we said in Boston, you need to be rigorously using account updater, but not just the way it has been historically imposed. In new and incisive ways that help weave together a safety net that captures as many payments as possible. Otherwise, EMV will take a sledgehammer to your bottom line.
Let’s take a look at another challenge of recent vintage, and that is the penetration of prepaid cards into the subscription equation. Here’s the reach of prepaid into our array of companies. Anywhere from 2% to 40% of sales are potentially inaugurated on prepaid instruments. 20% of our B2C customers have greater than 5% of their sales on prepaid, overall 2.3%. If it’s hard goods, because people are trying to use prepaid cards to get something for very little, it’s 4.2%. The ramifications of (pauses) prepaid cards is, obviously, a greatly reduced lifetime value, because of the premature end to the customer relationship. Because there’s no funds left on that card. Obviously, that’s going to reduce return on investment regards to products and services.
Oftentimes, there’s insult added to injury, because these may have been leads that you’ve purchased and that you paid for, only to find out that they were not very good. All of this actually costs you, not only in reduced lifetime value, but in fees themselves. Here, we’re taking a look at two of our clients. One has just over 3% of their transactions on prepaid, the other one almost 8%. You can see that for merchant A, it took 666,000 authorization attempts to gain 184,000 settlements on prepaid. You could see the comparison with these two merchants between the effort to get money out of prepaid versus their normal cards. Authorization for settlement 3.6 and 4.41 on prepaid versus- not even 2 to 1 for their normal debit and credit.
What can you do about that? There’s a couple things you can do. You can align yourself with a processor that can provide indicators in the auth responses that signify that the card being offered by the consumer is non-reloadable prepaid. That’s a great thing because then you, the merchant, are in the drivers seat. You can decide what you want to do. You could take all the money, and run, that you can. You can decline it and tell the customer, “No, this isn’t appropriate for a recurring arrangement.” Or you could put it through and just kind of flag it in your system to know that it’s likely going to decline the next time, and you need to be prepared to go to town to get this customer back. You can also, in theory, you can set the recurring indicator on the initial e-commerce transaction, and that can act as a filter to a prepaid usage. Or, finally, some of the processors now have a prepaid filtering service, and they will, if you want, auto-decline prepaid cards for you.
We have merchants who do that. Here’s one. They’re very impressive. They use affiliates to the max. Their first shipment of a hard good is a loss leader. They definitely don’t want to start subscriptions on prepaid cards, paying commission on those bum leads and/or losing their shirt, because of reduced lifetime value. They have their processor filter them out. You could see their results. In 2015, they allowed everything to the front door. 40% of them filtered out, and went on to serve the other 60%.
Okay … We’re going to be done with the past for now and go back to the future. As we said, we’re about halfway through chip card re-issuance. Aside from wreaking havoc on recurring merchants that don’t use Account Updater in a full-throated, take-no-prisoners way, online fraud is already on the rise. Commensurately, chargebacks are likely to rise as well. Although, there’s not always a correlation between fraud and chargebacks, there almost always is.
Listen, Visa is expecting online fraud to surge. By the way, here’s just a quick look at trends over time, chargeback rates for all of our merchants slightly rising over time, almost doubling since 2011. This is something that, as a merchant, you can look at now and just kind of benchmark yourself against these as kind of average chargeback rates. Over on the right-hand side are the percentage of the chargebacks that are considered fraud by Visa. Like we said, Visa is expecting online fraud to increase. You should too, because they just announced changes to their fraud and chargeback monitoring programs that kind of tip you off that there’s going to be more fraud.
The Visa US chargeback monitoring program that many of you are quite familiar with is virtually unchanged. It’s still 1% and a hundred chargebacks in any given month. The fines and penalties are delayed, but they’re higher. That’s the case with US monitoring program. Their global monitoring program has now come in line with the US program, dropping, I think, their chargeback rate from 2% down to 1, so that’s come together. But their fraud monitoring program increased the allowable fraud dollars by 300% to 75,000 and 1% fraud-to-sales ratio. Clearly they’re expecting more fraud, so you need to do that as well …
Hopefully, you’ve got screening in place, CVV of course. Yeah, let’s do that. Alternate payment methods. I got a call yesterday from someone that said, “Should we put apple pay in the mix for subscriptions?” I said, “Let me consult the records of the 450 merchants that we’re familiar with and see what it looks like in terms of apple pay and subscription,” and, of course, it was kind of a joke because no one is using it that we know of. Yeah, no one, certainly, in our portfolio. We would say this, that we would be excited to find out that there was one or two payment methods on the horizon that would have the impact of, say, Paypal on recurring. We would also say to you, if you’re not using Paypal, we’d ask you the question, “Why not?”
Because I want to show you some Paypal results. Look at the approval rates for Paypal, in yellow, compared to the other payment methods. This data is from a mega merchant that we service. As you could see, their approval rates generally exceed those of Visa, MasterCard, and are right up there with American Express and Discover in terms of positive results. Granted, the average value with Paypal of charges are a little less, but it’s a perfectly conducive payment method for subscriptions. It acts like debit, and that’s why you see, in December ’15, it’s kind of aligned with Visa, which has the grand majority of debit cards. The average value there is about the same. Begs the question, if you’re not offering Paypal as a payment method, why not? Most of the best processors support it so that you don’t have to build a separate integration …
Going global. The key to going global, of course, is, other than having potential business there, is a strong partner in the acquiring space. Or, perhaps, even strong partners in the acquiring space. You need to determine whether or not you should establish presence in a particular country or region. Whether or not there would be the appetite for your product or services there. Because, if at all possible, you would want to get the local payment methods in play, and, of course, the highest possible approval rates. Which you would achieve if you were an in country merchant … Listen, I wanted to get this slide redone, actually, but I was too late.
Kathy G. Sexton: (laughs)
Paul Larsen: That’s my fault. Because I really wanted kind of the hard-hitting finish to this. The outlook for 2016, is undiminished churn. Undiminished churn. You can expect to see churn equal to last year. Because, you’ve got to remember this too, that this was epic and historic churn last year without any huge breaches. Yes, there were breaches of health services, in which medical records were stolen, but there were no Target, Home Depot, TG Max like breaches. Imagine if we had had one of those on top of all the re-issuance.
We can expect to see similar increase churn, and hence account updater activity. Of course, all this costs us more, right? Because we’ve got to now apply the best practices in ways that are way beyond the way we used to do it. We used to have these best practices that were standalone functionality, decline recycling and account updater, and scale expiration date optimization. Those can no longer stand alone, those have to operate interactively. Undiminished churn, upsurge in fraud, and again, begs the question, “Are you PCI compliant?” If you’re not, you need to be. Get in touch with your acquirer and make sure you do that.
Also be exploring the ways in which you can screen for fraud, beyond just CVB. I’m just assuming everyone’s using CB, because you should be. But CB not only is the first line of protection against fraud, it’s actually, in this day and age, aids and abets sales. The legitimate customer wants to be sure that you care about security, and are looking, actually, to see that you’re asking for CVB. Those customers convert better and they stay longer. Undiminished churn, upsurge in fraud, persistent prepaid, especially in regards to low-ticket items and product-services targeting millennials.
Alternative quest, it’s kind of fun to sit there in this famous world watching what’s going on in this drive to find new payment methods in wallet. You need to be watching this closely and determining for yourself, thinking through whether or not these are appropriate payment methods for subscriptions. At the end of the day, or I should say, at the end of the last 30 years, we haven’t gone much beyond the big four: Visa, MasterCard, American Express, Discover. They’ve existed, seemingly, for time and eternity. After all this time has gone by, Paypal’s entered the mix. Maybe you could consider e-check an option. But nothing else has panned out that’s going to be interesting to see, if anything else does. Finally, subscription ubiquity expanding far and wide beyond our borders. Especially if you’re serving digital content. Certainly something to consider. That’s, very briefly, our outlook for 2016. At this point, I’ll pass it back to Kathy.
Kathy G. Sexton: Thanks, Paul. That was a really great presentation, and really informative. I’m thrilled to see that there’s questions already coming in. I want to remind everybody that you can submit your questions via the Q&A chat box on the lower left-hand side of your screen, or you can ask them live via your phone. Tammy, I’m going to ask you, if you can, please get on the line and let us know if they do want to ask a question by phone, how to do that. Tammy?
Tammy: Certainly. Again, to ask a question by the web presentation, select the chat pod located in the lower left corner of your screen, then type and send your question. If you wish to ask a question live, by the phone, press *1 on your telephone key pad. I will announce each caller prior to bringing you into conference. Please remember, if you have your phone on mute, take it off of mute when you request to ask your question. Once again, to ask a question by the web presentation, select the chat pod located in the lower left corner of your screen, then type and send your question. To ask a question live, press *1 on your telephone key pad. Kathy, I’ll turn it back to you.
Kathy G. Sexton: Great, thank you Tammy. I do see a number of questions coming in. The first one that came in, actually, I believe, from Eric, was just confirming what he heard in terms of the volume and the number of cards that are going to be reissued due to the new chip cards. Could you review that, please, Paul?
Paul Larsen: Yes, 1.5 billion in all. [00:38:08] First did a study recently that seemed to indicate that about half of those would’ve been issued by the end of 2015. The rest in 2016, and maybe in 2017, primary among those cards still to be reissued are the smaller banks, credit unions, et cetera, and debit cards.
Kathy G. Sexton: Interesting. I have a question from Aaron, “How do you generally feel about Stripe or similar services for very small online digital goods business? Do you find them to be reliable, [ 00:38:52] this is for Stripe and similar services, not to pick on Stripe specifically, but how can these types of services help us tap into the recommendations that you made today? Are your recommendations that you talked about only available to, let’s say, some of the larger platforms?”
Paul Larsen: Wow, that’s a really crazy question. We live in a world in which a lot of people are technologically with it, and feel strongly that they want to control their own transactional destiny. Even as a small guy can build their own internal, in house database that connect directly to a payment processor and do their thing to maximize payment performance. But more and more, because there’s a tremendous desire to not have a burgeoning IT infrastructure in house, to stick to their knitting and sell what they’ve created and invented. There’s opportunities to outsource these things to different kinds of platforms. To Stripe and to others like Stripe, they do a absolutely serviceable job. They are all things to all people, so they don’t just service subscription merchants. You have to ask yourself, “Do I want to have a simple connection, a simple API, simple rules, and take a bare-bones approach to recurring billing, or do I want to build it myself, or do I want to find a third party that majors completely in art and science of recurring billing?” I’m happy to talk further with anyone about those different permutations.
Kathy G. Sexton: That is an important point when you’re choosing partners, that they do understand recurring subscription business models. Not all do.
Paul Larsen: Yeah, Kathleen, I don’t think I answered one point. There’s a belief out there that you may be too small to take advantage of the things that we talk about. That’s absolutely not true. If I went back to a slide, and I won’t, the one I wanted to actually do a [Mea Culpa 00:41:32] on was the one that showed Account Updater results. It was a green line, and it was really low levels of Updater and then it just burst forward in 2014 and ’15.
Kathy G. Sexton: Is it this slide?
Paul Larsen: Yeah, it’s that one there. That has to do with, again, a small merchant that came to us and said, “We can’t do what the big guys do,” and we said, “You can do what the big guys do.” You can see they grew slowly over time, but once they hitched their wagon to industry standard bearers, their business just took off. It’s 20x what it was in 2013. You could see they went from getting near thousands of new account updates for a couple years to now getting almost 200,000 updates, not just subscribers, that’s just updates. [crosstalk 00:42:36] subscribers. Don’t short-change yourself regarding size as to what best practices you can take advantage of. [crosstalk 00:42:48]
Kathy G. Sexton: I think that’s a really good point. I see a lot of questions here. Dorothy asked, “Visa’s global CB (Chargeback) program to mirror the US program? When has that been implemented, and if not when?”
Paul Larsen: The Visa chargeback monitoring program was kind of taken down at the end of 2015 and resurrected in 2016 with kind of new measurements. Mainly on the chargeback monitoring program. Like I said, nothing changed if you’re a US merchant. If you’re domiciled outside of the US, you used to be able to have double the chargeback rate than your US side of the business. Now that’s all been brought into conformity to reflect the historic US model of no greater than 1% chargeback rate in any given month, and no greater than a hundred chargebacks.
Kathy G. Sexton: I’m going to pull in Peter, you have a question about protecting your business, and I’m going to ask a related question that I had. Paul, if I’m remembering some of the conversations that we’ve talked about in the past, when Europe adopted EMV, their online [fraud 00:44:13] doubled, as well as the same trend was in Canada. Are we expecting those types of rates in the United States; fraud rates doubling?
Paul Larsen: I think we are. I think we are, yes. There’s no reason to believe why it wouldn’t, other than this one little difference in the other conversions, and that is when Great Britain, the United Kingdom, and Canada converted to chip and PIN at point of sale, they required the chip and they required the PIN, whereas here in the US there’s still an easy fall back to swipe. There’s still a magnetic stripe on the back. It remains to be seen how vigorous our retail merchants are going to be in terms of forcing the chip and slowing down the sales process at the checkout counter. That’s the only kind of difference. To answer your question, there is no reason to believe that I can think of that we won’t have an uptick in fraud online similar to the UK and Canada.
Kathy G. Sexton: “As a subscription business,” and this is Peter asking this [00:45:40] question, “what’s the easiest thing we can do to protect our businesses moving forward?
Paul Larsen: If you are PCI compliant, you will have a lot of things in place that minimally make you aware of challenges and problems you face. Absolutely need to utilize CB. Then you have the big determination of whether or not you want to build your own internal algorithm that’s a check on different things like IP address, and things like that. I think that if you know that you’re potentially the kind of merchant who would be susceptible to online fraud, you should begin to explore with your acquirer protective broad screening solutions. A lot of them now have licensed some third party fraud screening tools and built them right into their front end. Without even having to go to a third party [ 00:46:56] like ThreatMetrix, or 41st Parameter, the better processors have built those tools right into their authorization platform. Those are good questions to ask of your acquirer, “What fraud tools that can help us have you built into your platform?” Yes.
Kathy G. Sexton: Jason’s talking about the best way to combat chargebacks. “Customers using monthly service, but they’re doing chargeback and they don’t have a signature.” I’ll address this a little bit, Jason, and then I’ll hand it off to Paul. To combat chargeback, start when you’re recruiting that first subscription and making sure everything is very clear in your offer page, when they’re signing up in your terms and conditions. Make sure you’re very clear and you’re very up front that your subscription is an auto-renew type of program. Make sure that you have that on hand for when the chargeback come in to address with your acquirer, your processor. Paul?
Paul Larsen: I couldn’t agree more. It starts right there. You want to nip chargebacks in the bud. Make sure they know they’re going to be in a recurring scenario. Secondly, of course, you need to make sure that your descriptors are clear. We advise all of our merchants, it seems like a very simple thing, but we advise all of our merchants to actually have a seed program in their own company where they subscribe to the service themselves on different kinds of cards, so they could see what the descriptor looks like when it comes in the mail. They can be confident that the customer can look at their descriptor and rest assured they know what this is all about.
You need to have adequate customer service so when a customer questions a charge and they call the 800 number that you’ve put on your descriptor, you actually have someone there to answer the question. Otherwise, they’re going to call the bank and they’re going to do chargeback. You need to issue refunds immediately. That’s really before [00:49:38] combat the chargebacks. But yours was the most important one, Kathy
Kathy G. Sexton: I can’t help myself but adding a chargeback “don’t”. Earlier in my career, we acquired a company and we were really shocked at how high the chargeback rate was. Come to find out the customer service team was a little bit lazy and didn’t feel like cancelling customers. They just suggested the customer call their credit card company and issue a chargeback. We stopped that and our chargeback rate went down immediately. You do need to look at messaging and processes with your team as well. One would think that that would be self-evident, but I guess that sometimes it’s not.
I have another question here. Klaus is calling from Europe and he does say Hello, Paul. He is wondering if you know if subscription businesses in Europe see the same decline in payment approval as you’re seeing in the US.
Paul Larsen: Depends where you are in Europe. For good or bad, the UK is mimicking the US more and more. The amount of recovery through Account Updater and sophisticated decline recycling is just as effective in the UK and in Canada as it is the US. They are aligned quite strikingly in consumer behavior. When you get on the continent, of course, things do change. Each country has its own kind of culture. It really depends on the country. Germany is different from France and from Netherlands, from Scandinavia. You have to take each of those on, on their own terms, you can’t treat them all exactly alike. But we’re happy to say that the subscription model is becoming more and more accepted even in places like Germany where it hadn’t been so much before.
Kathy G. Sexton: Thanks, Paul, on that. Barbara’s wondering if you’re seeing any specific trends in business-to-business processing? They don’t have very many chargebacks for their publications business, and just curious if you’re seeing B-to-B using some of these alternative payments that you discussed.
Paul Larsen: In terms of using alternative payments, again, if it’s a subscription you’ve got to ask the question, “Is the payment method even serviceable in subscriptions?” We have probably 20% of our universe is B-to-B. They’re feeling the pain of the re-issuance as well. It’s not just every consumer card that’s being reissued with a chip, it’s every card, even business cards are being reissued with the chip. Of course, many B-to-B subscriptions are actually placed by individuals within a company that use their own personal cards so they can get the points and things. Most of the things that we talked about today apply to B-to-B as well as B-to-C.
Kathy G. Sexton: Great, thank you. Dorothy, there’s a question, I just need to understand a little bit more what you were asking. If you can add a little bit more detail, I’d appreciate that.
Hemnalani [00:53:40], I hope I pronounced your name correctly, if not I apologize. The question is, “In this very large information company, sales reps find the credit card authorization on behalf of the cardholder, and we can see it challenge the chargebacks with the credit card company in case it’s being disputed by the cardholder. I hope that makes sense. Does that, to you, Paul?
Paul Larsen: Could you say that one more time?
Kathy G. Sexton: I will try. Okay, in cases where sales reps sign the credit card authorization on behalf of the cardholder, can we challenge the chargeback with the credit card company in case it’s being disputed by the card holder?
Paul Larsen: I don’t know the answer to that question. It sounds like it’s possible, but I think it’s going to depend on the issuer. Issuers have their own rules [00:54:49] I could do some research on that, that’s a really good question.
Kathy G. Sexton: That actually is a great point, there’s a couple questions that I did skip that were very specific. What we will do is, we can get back to you on any questions that we may not be able to answer. I’m going to ask one more question, because we’re getting to the top of the hour and these have been just fantastic questions. Dorothy asks, “Our understanding was that the alignment of the US Visa chargeback monitoring program with EU would not be implemented right away in 2016. What is the alignment to the US CB [00:55:33] program implementation as of January 1?”
Paul Larsen: Our understanding is that it was. We will double check and if it wasn’t we will let you know, but our understanding is that it is in effect right now.
Kathy G. Sexton: Okay. Thank you. I would like to thank everybody for joining us today. We have our next payment processing focused event, it’s the live payment accelerator workshop, it’s going to be May 5 in New York, which’ll focus on best practices, tips, case studies for managing recurring revenue. Watch your inbox for details on that, and anybody that did attend we will send you a special discount code.
I would also like to send a big thanks to Paul Larsen and the entire Paul Larsen team for really helping create a very interesting and informative presentation today. You can see on your screen there’s some great information and some contact information if you would like to get in touch with them.
I would also like to thank, again, Recurly for sponsoring and underwriting this webinar. Thank you to Recurly and the Recurly team.
One final note, we would like to get your feedback on today’s event. Shortly, you’ll be getting an invitation to complete a survey about it. If you can, we would very much appreciate it if you could take a few minutes to let us know what you think of the webinar and any suggestions for topics that you’d like. Whether it’s speakers, topics, anything that you’d like to hear in the future. Thanks again so much for attending today’s webinar and have a great day.
Paul Larsen: Thank you.
Tammy: Thank you for joining us today. This concludes today’s conference, you may now disconnect.
