Payments can fail for a variety of reasons. Most declines are soft declines, in which a card issuer approves a payment, but there is some problem in the payment process. Some are hard declines, in which the card issuer itself declines the payment. Here then are 25 reasons why a payment might be declined in your subscription-based business, as well as our strategies to recover them.
1) Account has been closed: Credit card issuers can close accounts either without notice to the user or, in the context of a single payment, before such notice has reached the user.
2) Payment collection failed: Often this is due to automated fraud detection on the part of the payment gateway.
3) Not enough available credit/card maxed out: If a user exhausts the credit limit on their card, it cannot be used for payments. This can result from unplanned or recurring expenses but also a lowered credit ceiling.
4) Invalid credit card number: Often a user error, the credit card number inserted into the gateway, does not match an active account.
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5) Invalid address: Similarly, the billing address inserted into the gateway doesn’t match an address associated with an active account.
6) Blocked by merchant account / payment gateway is misconfigured: It’s possible your account configuration doesn’t accept the payment, although this is relatively rare.
7) Transaction not allowed: In this case, the financial institution that issued the credit card has not authorized the payment for various reasons.
8) Account is suspended: In most cases, the user has failed to make minimum payments, and the credit card issuer has prevented them from making new purchases with the card.
9) Payment is past due: Before the account is suspended, but after the card is maxed out, payments may fail to process because the new credit cycle hasn’t begun yet since the customer has been unable to make the payment to reset it.
10) Expired card: Credit cards that have expired cannot be used for payments.
11) Incorrectly entered information: Although the payment method may be valid and current, the payment gateway doesn’t accept it.
13) Account flagged for fraud / do not honor: In this case, the credit card issuer suspects the account itself has been compromised, often beginning with a transaction that does not match the user’s typical spending.
14) Transaction cannot be authorized: Usually, this is the result of an incorrect one-time password entry.
15) Signature validation failed: If the 3D signature check fails, the payment will not be processed.
16) Processor denied: In this case, the payment authorization was denied by the credit card issuer.
17) Primary cardholder deactivated an additional user: The primary cardholder can authorize or deauthorize additional users, and in this case, they have chosen to deauthorize another user who then attempts to use the card.
18) Insufficient funds/payment not captured: The bank account linked to the payment method does not have enough funds for the transaction. It is also possible that the CVV has not been entered incorrectly, which fails to capture payment.
19) Transaction limit exceeded: Some credit card issuers have limits for the amount of funds transferred in a single transaction.
20) Card reported lost or stolen: If the cardholder reports that the card has been lost or stolen, the issuer will block payments.
21) Purchase made while traveling: Alternatively, purchases made while traveling may be flagged as such by the issuer.
22) Credit card has been canceled: The issuer has canceled the credit card for a variety of reasons.
23) Credit card type isn’t accepted: Payment portals may not universally accept smaller credit card issuers.
24) Incorrectly entered information: Some piece of information necessary to identify the user’s account has not been entered correctly.
25) Transaction blocked: The card has been declined for some reason, but there may not be a general hold on the account.
Unfortunately, there are far more than 25 ways for payments to fail regarding your subscription-based business, but we cannot enumerate them all here. Although failed credit card payments are a fact of life, there is plenty you as a business owner can do to manage this problem. Advanced planning is vital since customers will often switch services or simply decide not to renew their subscription service at all if a payment fails. Taking a proactive approach will increase customer retention and the recurring revenues that are the lifeblood of any subscription-based business.
Failed payment recovery refers to the toolkit we use to recover your lost revenue from failed payments. Some of these approaches work to reduce the number of failed payments, while others address them after they happen. For example, to prevent a failed payment, you could send an email reminder to the customer to update their payment information, but these emails can get lost or ignored. For this reason, it is essential to give your customers the option to update their payment information directly through your site, avoiding the need for you to reach out to them.
Card updater enables your business to update your subscribers’ card information when their cards are nearing their expiration dates. Suppose a customer doesn’t update their payment details and the payment fails. In that case, the usual response is dunning emails, which nudge the customer into making such an update to continue their subscription. This is not an ideal solution because of the reasons stated above: according to our statistics, dunning emails alone recover only 15% of failed payments. Some of the reasons behind this low recovery rate include ignored automation, lack of empathy, and inability to problem solve.
With Gravy, you receive field-tested and effective payment recovery and customer retention results. Our team of payment recovery and customer retention experts uses proven engagement strategies. It leverages our platform of innovative technologies to retain your customers with empathy, problem-solving, and the human touch. Of course, it’s essential to take a preventative approach to failed payments and customer churn.
Still, it’s also necessary to manage the “Forgotten Funnel” at the back end of your business to keep a healthy volume of loyal, paying customers. We can take this task and turn it from an unpleasant fact of business to an opportunity to quickly and efficiently preserve your brand and retain your customers. Every minute counts when managing customer churn since it’s not only about avoiding losses but building a solid foundation of satisfied customers for a robust and stable future. So take the first step and book a chat with Gravy today to learn more about how we can empower your business with our team of experts, so you can continue to do what you love.