Broken payments — how to save more recurring payments
Recurring payments are what they sound like, payment transactions that occur over repeated, periodic cycles without interruption. They're not new when you think about it—cable, telephone and utility providers have been driven by them for decades. But today they've become a staple of online payments made for a range of subscription services. And it's online that their tendency to "break" has become particularly apparent. A recurring payment breaks, for example, when a credit card that is authorized month-after-month is updated or replaced let's say after a data breach. Sellers who don't receive updated information can find themselves without payments.
Businesses of all types, including retailers online and off, are extending the so-called "subscription economy" model because it supports predictable revenue streams, can accelerate growth and help maximize cash flow.
Since the dawn of eCommerce, consumer buying habits have moved aggressively toward simpler, hassle-free online shopping experiences catering to very busy lifestyles across generations and across channels. We're at that point of commerce on demand. Nowhere is this on-demand movement more clear than subscribed services we use. Rooted in consumers' desires to receive products they love without interruption subscription services today span a gamut of needs: razor blades (Dollar Shave Club), high-end beauty (BirchBox), nutraceuticals (Healthy Direction), wine selections (Club W), cigars (Thompson), snacks in a box (NatureBox), to name just a few. Long-standing retail leaders, such as Target (monthly diaper shipments) and Walmart (Goodie service) are in on it too.
Over the last few years, card reissuance has accelerated for a few reasons. First, there are data breaches. In the aftermath of breaches, issuers—either as a function of real fraud or as pre-emptive move against it, have taken to scale reissuing of cards. Then of course there are the mass reissuance events associated with the introduction of chip cards which began heavily in 2015. These reissuance events have involved both debit and credit cards.
So how do you keep up with all of these changes and minimize broken payments?
At a minimum, you should be using the account updating features offered by card brands and payment processors. In some instances, these services are available in an automatic mode, requiring little energy from you to maintain up-to-date card data information. For example, a "recovery" solution can help with recurring payments by obtaining cardholder information from the card networks so that payment authorizations automatically use the most up-to-date card information.
Based on experiences with merchants, including retailers and donor-driven non profit organizations, here's what merchants tell Vantiv they value most about recovery solutions.
- Workload of maintaining current card information is shifted off of them and onto a provider like Vantiv
- Card update requests made automatically to the networks and subsequently processed
- Most current card information is used on authorization attempts to turn declined authorizations into approvals
- Card data exposure is minimized, or eliminated, through end-to-end data protection
- Maximize customer lifetime value by retaining highly-prized recurring payment customers
According to Michelle Epstein, deputy chief advancement officer at Sierra Club, the nation’s largest and most influential grassroots environmental organization, “We leveraged Vantiv’s eCommerce Recovery offering for the last two weeks of our April 2015 charge cycle. The results were amazing – we recovered 63 percent of our declined authorizations in less than 30 days. It usually takes us four-to-five months to recover even 50 percent. This has already made a huge difference in our top-line revenue growth.”
Cindy Champion, vice president of marketing for Healthy Directions, LLC, a leading health publisher and direct-to-consumer retailer of nutritional supplements and skincare products, said her company realized an additional $3.4 million in revenue – over a six-month period – using Vantiv’s Recovery for their subscription customers. It also helped her reduce the volume of inbound customer service calls, as well as inventories on reserve.
Implementing an effective recurring payments strategy can be challenging and overwhelming, but recovery solutions can help you avoid having to reach directly to your customers to obtain new card data. An effective approach can also help minimize the likelihood of involuntary churn and attrition through automatic card updates, and it helps you maximize customer lifetime value with predictable revenue streams.
Read more about Vantiv XCelerator for online and eCommerce payments, or ask us for help in better understanding broken recurring payments.