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How to Handle Failed Recurring Payments



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If you accept recurring payments on your website, you’re probably familiar with failed transactions. They’re an unfortunate reality of any subscription business. They lead to involuntary churn which ultimately affects your revenue and growth.

Failed recurring payments
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In this article, we’d like to help you understand why failed recurring payments happen and how you can respond. If you’re prepared and ready to respond to a failed transaction, there’s a good chance you can recover the customer and keep your revenue flowing.

Why Recurring Payments Fail

Before you can address failed payments, it’s good to know why they fail in the first place. There are lots of possible reasons, but here are the big culprits:

  • Expired card details
  • Insufficient funds
  • Bank fraud prevention refuses the charge

If you use a mainstream payment processor such as Stripe, you can look at each transaction to determine why it failed. With less reputable processors, however, you aren’t given a reason. (PayPal doesn’t give much reason either, which is odd considering their resources.)

The worst type of failed payment is when the customer’s bank refuses to charge. It’s not like you can ask the bank for more information. The only solution is to ask your customer to contact their bank directly. Obviously this is frustrating for everyone.

Fortunately, a failed payment doesn’t mean you don’t get the sale. It can usually be resolved one way or another.

4 Things to Know About Failed Payments

Before we get into resolving failed payments, let’s go over some unique scenarios you should understand about these kinds of transactions.

Some Customers Use Failed Payments as a Way to Stop Their Subscription

They’ll tell their bank or credit card company to reject those payments. In some cases, they do this because they’re uncomfortable asking you to discontinue their service. In other cases, they think you’ll ignore their request and keep charging anyway (gyms and magazine subscriptions are notorious for this).

Some Subscribers Will Notice a Failed Payment and Then Create a New Subscription Rather Than Contacting You

It’s great that they’re eager to keep using your service, but you’ll need to cancel their original membership or they could be double-charged. As you can imagine, this is difficult at scale, so be prepared to investigate complaints of extra charges.

Some Subscribers’ Payments Will Fail Multiple Times Every Month

Unfortunately, for any number of reasons, some people just may not have the money in their account at the time of renewal. You can keep trying each month until it goes through, reach out to them to come up with a better system, or (if the failures cost you fees) remove them as a subscriber.

Many People Become Embarrassed When Their Payments Fail, Even if it’s Not Their Fault

Try not to assume people are trying to make your life difficult. Don’t be accusatory when you contact them. Use empathetic language and let them know you aren’t concerned about the reason, you just need to fix it.

How to Respond to Failed Payments

It’s important to have a process in place to respond to failed payments before you get your first one. Once a payment fails, you want the ability to respond quickly to recover the customer. The longer you wait, the less chance you have of retaining that subscription revenue.

Don’t make the assumption that failed payments can happen to you. They happen to every business that collects recurring payments.

Step 1: Understand Your Tools

The first thing you should do is discover what features are available to you to investigate failed payments. Poke around your payment processor account, your ecommerce tool, or your payments plugin to learn what’s available. Make sure you understand how those features work. Is there a “notify customer” button? A “retry payment” link?

Stripe, for example, helps you recover failed recurring payments automatically by retrying to collect. If that doesn’t work, it notifies you and the customer about the issue. You can adjust these settings in the Stripe dashboard, but keep in mind that Stripe sets them as default because they work.

Failed recurring payments

If your payment tool sends an email to the customer on your behalf, make sure that email includes steps to fix the issue. “Hey, your card doesn’t work” isn’t enough. The customer needs to be walked through the process of inputting better payment details.

If you use WP Simple Pay with Stripe, you can configure whether you’d like to email your subscribers a reminder to keep their payment information up to date before a subscription renews. This gives them an opportunity to update their details before the renewal so a failed transaction never occurs. Read how here.

Step 2. Suspend Access or Stop Service

While a failed recurring payment is often a simple mistake, that doesn’t mean you should continue to provide access to your products or services during the unpaid period. It’s tempting to give people a little leeway for the sake of good customer service, just look out for people who abuse your generosity to get free subscription time.

If the customer’s recurring payments give them access to an application or special content on your website, suspend their account. Redirect them to a page that asks them to update their payment details.

If you perform work based on the recurring payment, stop working right away. Any work you perform after they stop paying could be lost time and money, so wait until you have more information from the customer.

Step 3: Contact the Customer Manually

If your payments tool doesn’t notify the customer automatically, or if you prefer to do it manually, your next step is to send an email. Without accusing the customer of any wrongdoing, let them know that their most recent payment failed and that you would like to help them fix the problem. This is also a good time to gently remind the customer that you can’t provide service or access to your products without their recurring payment.

Keep in mind, however, that this method is not suitable at scale. If you have thousands or tens of thousands of customers, you couldn’t possibly send a manual email for every failed payment. You need an automated solution.

Step 4: Tag the Customer in Your Email Marketing Tool

You’re using email marketing to engage your customers, right? Great!

Even if your payments processor sends an email to the customer, you may want to take additional steps to recover their subscription. So it’s a good idea to segment those customers in your email marketing tool so you can send them special recover messages.

For instance, you might set up an email sequence like this:

  • Email 1: “Hey, just reminding you that your payment failed.”
  • Email 2: “Heads up! We’re deleting your account soon.”
  • Email 3: “Here’s a discount code if you decide to resubscribe.”

Create an integration between your payment processor and your email marketing tool. The mainstream email marketing tools have easy to set up integrations already, but if you use something less popular, you might need to use Zapier to connect them together. Set the integration to add a tag to anyone whose recurring payment fails and to remove the tag if the failure is fixed.

Step 5: Implement a Dunning Email Service

A dunning email is a simple message that notifies the customer about the status of their account and gives them instructions on how to make changes. In the case of a failed payment, a dunning email would let the customer know that you weren’t able to charge their card so their service has been suspended.

Here’s a basic dunning email from Spotify:

Failed recurring payments

Here’s a dunning email with more forceful language from Helpscout:

Failed recurring payments

If none of your payment tools have features to send dunning emails, you can use a third-party service like Stunning.co or ProfitWell to send them for you. Some tools will even notify customers before their card expires so they can update their payment details before the payment fails. A tool like this could pay for itself in retained customers.

Going Forward

Failed recurring payments are only a problem if you don’t do anything to resolve them. Follow the tips we outlined above to address these failed transactions and keep your recurring revenue flowing in.

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