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How to Resolve Failed Recurring Payments

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Written By: author image Natalie Jones

Feeling frustrated by failed recurring payments on your eCommerce site?

If you accept recurring payments, you’re probably familiar with failed transactions. Unfortunately, they’re a reality for any subscription-based business and can lead to involuntary churn, which ultimately affects your revenue and growth.

In this article, we’ll go over why failed recurring payments happen and how you can respond to them to reduce customer churn 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 a lot of possible reasons, but here are the big culprits:

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

If you’re using Stripe as your payment processor, which we strongly recommend, you can easily access payment reports to look at each transaction to determine why it failed. With less reputable processors, however, you aren’t always given a reason.

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 Common Failed Payment Scenarios

Before we dive into how to resolve failed payments, let’s go over some of the most common scenarios you should understand so you can address them in the most productive way.

1. Customers Use Failed Payments to Stop Their Subscriptions

Oftentimes, customers will tell their bank or credit card company to reject subscription 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 them anyway (gyms, magazine subscriptions, and some membership sites are notorious for this).

2. Some Subscribers Create a New Subscription

Another scenario is when a customer notices a failed payment, but rather than contacting you or updating their payment details, they create a new subscription instead.

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

3. Some Subscribers’ Payments Will Fail Every Month

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

4. Many People Feel Embarrassed About Failed Payments

Do your best at trying not to assume people are trying to make your life difficult. Sometimes, the issue is not their fault. 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 won’t 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 tools, or your payments plugin to learn what’s available. Make sure you understand how these features work. Is there a “notify customer” button? A “retry payment” link? Perhaps an automatic renewal reminder?

If you’re already using WP Simple Pay, the #1 Stripe payments plugin for WordPress, to accept payments on your site, you can allow your subscribers to manage their own subscriptions. This is a great way to prevent failed payments because they can update their payment details on their own.

The plugin makes it easy for you to set up recurring payment options directly in the payment form builder. It also gives you the option to let your customers manage their subscriptions On-site or through Stripe’s hosted Customer portal.

failed recurring payments

Stripe works on your behalf to help 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 set up a Customer portal and adjust these settings in the Stripe dashboard.

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’re using 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.

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 grace period for the sake of good customer service, but 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 as a freelancer or contractor 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 a service or access to your products without their recurring payment.

Keep in mind, however, that this method is not sustainable for growing businesses. 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. It’s a good idea to segment those customers in your email marketing tool, such as Drip or ActiveCampaign, so you can send them special recovery attempt 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.”

Be sure to create an integration between your payment processor and your email marketing tool. For example, WP Simple Pay has a built-in automations feature that lets you easily connect your Stripe payment forms to several different email marketing platforms directly from the form builder.

Step 5: Implement a Dunning Email Service

A dunning email is a simple transactional 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’ve outlined above to address these failed transactions and reduce customer churn.

If you liked this article, you might also want to check out our guide on how to add a setup fee to a subscription plan in WordPress.

What are you waiting for? Get started with WP Simple Pay today!

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