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More Declined payments Articles
Failed payments in SaaS can be a real issue for both the customers and your company.
Anyone tasked with understanding why payments decline or fail knows their work is cut out for them. The amount of financial information to be followed is so disparate; it can seem like one is going round in circles most of the time.
With Baremetrics, the nightmare of not understanding why declined or failed charges happen is one that can be avoided. Baremetrics monitors subscription revenue for businesses by integrating directly with your payment gateway, such as Stripe, and pulls information about your customers and their behavior into a crystal-clear dashboard.
From there you can get insights into your all failed payments using our dunning tool, Baremetrics Recover. Sign up for the Baremetrics free trial and start seeing more into your subscription revenues today.
Why do payments fail?
When payments fail, the chances of that customer churning and not coming back drastically increases. Why does it happen in the first place?
Here are 7 reasons why your customer’s credit cards fail in the first place:
1. A bank’s attempt at reducing fraud:
Payments can fail due to a bank wanting to lower the risks of fraudulent payments. From the administrative backend of your SaaS website, it may be unclear if this is the reason because these failed payments (and their causes) may be generally categorized.
When clients get to the checkout page, they will need to enter details like CVV, multi-digit account or credit card number, expiration date, shipping address, and billing address.
It is a lot of information so the chances of something being missed here and there is likely. When client details are incorrect, it’s difficult to process their payments; payment details such as credit card information cannot be recalled correctly from the incorrect information provided by the client. When this happens, the checkout process goes no further than the error message or declined payments message.
3. Blocked Payments:
When payments are blocked, it’s due to the bank wanting to prevent fraud by deeming a transaction high-risk.
In such cases, the card issuer (namely, a commercial bank) may process said transaction, but the payment system your company integrates may not charge the customer account, still yielding a failed charge. Situations where the postal code does not match the card issuer’s information may be flagged as a risky transaction.
4. Invalid API calls:
While developing a payment system API, it’s advised to complete several test runs to make sure all kinds of bugs are identified early on. The reason being when API codes are not positioned to handle possible payment errors, your customers’ payments will often fail.
An example of this would be when one of your customers is trying to make a purchase on your website and their network connection isn’t strong enough. That unstable connection can prevent an accurate recall of their profile data from your company servers. This results in a failed payment due to an invalid API call.
If your company uses a payment provider like Stripe, be sure to include lines of code that can anticipate these kinds of errors.You can do so by prompting your customer to initiate another credit card transaction or online payment.
5. Payments declined by card issuers:
Card issuers (commercial banks or other financial institutions) have automated systems that consider charges sent to them from SaaS companies like yours for authorization or decline. Depending on the payment system your SaaS company uses, information relays on the reasons for cards declined by the issuer can be extensive.
On their end, card issuers consider and analyze pieces of information about your customer, such as account balance, spending habits, CVV, among others, before an authorization is made.
In the case of a decline, the card issuer may provide helpful information on why the payment was declined. However, most declined payments by card issuers are categorized as “generic” and without any more specific information.
6. Credit Card Expiration:
A transaction is never approved when the card in use has expired or been deactivated. This is one of the more common reasons why credit card payments fail.
7. Exceeding Credit Limit:
Credit limits or insufficient account balances are another reason for declined payments and failed charges. Once a purchase exceeds the credit limit, the payment may be declined. When this happens, simply reach out to your customer to notify them that their credit card failed due to a low balance.
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How can you avoid failed payments?
It’s easy to see from the reasons as mentioned above that the problem isn’t always coming from the payment company.
Conveying the right information to your customer at the right time can make all the difference when there is a declined payment or failed charge. We’ve found that up to 9% of your monthly recurring revenue is at risk each time a payment fails.
Signing up for the Baremetrics Recover tool brings you a step closer to solving this problem of failing payments for good.
Here’s are 4 ways you can get started today:
1. Expiry Date Reminders:
Sending reminders for expiry dates that are just around the corner can alert your customers before a failed payment occurs. When these reminders (email, text, or push notifications) are in place, the chances your customers use an expired card is greatly reduced.
2. Notifying of Out-of-Range Payments:
Given the global reach of your SaaS company, some of your customers will be processing payments from countries that are considered out-of-range.
Such transactions are likely to fail as a security measure initiated by the forgeign bank. Informing your customers that their country may be out-of-range can prompt proactive action on the part of the customer.
3. Identify card or financial restrictions:
Similar to situations in out-of-range countries, some cards contain structural restrictions (e.g., FSA/HSA cards for healthcare products and services) or functional restrictions (international card payments must not exceed $100).
When customers are prompted to try different means of payment before the fact, the chances their credit card fails is less likely.
4. Identify CVC or AVS failed checks:
Due to network errors, the security checks on CVV or AVS codes may not be successful the first time around.
Resolving this issue when it happens can ensure the next try will be successful. If the country where the card is issued differs from the client’s current IP address, it can be ruled as a potentially fraudulent transaction.
When you know why a customer’s credit card is failing, it becomes easier to reach out to your customers with the right kind of information to enable successful payments the next time.
How can you monitor your customers’ declined payments?
Staying on top of customers’ failed payments is a painful, yet necessary evil of all SaaS businesses.
Since the bulk of your churn comes from involuntary churn (credit card failures), having a process in place to ensure you don’t leave any money on the table is a must.
Below are three ways to monitor failed payments based on what works best here at Baremetrics:
1. Integrate an efficient online payment system
You can tell the efficiency of a payment system by how seamlessly it integrates with your checkout page. Stripe, as an example, allows you to start accepting payments with a few lines of code.
The smart payments system works seamlessly across devices and includes support for different payment types (recurring or one-time payments) and payment authentication.
Braintree provides optimized processing from day one. They leverage strong communication among payment methods (Visa, Mastercard, etc.) to achieve seamless payments processing on the first attempt.
When your payment system can automatically show you what payments have declined or failed, it arms you with the correct information to follow up with your customers.
2. Reach out to customers with solutions
When a payment fails, simply send a quick email to your customer with the necessary steps to update payment details.
If their card details have expired or their current IP address or postal code no longer matches the information held by the card issuer, you can prompt them to update this specific information as they may not be aware. Where the customer should visit their bank (e.g., when they need to request for a new card), it is helpful to indicate this in a customer support email.
The more information your customer has about getting their payments right the next time, the higher the chances they will try again.
3. Integrate an automated Dunning solution
For membership and subscription-based SaaS companies, churn is a big problem. Churn is a recurring affair when payments are not quickly recovered when they fail. A Dunning solution is a payment recovery software that alerts customers when their subscription payments are due. Baremetrics Recover automates a dunning solution and can easily be integrated into your website.
Monitor your failed payments using Baremetrics
If your SaaS company wants to get in front of declined payments and failed charges, using a top payment system and a dunning solution is a must. When using a payment provider like Stripe, take it a step further and get the most out of monitoring your failed payments with Baremetrics Recover.
Recover provides a combination of tools to help you combat failed payments with customizable email campaigns, in-app reminders and paywalls, credit card capture forms, and in-depth analytics to track everything along the way.
The best part?
If the recovered revenue doesn’t at least pay for your entire Baremetrics account, we’ll credit you next month! No commissions. No gimmicks. No hidden fees. We offer simple tiered pricing so you don’t overpay for commission on the revenue that should be yours in the first place.