Recover Failed Payments: 7 Proven Strategies

August 31, 2024

Recover Failed Payments: 7 Proven Strategies

Failed payments cost businesses billions. Here’s how to get that money back:

  1. Use automatic retry systems
  2. Send smart follow-ups
  3. Offer more payment options
  4. Improve customer communication
  5. Use services that update customer info
  6. Simplify payment forms
  7. Study payment failure data

These tactics work together to reclaim lost revenue and keep customers. Let’s break them down:

Strategy Key Benefit
Automatic retries Recover 32% of failed payments
Smart follow-ups Guide customers to fix issues
Multiple payment options Cut cart abandonment 17%
Better communication Build trust, prompt action
Auto-updating info Prevent outdated card declines
User-friendly forms Boost payment success
Data analysis Fix common failure points

Act fast on failed payments. Use data to guide your choices. Keep testing new approaches.

One company boosted recovery from 51% to 66% in a month with these strategies. You can too.

What Are Failed Payments?

Failed payments happen when a transaction is rejected, stopping money from moving from customer to merchant. This can happen at different stages of the payment process, frustrating both businesses and customers.

Failed payments fall into three main types:

  1. Technical failures
  2. Risk assessment failures
  3. Financial failures

Each has its own causes and potential fixes:

Failure Type Common Causes Examples
Technical Issues with payment providers, networks, or banks Server downtime, network errors
Risk Assessment Lack of trust from banks Suspicious patterns, mismatched info
Financial Problems with customer’s account or card Not enough funds, expired cards

Some specific reasons payments fail:

  • Wrong card details
  • Not enough money (nearly half of bank declines)
  • Expired cards
  • Fraud suspicion
  • Transaction limits

For example, a big purchase from a new location might look like fraud to a bank.

Payment failure rates vary widely – from 5% to 20% for most businesses, up to 30% for high-risk industries like fashion or travel.

Understanding these causes helps businesses cut failed payments and get back lost money.

1. Use Automatic Retry Systems

Automatic retry systems are game-changers for recovering failed payments. They try processing a payment again after it fails, often without the customer doing anything.

Why use them:

  • Recover about 32% of failed payments with one retry
  • Cut involuntary churn
  • Improve customer experience

Setting Up Retry Schedules

To make retries work best:

  1. Check your data: See when retries usually work.
  2. Use a token vault: Safely store payment info for retries.
  3. Plan your retries: Decide how many times to retry and when. Example:
Retry Timing
1st 24 hours after failure
2nd 3 days after 1st retry
3rd 5 days after 2nd retry
  1. Use smart logic: Adjust based on why the payment failed.
  2. Tell customers: Let them know about failed payments and upcoming retries.

Balance persistence with customer experience. Too many retries can annoy, too few miss chances to recover payments.

Recharge, a subscription platform, uses smart retries that adjust timing based on success rates. This can boost payment success by up to 2%.

2. Use Smart Follow-up Messages

Smart follow-ups are key for recovering failed payments. These personalized emails tell customers about payment issues and guide them to fix them.

Creating Good Follow-up Campaigns

To make effective follow-ups:

  1. Clear subject lines: Be direct. Example: "Action needed: Payment issue for [Product]".
  2. Keep it short: Focus on:

    • What’s wrong?
    • How to fix it?
    • What happens if not fixed?
  3. Clear call-to-action: Direct customers to update payment info.
  4. Be friendly: Use a helpful tone.
  5. Offer support: Include contact info for help.
  6. Strategic timing: Use a series of emails:
Email When Tone
1st 1 day after failure Gentle reminder
2nd 3 days after Friendly follow-up
3rd 5 days after Urgent request
  1. Personalize: Use customer’s name and account details.

Example follow-up:

"Hi [Name],

We couldn’t process your $[Amount] payment for [Product]. Please update your payment info to keep your account active.

Common issues: expired cards or low funds. We’ll try again in [X] days.

Update here: [Link]

Need help? Contact us at [support info].

Thanks for being a customer!

[Your Company]"

3. Give Customers More Ways to Pay

Offering multiple payment options cuts failed payments and keeps customers happy. It caters to different preferences and boosts successful transactions.

Adding New Payment Options

To add options in Shopify:

  1. Log in to Shopify admin
  2. Go to "Settings" > "Payment providers"
  3. Click "Choose alternative payment method"
  4. Select and activate options

Consider adding:

Method Benefit
PayPal Trusted by 51% of customers
Google Pay Easy checkout, no manual entry
Apple Pay Quick, secure iOS payments
Amazon Pay Uses existing Amazon accounts

Benefits of multiple options:

  • Cuts cart abandonment (up to 17%)
  • Expands customer base
  • Boosts sales

Remember, payment preferences vary by region. For example:

  • Netherlands: iDEAL used for 60% of transactions
  • Philippines: Cash dominates (65% lack bank accounts)

To make the most of multiple options:

  • Review and update offerings regularly
  • Handle customer data securely
  • Make updating payment info easy
  • Allow backup payment methods
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4. Improve Customer Communication

Quick, clear communication about payment issues builds trust and can make the difference between recovering a payment and losing a customer. Good communication turns a potential problem into a chance to show great customer service.

How to Notify Customers Effectively

  1. Use email templates: Set up pre-made emails in Klaviyo or Shopify to:

    • Send emails right after a payment fails
    • Keep your brand voice consistent
    • Give clear instructions for updating payment info
  2. Multi-step reminders: Send a series of reminders:

    • First: Right after payment fails
    • Second: 3-5 days later
    • Final: 7-10 days after second
  3. Personalize: Use customer’s name and order details. Personalized emails have 6x higher transaction rates.
  4. Clear next steps: Every message should have:

    • Brief explanation of the issue
    • Simple instructions to update payment
    • Direct link or button to take action
  5. Use multiple channels: Don’t just use email. Try:

    • SMS for urgent notices
    • In-app messages for active users
    • Phone calls for high-value accounts
  6. Friendly tone: Show that payment issues happen and are easy to fix. Avoid blame or jargon.

Example approaches:

Company Style Key Features
Amazon Detailed Clear steps, step-by-step guide
Hulu Concise Short message, clear action, reminder of benefits
Join It Automated Unique link for easy updates, no login needed

Good communication about failed payments can:

  • Prevent lost revenue
  • Reduce involuntary churn
  • Strengthen customer relationships
  • Show commitment to service

5. Use Services That Update Customer Info

Keeping payment details current is key to avoiding failed payments. Card Account Updater (CAU) services do this automatically, saving time and reducing payment issues.

Why Use These Services and How to Add Them

CAUs work behind the scenes to keep card info up-to-date. They connect with card networks, payment processors, and banks to update expired or replaced cards without bothering customers.

Why use a CAU:

  • Fewer declined transactions
  • Less work for you
  • Happier customers with uninterrupted service

Adding a CAU is often easy:

  1. Check if your payment gateway offers it (many do, like Stripe and Authorize.Net)
  2. Enable the feature in your account settings
  3. Set update frequency (usually monthly)

For example, Authorize.Net’s Account Updater runs monthly for all stored Visa and MasterCard payments unless excluded.

CAU Benefits Details
Revenue boost Postmates saw 1.72% uplift, $60M in one year
Less admin work Automatic updates mean less manual work
Better retention Continuous service keeps customers happy

To start:

  1. Ask your payment provider about CAU options
  2. Set it up and watch its performance
  3. Look for fewer declines and more successful payments

6. Make Payment Forms Easier to Use

Good payment forms boost successful payments. Poor ones lead to abandonment. Here’s how to create user-friendly forms:

Making Payment Updates Simpler

  1. Simple layout: Use one column with aligned fields for a clear path.
  2. Fewer fields: Ask only what’s needed. Fewer fields mean fewer errors.
  3. Smart inputs: Use autofill, dropdowns, and radio buttons to reduce typing.
  4. Real-time feedback: Validate as users type. Show clear error messages.
  5. Mobile-friendly: Optimize for phones with big, touch-friendly buttons.
  6. Visible security: Show security badges and use SSL. 17% of shoppers leave due to security concerns.
  7. Multiple payment options: Offer credit cards, PayPal, digital wallets, etc.
  8. Progress indicators: Show how close users are to finishing.
Form Element Best Practice
Layout One column, vertical alignment
Fields Essential info only
Inputs Autofill, dropdowns, radio buttons
Validation Real-time, clear errors
Mobile Big buttons, touch-friendly
Security Visible badges, SSL
Payment Options Multiple methods
Guidance Progress indicators, clear CTAs

7. Study and Use Payment Failure Data

Analyzing payment failure data helps you understand why payments fail and how to fix issues. This info can boost recovery rates and keep customers happy.

Important Numbers to Watch

Keep an eye on these key figures:

Metric Meaning Why It Matters
Payment Failure Rate % of failed payments Shows how often payments fail
Purchase Success Rate % of successful payments Tells if customers can pay easily
Recovery Rate % of failed payments recovered Shows how well you fix issues

Payment Failure Rate: Most businesses see 5% or fewer failures. Higher? Look closer at why.

Purchase Success Rate: Shows how smooth your payment process is. Low rate might mean customer payment troubles.

Recovery Rate: Shows how well you fix failed payments. One company boosted from 51% to 66% in a month with new tools.

"We took our failed payment recovery rate from 51% to 66% in just a month! Our peak? 71% recovery in January!" – TJ Ferrara, BUBS Naturals Co-Founder

To use this data:

  1. Find patterns: Look for common failure reasons.
  2. Fix issues: Lots of expired cards? Remind customers to update.
  3. Try new tools: Use software for retries or auto-updates.
  4. Talk to customers: Send clear emails about problems and fixes.

Conclusion

Failed payments hurt businesses. In 2020, they cost the global economy over $118 billion. But you can recover many with the right approach.

Recap of strategies:

  1. Use automatic retry systems
  2. Send smart follow-up messages
  3. Offer more payment options
  4. Improve customer communication
  5. Use services that update customer info
  6. Make payment forms easier to use
  7. Study and use payment failure data

These methods work together to recover lost revenue and keep customers happy.

How to Start Recovering More Payments

To boost recovery:

  1. Check your current methods
  2. Try 1-2 new strategies
  3. Track your progress
  4. Keep improving based on results

Each business is different. Test to find what works best for you.

BUBS Naturals saw big results fast:

"We took our failed payment recovery rate from 51% to 66% in just a month! Our peak? 71% recovery in January!" – TJ Ferrara, BUBS Naturals Co-Founder

This shows how powerful these strategies can be.

Key takeaways:

  • Act fast on failed payments
  • Use data to guide choices
  • Keep testing new approaches

FAQs

What is a retry payment?

A retry payment is when a business tries to process a payment again after it fails. It’s common for online transactions, subscriptions, and recurring billing.

Key points:

  • Helps recover revenue from failed transactions
  • Often automated and scheduled
  • Can happen multiple times for one failed payment

Card payments may be retried up to 15 times in 30 days, except for certain declines.

Important notes:

  • Get customer consent for retries
  • Communicate clearly about retry attempts
  • Let customers update payment info easily

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