Recover Failed Payments: 7 Proven Strategies
August 31, 2024
Failed payments cost businesses billions. Here’s how to get that money back:
- Use automatic retry systems
- Send smart follow-ups
- Offer more payment options
- Improve customer communication
- Use services that update customer info
- Simplify payment forms
- 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Auto-updating info | Prevent outdated card declines |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.
Related video from YouTube
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:
- Technical failures
- Risk assessment failures
- 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:
- Check your data: See when retries usually work.
- Use a token vault: Safely store payment info for retries.
- 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 |
- Use smart logic: Adjust based on why the payment failed.
- 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:
- Clear subject lines: Be direct. Example: "Action needed: Payment issue for [Product]".
-
Keep it short: Focus on:
- What’s wrong?
- How to fix it?
- What happens if not fixed?
- Clear call-to-action: Direct customers to update payment info.
- Be friendly: Use a helpful tone.
- Offer support: Include contact info for help.
- Strategic timing: Use a series of emails:
When | Tone | |
---|---|---|
1st | 1 day after failure | Gentle reminder |
2nd | 3 days after | Friendly follow-up |
3rd | 5 days after | Urgent request |
- 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:
- Log in to Shopify admin
- Go to "Settings" > "Payment providers"
- Click "Choose alternative payment method"
- 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
-
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
-
Multi-step reminders: Send a series of reminders:
- First: Right after payment fails
- Second: 3-5 days later
- Final: 7-10 days after second
- Personalize: Use customer’s name and order details. Personalized emails have 6x higher transaction rates.
-
Clear next steps: Every message should have:
- Brief explanation of the issue
- Simple instructions to update payment
- Direct link or button to take action
-
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
- 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:
- Check if your payment gateway offers it (many do, like Stripe and Authorize.Net)
- Enable the feature in your account settings
- 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:
- Ask your payment provider about CAU options
- Set it up and watch its performance
- 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
- Simple layout: Use one column with aligned fields for a clear path.
- Fewer fields: Ask only what’s needed. Fewer fields mean fewer errors.
- Smart inputs: Use autofill, dropdowns, and radio buttons to reduce typing.
- Real-time feedback: Validate as users type. Show clear error messages.
- Mobile-friendly: Optimize for phones with big, touch-friendly buttons.
- Visible security: Show security badges and use SSL. 17% of shoppers leave due to security concerns.
- Multiple payment options: Offer credit cards, PayPal, digital wallets, etc.
- 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:
- Find patterns: Look for common failure reasons.
- Fix issues: Lots of expired cards? Remind customers to update.
- Try new tools: Use software for retries or auto-updates.
- 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:
- Use automatic retry systems
- Send smart follow-up messages
- Offer more payment options
- Improve customer communication
- Use services that update customer info
- Make payment forms easier to use
- 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:
- Check your current methods
- Try 1-2 new strategies
- Track your progress
- 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