25 May 2017
Myles Dawson

The Best Payment Blog By Myles

Myles Dawson - Adyen

12Posts 59,530Views 2Comments
Finextra community

Payments strategies 2015-2020-2030

Payments systems visions, strategies, trends, pilots, forecasting, and planning for the short-, medium-, and far-term.

4 tips to optimize your recurring and subscription payments

10 May 2017  |  4984 views  |  0

Increasingly, businesses are adopting subscription and recurring business models, as championed by the likes of Netflix and Spotify. Indeed, Zuora’s latest Subscription Economy Index highlighted how subscription business sales are growing nine times faster than S&P 500 sales, with further research showing 78% of British adults now consume products and services through a subscription model.

But in order to get the best out of this model, a carefully planned and executed payments strategy is required. The focus is simple: Make the signup process easy, and avoid service interruptions. With that in mind, here are 4 tips to help keep your payments seamless every step of the way:

1. Optimise your billing strategy

Unsurprisingly, insufficient funds are one of the most common reasons for a transaction being rejected. But there are actually things you can do to minimise the risk of transactions being rejected for this reason.

It would be sensible to adjust your billing schedule to increase the chance that your customers have funds available. For example, in Western Europe people are typically paid monthly, towards the end of the month, whereas in more emerging markets like Mexico and the Philippines they are paid at least twice a month. In order to maximise authorisation rates, it is therefore worth lining up your billing cycles with such regional payday cycles.

If the rejection is due to technical issues or Do Not Honour, it is worth retrying the transaction. For the best chance of success you should wait no less than an hour and no longer than three or four days before retrying.  

2. Keep card information up to date

Another frustrating reason for a transaction being declined is an expired, lost or stolen card.

Roughly 3% of cards expire every month, not accounting for the cards that have outdated billing information, or have been lost, stolen, or reissued due to data breaches. And of course, when customers receive a new card, updating their payment details for all the services to which they subscribe is rarely a priority. As such, you often won’t know the customer has a new card until a payment is rejected.

Luckily, major card schemes offer a service that allows you to check stored customer cards periodically to see if any changes have been made to that card. So it is well worth enrolling in these account updating services.

3. Strike the right balance in combatting fraud

Businesses that process subscription payments are particularly vulnerable to two main types of fraud: Card testing and reseller fraud.

Card testing is where fraudsters make test transactions using stolen card details. Subscription payments are often used for these tests because they offer easy signup and small, inconspicuous transaction values. There are a few giveaway signs for this kind of fraud, such as payment details being inputted suspiciously quickly, a high number of unique credit cards coming from one IP or email address, and the use of identity obscuring tools, such as proxies.

Less simple to detect is reseller fraud, where fraudsters sign up for trial periods of a subscription service and then sell them on to unsuspecting consumers.

There is a delicate balance to be struck between reducing risk and hindering actual business. And, while it may be tempting to place a blanket block on any suspicious behaviour, you should be cautious not to interrupt payments for genuine customers. It’s estimated that in the US alone, risk checks prevent $4 billion of fraud, while also blocking $8.6 billion of legitimate transactions. So, if not implemented carefully, fraud prevention measures could actually increase the loss of revenue for businesses.

4. Support key local payment methods

In many parts of the world, particularly in the fastest growing markets, credit card penetration is low. Instead customers prefer local methods, particularly when it comes to recurring payments. In China for instance, only 1% of online shoppers pay with international credit cards, whereas 400 million shoppers use Alipay, a wallet that enables recurring payments.

However, it is important to note that many payment methods do not support recurring or subscription payments, whilst others, like debit cards, are not the best optimised for such uses. In Europe, for example, businesses often rely on payment methods such as Giropay or iDEAL for the initial transaction, and then revert to SEPA Direct Debit for the subsequent payments.  

One thing to be aware of is that certain payment methods carry more risk than others for recurring payments. It is therefore worth getting expert advice to help you decide which payment methods are right for your business.

Accepting recurring payments across multiple markets, while ensuring each customer benefits from the best experience every time, can be a challenge. And there are many factors to consider in order to maximize conversion and minimize churn. However, with the right partner, providing rich data insights and experienced expertise, you can optimize the process. The result? Happy customers that can enjoy your products or service again, and again, and again.

TagsCardsPayments

Comments: (0)

Comment on this story (membership required)

Latest posts from

Myles's profile

job title UK Country Manager
location London
member since 2014
Summary profile See full profile »
Myles blogs from his role as UK Country Manager at Adyen about all things omni-channel payments, and more besides.

Myles's expertise

Member since 2014
11 posts2 comments
What Myles reads

Who's commenting on Myles's posts