December 16, 2022 | Authored by: Trace Galloway
What industries could win 2023 with a game changing approach to failed transactions
In the world of subscriptions, failed transactions are a fact of life.
Expired or stolen credit card. Temporary lack of funds. Simple error when entering payment details…
E-commerce and digital media companies have been dealing with passive churn and failed subscription payments since forever.
But no company that operates on recurring payments is immune. There are several other industries where failed transactions are a problem that hasn’t been solved.
In 2023, that is going to change.
The risk…and the solution
A failed transaction disrupts the connection between the service provider and the consumer, giving the customer an opening to leave for good. Moreover, if the customer is disconnected from a service due to a payment error, then a lot of effort and resources must go towards reactivating them. Failed transactions are more than just a momentary headache; they make the company vulnerable to high levels of churn and future lost revenue.
Many subscription companies are already adept at preventing failed transactions before they occur. However, there are three industries in particular that haven’t yet done the mindset shift to prevent churn and they will be the most affected by failed transactions in 2023.
Typically, a patient undergoing treatment or elective surgery will only pay a partial amount of the bill upfront. The balance is due on a recurring payment plan. While this is convenient for the customer, it puts hospitals and healthcare providers at risk. After the treatment is complete, the customer has low incentive to track whether the payments are going through. If a transaction fails for whatever reason, it is up to the healthcare company to “chase” the customer via a collection department or external collection agency – a long, expensive, and drawn-out process. It is far preferable for medical providers to prevent failed transactions in the first place.
Insurance is a complex and highly competitive industry. Customers make recurring payments to maintain their coverage and have little contact with the insurance provider unless they need to make a claim. Failed transactions are a dangerous trap for insurance companies, because they disturb the smooth and frictionless connection with the customer, giving them the opportunity to negotiate a better plan or lower premium with a competing insurer. This is a situation that insurance companies should and can avoid at all costs. With the right subscription technology, they can.
Utility bills are not usually thought of as “subscriptions.” A typical subscription plan has a fixed recurring price, while utility payments vary from month to month, depending on usage. Utilities such as electricity and water are essential services, so there is no risk of active churn. Nevertheless, utilities and subscriptions share one very important characteristic.
Like subscription companies, utility companies depend on a seamless ongoing connection to customers and their recurring payments. If a transaction fails, the work needs to be done to fix the payment issue and reconnect them to the utility service. This demands significant and costly resources that could be saved if utility companies make the move to subscription technology in 2023 and start preventing failed transactions before they happen.
In 2023, build a resilient payment strategy
There is no industry that works on a recurring payment model that is not affected by failed transactions. A monthly fee is a monthly fee, and you don’t need to be Netflix or Peloton to start treating your customers like subscribers.
With Vindicia Retain, healthcare providers, insurers and utility services can finally catch up with subscription companies that are already managing failed transactions, preventing passive churn, and recovering lost revenue smoothly and quickly. In 2023, it’s time to get out of the expensive and inefficient loop of failed payments and collections, once and for all.
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