How failed payment data can optimize your subscription business for endless growth

For companies and organizations operating under the subscription business model, failed payment data analysis is an important business process to examine and interpret information concerning declined credit and debit card payment transactions. The process involves analyzing the reasons behind payment friction and failures, identifying patterns and trends, and extracting insights to optimize the payment authorization processes and reduce the occurrence of failed payments in the future.

Failed payment analysis typically involves examining the data associated with failed online payment transactions, such as error codes, transaction details, subscriber information, payment method, and timing of the failures. By analyzing this data, subscription businesses can gain a deeper understanding of the underlying causes of payment failures and take appropriate actions to mitigate them in the future.

Failed payment transactions directly impact your company's bottom line by reducing immediate revenue. If your business is based on subscriptions, memberships, or other forms of recurring revenue, then failed payments have an even bigger impact because payment friction or failure can lead to passive churn, which means you lose the subscriber and will not receive the recurring revenue in the subsequent months or years. By analyzing the payment transaction data, your business can identify trends, patterns, and common issues that lead to payment failures. This information can then be used to implement strategies to minimize payment failures and improve ongoing revenue flows.

In order to leverage failed payment data to improve revenue flows and customer retention, your businesses should dig deep into your past payment transactions and analyze areas such as:

• Reasons for payment failures: By examining the error codes associated with failed online transactions, your business can determine the primary causes behind payment declines. These reasons can vary, including insufficient funds, expired cards, technical errors, incorrect card details, fraud suspicion, or issues with your payment provider.
• Payment methods and timeframes: Analyzing failed payment data can help identify trends or patterns in payment failures. For example, certain payment methods or specific time periods may be more prone to failures. Identifying these patterns will allow your business to proactively address and resolve issues to reduce future payment failures and passive churn.
• Subscriber information: By examining customer information associated with failed transactions, your business can identify which recurring customers are experiencing payment issues, potential fraud patterns, or demographic segments more likely to experience payment friction or failure. This can help your business tailor strategies to address specific customer needs or risks.
• Payment processes: Look for data that can highlight areas of improvement in your payment transaction process. This may help identify possible weaknesses with your payment gateway or provider, issues with specific payment methods, or errors in the checkout process that contribute to payment failures. By analyzing and addressing these issues, your business can enhance your payment systems, streamline the checkout process to remove friction, and reduce the likelihood of future payment transaction failures.

Payment failures lead to immediate and future revenue loss for your subscription or recurring revenue business. Failed payment data analysis can help you quantify the financial impact of payment failures, enabling your business to understand the magnitude of the problem. By implementing strategies based on the analysis, such as card retry processes, personalized notifications, or alternative payment options, your business can recover potential revenue and minimize subscriber churn.

By reviewing past credit card payment declines, your business can gain valuable insights into customer behavior, payment trends, and areas for process optimization. These insights can be used to improve payment success rates, enhance customer satisfaction, and optimize the overall subscription management process. For example:

• Subscriber communication and retention: Failed payment data can be used to improve customer communication and retention strategies. For example, your business can set up automated emails or notifications to alert subscribers about failed payments and provide instructions for resolving the issue. By addressing payment friction proactively, your business can minimize passive churn and maintain a positive customer experience.
• Discover areas for process optimization: Failed payment data can help your business identify areas where you might want to improve your business processes. For example, if a significant number of payment failures occur on a specific day of the month, a specific month, or a specific season, this could indicate issues with your renewal of billing processes. Similarly, if a particular payment gateway or payment provider consistently experiences higher failure rates, you may want to explore alternative providers or investigate technical integration problems.
• Develop targeted strategies: Insights from failed payment data can help your business develop targeted strategies to reduce payment friction and failures. For example, if a specific customer segment or geographical region consistently experiences payment issues or card declines, you may want to offer alternative payment methods, flexible payment options, or timely reminders for upcoming subscription renewals to improve your success rate.
• Predictive analytics: Over time, analyzing failed payment data can help your business develop predictive analytics models. By identifying patterns and correlations, you can predict which subscribers are more likely to experience payment failures in the future. This will allow your business to take proactive measures, such as contacting subscribers in advance of renewal cycles or implementing other preventive measures that can result in extended customer lifetime value.

The process for a subscription or recurring revenue business to analyze past credit card payment failures typically involves the following steps:

1. Capturing data. Gather the necessary data related to past failed credit card payment transactions. This includes transaction details, subscriber information, error codes, payment method, time of transaction, and any other relevant data points.
2. Cleaning and preparing data. Cleanse and organize the data to ensure accuracy and consistency. Remove any duplicate or irrelevant records and format the data for analysis.
3. Categorizing failure reasons. Analyze the error codes associated with the failed transactions to categorize the reasons for the payment declines. This helps identify common failure patterns and themes.
4. Exploratory data analysis. Conduct exploratory data analysis to gain initial insights into the payment failures. This may involve visualizing the data, calculating basic statistics, and identifying any apparent trends or outliers.
5. Identify key metrics. Determine the key metrics to assess the impact of payment failures. These metrics may include the total number of failed transactions, the revenue loss due to failures, the percentage of failed transactions compared to successful ones, and other relevant measures.
6. Perform root cause analysis. Dig deeper into the data to identify the root causes of payment failures. This may involve examining subscriber information, transaction characteristics, error codes, payment provider performance, or other factors that could contribute to failures.
7. Segment and analyze. Segment the data based on different attributes such as subscriber demographics, payment methods, or transaction types. Analyze each segment separately to understand any unique patterns or characteristics associated with payment failures.
8. Identify trends and patterns. Look for recurring trends, patterns, or anomalies in the data. This could include identifying specific time periods, days of the week, seasons, or product categories that are more prone to payment failures.
9. Subscriber behavior analysis. Analyze subscriber behavior associated with failed transactions. Identify common traits or characteristics among subscribers experiencing payment failures, such as high-risk profiles or specific purchase patterns.
10. Insights and recommendations. Extract actionable insights from the analysis and use them to make informed decisions for your subscription business. These insights may involve optimizing the payment process, enhancing fraud prevention measures, implementing subscriber education initiatives, or improving customer support for payment-related issues.
11. Monitor and iterate. Continuously monitor the payment failure rates after implementing any changes or recommendations. Iterate on the analysis process to refine strategies and improve payment success rates over time.

By following these steps, your business can gain valuable insights into past credit card payment failures, understand the underlying causes, and take proactive measures to reduce future payment failures, optimize payment processes, and minimize the passive churn caused by payment friction and failures.

An important part of your data analysis is determining why card payments have been declined by the card issuers. Credit and debit card transactions fail for a variety of reasons. Some of the most common reasons include:

• Card Expired. All credit and debit cards have an expiration date. If your subscriber attempts a payment with an expired card, it will be declined by the card issuer.
• Insufficient funds. This occurs when a credit card does not have enough available credit or the linked bank account for a debit card does not have sufficient funds to cover the payment transaction.
• Invalid card information. If the card number, expiration date, card verification value (CVV) code, or billing address provided during the payment transaction is incorrect or does not match the records of the card issuer, the transaction may be declined.
• Card canceled or not activated. Your subscriber’s card may have been canceled due to theft, fraud, delinquency, missed payments, or inactivity. Or your subscriber may have neglected to activate their new card.
• Suspected fraud. Credit card issuers employ sophisticated fraud detection systems that analyze transaction patterns. If a transaction is flagged as potentially fraudulent, the card issuer may decline the payment until your subscriber verifies the transaction or confirms their identity.
• Daily spending limit. Some credit cards have daily spending limits imposed by the cardholder or the card issuer. If the transaction amount exceeds this limit, the payment may be declined.
• Other cardholder restrictions. In addition to daily spending limits, your subscriber may have placed other restrictions on their credit card. For example, they may have set limits on certain merchant categories, geographic regions, or specific transaction types. If a transaction violates these restrictions, it can lead to a decline.
• Overlapping transactions. If multiple transactions are attempted within a short period of time, especially for large amounts, it can trigger a decline due to security measures in place to prevent fraudulent activity.
• Technical issues. Technical problems can occur during the payment process, such as communication errors between the payment provider and the card issuer, network issues, or temporary system outages. These issues can result in declined transactions.
• Blocked or suspended card. If your subscriber has reported the card as lost, stolen, or compromised, the card issuer may block or suspend the card temporarily until the issue is resolved.
• Closed account. If your subscriber has closed their credit card account, any subsequent attempts to charge the card will result in a decline.

Many recurring revenue businesses may not have the staff, expertise, or bandwidth to perform time-consuming data analysis on payment transaction failures. In this case, the best approach may be to easily integrate with a smart solution like Vindicia Retain that specializes in failed payment recovery,

Vindicia provides recurring revenue businesses with ML-driven subscription intelligence, which is a key component of our Vindicia Retain failed payment recovery solution. Subscription intelligence allows your business to be data driven and optimized 24/7.

Subscription intelligence combines a real-time view of recurring revenue data dashboards with guidance from Vindicia industry experts. We help your business apply failed payment insights to improve business outcomes. Subscription intelligence is grounded in our 20 years of subscription payments experience and expertise, including:

• $78 billion processed
• 1.8 billion transactions
• 420 million digital accounts
• 702 million payment accounts

Subscription intelligent helps you understand your failed payment ecosystem, taking you one step ahead of the competition.

Vindicia Retain is the subscription industry’s #1 failed payment recovery solution that recaptures up to 50% of terminally failed card transactions. Vindicia Retain automatically evaluates failed payment transactions and applies ML-driven subscription intelligence to optimize the transaction so the payment can be processed successfully.

With Vindicia Retain, your business retains the revenues from both the current and future billing cycles because the subscriber stays with your product or service. When Vindicia Retain resolves a failed transaction, your customer will not even know that there was a payment problem. There is no disruption in service, and no need for an intrusive email or phone call.

Vindicia Retain benefits include:

• Revenue-focused: Resolves up to 50% of terminally failed card transactions
• Effortless: Go live in days with a SaaS solution that works with any billing system
• Data-driven: Provides clear, actionable insights via subscription intelligence dashboards
• Secure: PCI-DSS Level 1 compliant solution conforms to your business rules and best practices
• Proven: Trusted by leading subscription brands around the globe
• Smart: Fueled by two decades of payments recovery data and expertise

Vindicia Retain dashboards show intelligent analysis of failed transactions and success metrics, providing in-depth data on capture rates, retry efforts, and recovered revenue.

Even the smallest increases in failed payment recovery can have a large impact on your recurring revenue stream. That’s why it is important to carefully track subscription metrics such as customer lifetime value, customer acquisition cost, and the all-important CLV:CAC ratio. Refer to our online revenue calculator to see how small increases in failed payment recovery and customer retention can result in substantial gains over time.