Guide·7 min read
Subscription Payment Best Practices
Failed payments cause involuntary churn. Here's how to optimize your subscription payment stack.
The Problem
Involuntary churn from failed payments costs subscription businesses billions annually. A customer wants to keep paying but can't - that's a preventable loss.
Why Payments Fail
- Expired cards
- Insufficient funds
- Card limits exceeded
- Bank declines (fraud suspicion)
- Lost/stolen cards
- Account closed
Prevention Strategies
1. Card Updater Services
Visa Account Updater and Mastercard Automatic Billing Updater automatically update stored card details when cards are reissued. Essential for subscription businesses.
2. Smart Retry Logic
Not all failures are the same. Optimize retry based on decline reason:
- Insufficient funds: retry in a few days
- Do not honor: retry at different time
- Card expired: don't retry, request update
3. Dunning Optimization
When automatic recovery fails, communicate:
- Immediate notification of failure
- Clear instructions to update payment
- Multiple retry attempts before cancellation
- Win-back sequences after cancellation
4. Multiple Payment Methods
Offer alternative payment methods. If card fails, ACH or backup card can save the subscription.
Technical Implementation
- Use network tokens for better approval rates
- Implement retry logic based on decline codes
- Track and optimize payment timing
- A/B test dunning sequences
Metrics to Track
- Involuntary churn rate
- Payment failure rate by reason
- Recovery rate from dunning
- Time to recovery
- Card updater hit rate
Key Takeaways
- Involuntary churn is preventable
- Card updater services are essential
- Optimize retry logic by decline code
- Good dunning sequences recover many failures
- Measure and optimize continuously
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