Business Models
Involuntary Churn
Definition
Involuntary Churn customer loss due to payment failures rather than intentional cancellation. Caused by expired cards, insufficient funds, or technical issues. Represents 20-40% of subscription churn. Prevention requires card updater services, smart retry logic, and effective dunning. Involuntary churn is largely preventable with proper payment optimization.
Related Terms
Dunning
The process of recovering failed subscription payments through retries and customer communication. Includes automated retry attempts, customer notifications, and grace periods before cancellation. Effective dunning recovers 10-30% of failed payments. Optimize retry timing based on decline reason. Balance persistence with customer experience - over-aggressive dunning annoys customers.
Card Updater
Services that automatically update stored card credentials when cards are reissued or replaced. Visa Account Updater (VAU) and Mastercard Automatic Billing Updater (ABU) provide new card details to merchants. Essential for subscription businesses to reduce involuntary churn from expired cards. Updates happen during batch processes - not real-time.
Subscription Billing
A payment model where customers are charged on a recurring schedule (monthly, annually, etc.) for ongoing access to products or services. Requires card-on-file capability and careful attention to authorization rates, dunning, and involuntary churn. Card networks have specific rules for subscription billing including clear disclosure and easy cancellation. Higher risk classification due to chargeback patterns.
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