When Is the Right Time to Break the Credit Card Chain? Try Never.

By Georg Richter

Mediamodifier / Pixabay

A cardinal rule when it comes to online subscription sales: Never cancel a subscription order because a payment card transaction fails.

Cards are declined for many reasons. They expire, they get stolen, they fall out of back pockets, and, yes, customers often exceed their spending limits. But breaking the chain of transactions with a customer will break your bottom line.

Fortunately, decision makers who are facing recurring payment failures can implement certain strategies that will allow them to continue shipping and that will ensure high lifetime customer value.

Issuers Make Transactions Complex

Generally, there are only three categories of cards — credit, debit, and prepaid or gift cards — but there are many more issuers, networks, and banks that add layers of intricacies to card transactions. To add insult to injury, the credit industry operates on its own timetable driven by payrolls, interbank transactions, and clearing schedules.

Each card transaction is effectively either making a withdrawal from a customer’s bank account or stored balance or taking out a loan, and timing is everything in regard to the accessibility of funds or available credit.

Subscription operators have an advantage in knowing their customers’ habits and performance over time better than the payment card networks and banks. Savvy operators can use their combined customer knowledge and awareness of payment industry cycles to maximize returns from shipments and collections.

Attempts at Fraud Slow Service

Not everything is coming up roses for subscription services, though. Subscription services deal exclusively with situations in which the card is absent, which leads to more fraud. For subscription businesses, most fraud attempts occur during the initial enrollment transaction, so many systems need built-in screening at this stage.

Bad things can happen to good payment cards. They are lost, stolen, and hacked. A 2016 study by Javelin Strategy and Research found that 15.4 million U.S. consumers suffered identity theft in 2016, amounting to $16 billion. Identity theft totals have reached close to $112 billion in the past six years.

Two key markers for subscription fraud are high transaction volumes and rapid reuse of a payment card, which often are associated with either the same IP address or a small number of delivery addresses. Tracking use patterns of cards and scanning for potential telltale markers can be an effective fraud screen.

Perseverance Pays Off

Multiple payment card processors exist, and they all have their own strengths. Many providers focus solely on payment card billing. Decision makers typically use one of these companies and let its business rules decide what happens at each step. Thinking through your business rules critically and adjusting as necessary is essential for cultivating high lifetime customer value.

If a card is declined, many e-commerce companies stop at the initial stage of the payment life cycle: the order stage, or when the card is first enrolled. An increasing number of subscription businesses continue to the “recycling” stage but quit there if a recycled card still fails to authorize.

However, several powerful strategies are still available to save the Go to the full article.

Source:: Business 2 Community

Be Sociable, Share!