TL;DR
- As you strive to minimize SaaS failed payments, understanding the causes and solutions is paramount.
- Payment failures, which can lead to involuntary customer churn, stem from a myriad of issues, including expired cards and network errors.
- To prevent these, you should employ strategies like sending pre-dunning emails, using in-app notifications, offering multiple payment methods, and tagging transactions as recurring.
- When payments fail, distinguish between soft and hard declines to determine the appropriate action—retrying payments or reaching out to customers for updates.
- Togai's software, with its dunning management system, helps streamline this process, reducing errors and preserving transaction integrity.
- If prevention and recovery efforts fail, your next step is a systematic approach involving payment gateway checks and customer communication.
- In the face of global uncertainty and high customer acquisition costs, tools like Togai's revenue recovery suite are crucial for retaining customers and securing your SaaS business's financial health.
- Leveraging Togai's revenue recovery suite automates workflow and streamlines payment collections, transforming your revenue recovery strategy.
Amidst the dynamic world of digital payments, the integration of Software as a Service (SaaS) models has revolutionized business operations. However, in light of the growing competitiveness in the SaaS market, acquiring and retaining customers presents a formidable challenge, often accompanied by substantial costs.
A pivotal concern in this landscape is the prevalence of SaaS failed payments, exerting a profound impact on businesses relying on this model for seamless payment processing. Research indicates that a noteworthy percentage of customer churn stems from involuntary reasons, where subscriptions lapse not due to customer cancellations but rather owing to payment failures.
In this article, we delve into a thorough analysis of the root causes behind SaaS payment failures, examining various types of these disruptions. Furthermore, we present well-researched strategies endorsed by experts to effectively prevent and address these challenges, with a particular focus on leveraging the capabilities of Togai.
Discover how Togai emerges as a valuable ally in fortifying your SaaS payment ecosystem against disruptions, ensuring a smoother and more resilient financial journey for your business!
SaaS Failed Payments: Causes and Solutions
Subscription-based services have streamlined customer billing through periodic charges, facilitated by saved payment information for automatic renewals. This convenience eliminates the need for customers to manually input payment details, ensuring a seamless experience. However, the journey to a successful payment involves navigating various intermediaries, including processors, payment gateways, issuing banks, and card networks.
Amidst this complex process, payment failures can occur at any stage, with over 100 potential reasons behind recurring payment issues. Common causes include:
- Not enough funds in the account of the payer.
- Lost or stolen card.
- Wrong payment details ( expiry date, card number, security code).
- Expired card.
- Poor network connectivity.
- Processor or payment gateway error.
- Anti-fraud measures triggering declined transactions.
- Exceeding transaction limits set by the processor or card issuer.
- Frozen or closed bank account.
- Account or payer’s card flagged for suspicious activity.
Broadly categorized into soft and hard declines, subscription payment failures vary in recoverability.
Soft declines, stemming from operational glitches, can often be resolved by retrying the payment at a different time without implicating the customer's creditworthiness or identity verification.
On the other hand, hard declines, linked to issues like insufficient funds or expired cards, require customer intervention for resolution. Surprisingly, 10-20% of SaaS payment failures fall into the hard decline category.
With this understanding of payment failure basics, the focus shifts to proactive measures for prevention.
Also Read: Steering Clear of Revenue Recognition Errors: The SaaS Lifeline
Proactive Measures to Prevent SaaS Failed Payments
Underscoring the significance of proactive decision-making in the payments domain is crucial. Effectively optimizing the recovery of failed payments hinges on preventing them in the initial stages. The subsequent well-established strategies offer actionable solutions at each phase of the transaction process for your organization.
Stage 1: Mitigating Payment Failures
Pre-dunning Emails:
Initiate the pre-dunning process by sending progressively assertive email reminders to customers, encouraging them to update their payment information for a successful retry. This proactive approach occurs before a payment failure, typically when a high risk is flagged, such as an impending card expiry. Pre-dunning emails serve as a vital component in a business's debt collection process, acting as the initial contact point with customers to gently remind them of overdue payments.
Active In-App Notifications:
Leverage in-app notifications to maintain a direct line of communication with customers. These notifications, seamlessly integrated into your app, gently prompt users to update their card details or ensure sufficient balance for upcoming payments. In addition to payment-related reminders, in-app notifications are versatile tools for disseminating crucial updates, offers, and relevant event alerts to users.
Diversified Payment Methods:
Enhance payment success in your SaaS model by encouraging subscribers to have alternative payment methods readily available. Integration of your subscription management system with a flexible payment gateway expands payment options for customers. This not only enhances convenience but also acts as a safeguard against payment failures, ensuring smoother transactions and uninterrupted service access.
Tag Recurring Payments:
Mitigate the risk of SaaS payments being flagged as 'fraud' by categorizing them as recurring within your chosen payment gateway or processor. This involves providing pertinent information during authorization, establishing the transaction as secure when the payment method is charged, and preventing unnecessary disruptions.
Stage 2: Recovering from Initial SaaS Payment Failures
Payment Retries:
Initiate payment retries as the primary response to subscription payment failures. A systematic process for credit card declines allows for swift resolution of most payment failures. The key lies in distinguishing between hard and soft declines. For soft declines, where intervention isn't immediately required, implement retries promptly. Hard declines requiring customer action should be retried post-update of payment information. Tailor the retry sequence based on specific business needs for optimal results.
Utilise Effective Dunning Strategies:
Crafting an effective dunning strategy is crucial for recovering customers facing involuntary churn despite prevention measures. Segmenting your customer base appropriately enhances the likelihood of successful recovery. Utilize software with features like dunning management, subscription management, and streamlined payment processing.
Togai, the best Metering and billing software, is equipped with an integrated dunning management system. It facilitates the implementation of effective pricing strategies and reduces manual errors in billing processes. Togai's capabilities include establishing clear timelines for payments, defining communication frequency and types, and crafting customized messages for efficient recovery from SaaS payment failures. By understanding the root issue, Togai contributes to the implementation of specific measures, ensuring future payment success and preserving the integrity and efficiency of the transaction process.
When Strategies Fall Short: A Methodical Approach
In instances where all preventive strategies prove ineffective, a systematic analysis and resolution process becomes imperative.
- Begin by scrutinizing the payment gateway for any possible technical glitches.
- If the payment gateway is verified to be operational, initiate direct communication with the customer. Gain insights into the specific issue, whether it's related to insufficient funds or a processing error.
- Provide necessary guidance to the customer, aiding them through the payment process if required. Additionally, explore alternative payment methods, such as cash on delivery or bank transfers, to ensure a successful transaction.
By adopting this comprehensive approach, every conceivable avenue is explored to address and resolve payment issues, ultimately safeguarding customer satisfaction.
Recover Your Revenue: Claiming SaaS Success Amid Global Uncertainty
In today's era of global uncertainty, acquiring new customers for SaaS businesses is a formidable challenge. Decision-making processes are prolonged, and customer acquisition costs have escalated. Focused on retaining customers, companies are innovating to deliver enhanced value in unique ways.
In this challenging landscape, the impact of customer churn and revenue loss due to payment failures is particularly painful. Togai's integrated and hands-free dunning management system, coupled with revenue recovery features, proves instrumental in reducing involuntary churn and safeguarding revenue. Recognizing the significance of retaining revenue from willing customers, Togai eliminates the need for businesses to become payment recovery experts.
Togai’s revenue recovery suite empowers your team with a comprehensive dunning process that:
- Notifies customers of failed payments
- Sends payment reminders regularly
- Monitors expired credit cards
- Automates your workflow
- Streamlines payment collections
Join the ranks of businesses revolutionizing their payment recovery with Togai. Schedule a demo with our experts today and transform your revenue recovery strategy.
