Optimize Recurring Payments, Curb Revenue Leakage

What if we told you that you’re likely losing money and don’t even know it? Unfortunately, you’re not alone. With credit card approval ratings lower than the global average, US Merchants are losing billions of dollars through hidden revenue leakage. And as you expand your business worldwide, it’s increasingly important to strengthen your billing and payments systems to support the multiple acceptance processes that cross regional and national borders.

Today, many businesses are turning away from one-time sales transactions and toward recurring payments or subscriptions charged on credit cards left on file (ex: Netflix, Adobe CreativeCloud, etc). And it’s no wonder, considering the number of benefits associated with these types of flexible payments, including:

  • Recurring payments programs. Customers who can conveniently pick and choose their plans and pay for what they use experience higher lifetime customer value. Businesses can also decrease sales costs by automatically billing customers for products and services.
  • Installment and deferred payments. Companies can increase the average order by allowing payments to be spread over time, capture more sales by offering various payment options, and attract new customers with appealing financing terms. Customers receive timely payment assurance, enjoy uninterrupted service, and can avoid incurring late fees.

But the switch to flexible payments doesn’t come without a hitch – the added increased complexity can make acceptance management a daunting task, even for the most experienced finance teams. Because flexible payments rely on having a credit card on file, any credit card issues (breaches, EMV chip reissuance, etc.) can delay or deny payment processing.

So how do you optimize the acceptance rates of recurring payments? Here are three best practices a company should follow in order to curtail common revenue leakage in recurring payment environments.

  1. Monitor monthly metrics. Monitor your acceptance rates and understand the reason codes for declination. Look for patterns so you can make changes to minimize failed acceptance rates.
  2. Apply retry logic. Based on your metric analysis, identify the kind of transactions you want your system to retry. Even a slight improvement in acceptance rates can have incredible benefits for your business.
  3. Leverage analytics. Use analytics and data to benchmark to help spot trends. Once you have the foundation set, you can use the analytics to make changes to your system (like adjusting a merchant category code) to optimize results.

Flexible and recurring payments are increasingly popular today as more businesses embrace the recurring revenue business model. It’s important that your billing system and payment processor work with each other, not against each other, to ensure higher acceptance rates.

To learn more about this subject, check out the replay of Aria’s joint webinar with Chase on “Optimizing the Acceptance Rates of Recurring Payments.”

About the Author

Eileen Bernardo
Eileen Bernardo is the Content Marketing Manager at Aria Systems where she manages content creation for multiple projects. She has an M.S. in Public Relations and Corporate Communication from New York University and a B.A. in Communication from the University of California, San Diego.

The Forrester Wave: Subscription Billing Platforms, Q4 2015

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