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9% to 10% of credit card authorizations are declined, often for reasons that are temporary. While some retailers do nothing to recoup subscription payments that are declined, CyberSource’s TotalCollect automates recovery attempts.
It’s not just the sellers of magazine subscriptions – many in e-commerce are looking for a way to get into the subscription model of recurring payments because the revenue stream is more stable, Charley Chell, senior director of payment products development at CyberSource Corp., tells Internet Retailer. Some online retailers, such as companies like NetFlix that rent movie titles on subscription, for example, already are there.
However, problems can occur with automatic electronic subscription payment when there’s an issue with a subscriber’s credit or debit card, says Chell. “In normal credit card processing, about 9% to 10% of transactions are going to fail in authorization,” says Chell. That’s for a variety of reasons ranging from insufficient funds to stolen cards to the account being closed because the customer has moved to a different card. “Credit cards don’t last very long these days, what with all the specials offered for balance transfers,” says Chell. “The average card lifetime is well under three years.”
Many retailers take no further action when an authorization is declined on subscription payment, Chell says. Retailers that do make recovery attempts have to pay for it. “A call to the customer to get new banking information might take as much as $25 to $50 per contact,” Chell estimates. “But there are a lot of things they can do in an automated fashion to reduce that customer support cost.”
Automated solutions such as CyberSouce’s TotalCollect do just that. While some authorization failures can`t be recouped, Chell notes that many occur for reasons that are temporary in nature, called “soft declines” in the industry. These can range from something as simple as an outage somewhere in the banking network to an account without enough open to cover the payment. “Especially as people use more debit cards, you hit the open-to-buy issue more often. People tend to run those accounts a little closer to the bottom than their credit card accounts. Something like 3% of soft declines will fail for that type of reason,” Chell says.
TotalCollect automatically re-tries a declined transaction the next day and then again, as often as the set parameters dictate. Re-tries are set at different rates based on what CyberSource, which processes 100 million transactions per quarter, knows about the likelihood of recovery for different types of authorization declines. “After about 30 days or so, you find that you can bring back quite a lot of those subscriptions,” Chell says. “After a few months, you may be looking at a double-digit percentage difference between the subscriptions you would have by using a re-try logic versus not doing anything.”