How revenue recovery tech is solving the problem of expired cards on subscription accounts
Subscription-based membership site owners don't need reminding that churn is a major issue across the industry.
While recurring billing technology has made it simple for customers to sign up to a service, place a credit card on file and sit back and enjoy the service, there is one problem which still causes trouble for merchants: expired credit and debit cards.
The problem with expired cards
Automated recurring payments are convenient for both customer and merchant so when a credit or debit card expires and a subscription renewal fails, the disruption can cause several issues.
For example, having to manually re-subscribe prompts customers to re-evaluate their subscription, increasing the chance they will decide not to renew. They may even have been thinking about cancelling for months and just not got around to it.
Actively cancelling a subscription also requires a lot more effort than casually allowing one to lapse. The more effort involved in a process, the less likely someone is to follow through.
Expired cards also make it difficult for subscription-based businesses to plan for the future. According to software platform Stripe, over 50% of the cards stored on their system in January 2015 were due to expire within 12 months. Presuming this is similar across the board, that is a lot of uncertainty to build into your cash flow forecasts.
There is also an increase in support costs since personnel will usually be needed to reach out to those customers who haven't updated their billing information.
All it takes is a little hook
The good news for subscription site owners everywhere is that banks, card service providers and merchant platforms have got their heads together and found a beautiful tech solution. It's called Account Updater.
Account Updater involves a 'webhook' – a snippet of code – which recognises a card has expired and automatically connects with the card service providers (VISA, MasterCard or Discovery).
Providing the issuing bank has passed the new card details to the card provider, the merchant platform will retrieve them, update the customer billing info and try to take the payment again a few days later.
What impact is Account Updater having?
The ability to automatically update credit cards has had a massive impact on monetisation platform 2checkout. They have taken an extra step and created a Revenue Recovery Tool complete with customised dashboard. The tool includes Account Updater together with other technologies for handling all types of hard and soft card declines.
They have found that the Account Updater service alone has salvaged over 90% of cards on their platform.
Our customers who use the Stripe platform have found that expired cards typically go on working for 3-5 years after their official expiry date. Though it is hard to put an exact value on this, there is no doubt that it has decreased churn.
To conclude, for subscription businesses and membership organisations that are dependent on recurring billing, Account Updater is undoubtedly a positive step forwards. Customer churn resulting from outdated payment information will be significantly reduced, allowing your team to focus on upselling and bringing in new customers.
Do you have experience of Account Updater in your organisations? If so, please share your story with us.