Subscription Businesses Lose 9% of Revenue From Failed Payments

Download the PYMNTS and FlexPay March 2023 Decision Guide: Tracking Failed Payments to explore the link between payments friction and customer churn and the best practices of the subscription firms that best manage tracking and recovering failed payments.

Subscription businesses overlook the significant negative impact of failed payments on bottom lines. While many companies focus on customer churn, just a small share recognize failed payments as the cause. But providers need to understand  how failed payments can ruin the customer experience.36%: Share of companies that track customer churn

Our data shows the impact of failed payments on revenue in the subscription industry is substantial and underappreciated. Subscription providers lose, on average, 9% of annual revenue to failed payments. However, subscription firms tracking failed payments lose dramatically less revenue and recover significantly more payments than those that do not.

In “Decision Guide: Tracking Failed Payments,” a PYMNTS and FlexPay collaboration, we surveyed 200 executives to explore the link between payments friction, customer churn and best practices of the firms that best manage these challenges.50%: Share of companies that say failed payments are a direct cause of customer churn

This decision guide answers some of the big questions facing the industry.

• What do subscription businesses miss?

Currently, just 17% of subscription-focused firms track failed payments, despite the substantial impact on business performance. Fifty-eight percent of subscription businesses focus solely on outcome-based metrics such as customer churn and retention, which may be easier to measure but are not as crucial.

• How much money are failed payments costing subscription providers?

Subscription providers under appreciate the impact of failed payments on revenue.9%: Average share of revenue subscription companies lost due to failed payments On average, failed payments lose subscription providers approximately 9% of revenue. This revenue loss hit providers in the health and fitness industry hardest in the last year, with an average loss of 11%.

• What are the benefits of tracking failed payments?

Many subscription providers believe that tracking failed payments would not improve bottom lines — but data reveals the opposite. Subscription businesses tracking and analyzing failed payments lose 37% less revenue than those that do not. Additionally, on average, providers that track failed payments recover 43% more of these payments.

To learn more about the subscription industry’s best practices for tracking and recovering failed payments and revenue, download the report.