80% of Failed Subscription Payments Not the Customer’s Fault

Download the PYMNTS and FlexPay May 2023 "Decision Guide: Adopting Subscription Companies’ Top-Performing Payment Recovery Strategies" to learn more about failed subscription payments.

New data shows that top-performing subscription providers recover 22% more revenue on average for each payment recovery method used.

$141B: Amount of failed payments revenue which subscription providers that adopted payment recovery efforts recently recoveredAs subscription businesses navigate customer retention challenges and increase lifetime value (LTV), understanding the root causes of failed subscription payments is essential. By moving from a narrow focus on transaction failures to a broader understanding of the factors influencing customer churn, subscription companies are in a stronger position to adopt best practices and learn from top-performing peers.

These new findings come from “Decision Guide: Adopting Subscription Companies’ Top-Performing Payment Recovery Strategies,” a PYMNTS and Flex Pay collaboration. We surveyed 200 executives to examine the relationship between failed subscription payments, customer churn and financial performance in the industry and to learn the best practices of firms that best manage these challenges.

• Why aren’t all subscription businesses tracking failed payments?73%: Share of top performers using a combination of third-party and in-house solutions

Many subscription-focused firms severely underestimate the impact of failed payments on bottom lines and do not track them. For example, declined card payments create involuntary churn, which accounts for 50% of all customer churn. These customers would otherwise have remained subscribed, but instead canceled their subscriptions due to declined payments.

• What are subscription businesses missing about the causes of failed payments?

Four in five failed payments are not the customer’s fault. These occur due to friction in the process, causing the provider to decline legitimate transactions. Subscription providers that adopted payment recovery efforts recouped an estimated $141 billion in revenue in the last year. This is revenue that providers would have otherwise lost due to these failed payments.

50%: Share of involuntary customer churn that results from declined card payments

• Does recovering failed subscription payments increase LTV?

Business performance directly corresponds to measuring LTV. Subscription providers that best minimize revenue losses from failed payments also tend to recognize the connection to customer LTV — and manage it most effectively. More than two-thirds of top-performing subscription businesses specifically monitor failed payments. Companies that track LTV after recovering failed payments recover, on average, 24% more revenue than those that do not track this metric.

Subscription businesses understanding the relationship between failed payments, customer churn and financial performance can minimize revenue loss and increase retention. Download the report to explore how subscription providers can minimize failed subscription payments to improve customer churn and customer LTV.