82% of Merchants Don’t Have the Data to Pinpoint Why Payments Fail

In an era where flawless transactions are critical for customer loyalty, merchants are adopting payment vaulting not just for security, but as a strategic tool to enhance retention, reduce costs and personalize service.

A PYMNTS Intelligence report, “Into the Vault: Optimizing Payments,” created in collaboration with Spreedly, shows how businesses can maximize the value of vaulted data to drive growth and deepen customer connections.

Revamping Customer Retention Through Vaulting

Vaulting, or securely saving customers’ payment credentials, has emerged as a game-changer for improving customer retention by addressing a common pain point: failed payments. An overwhelming 82% of executives struggle to pinpoint why their payments fail, due to a fragmented view of consumer data.

This lack of insight results in substantial revenue losses. In the past year, eCommerce players experienced a failure rate of more than 10% for online transactions, translating into $31 billion in lost retail sales in Q3 2023.

The ripple effect of these failed transactions extends beyond immediate revenue loss. More than two-thirds of eCommerce firms report difficulty in reclaiming customers lost due to payment issues. Vaulting addresses these challenges by providing a comprehensive view of payment data.

Network tokens, a recent advancement, enhance security and ensure that payment information remains current, improving authorization rates and reducing customer churn. By maintaining up-to-date payment details, merchants can mitigate disruptions and retain valuable customers.

Unlock Savings Through Strategic Vaulting

Vaulting is not just a security measure but a cost-saving powerhouse, especially for subscription-based businesses. The subscription economy, projected to hit $1.5 trillion by next year, faces a significant threat from involuntary payment failures. These issues, including expired cards and gateway outages, could cost subscription businesses more than $129 billion by 2025.

The impact of failed payments is particularly severe in subscription models, where customers may not actively manage their accounts, leading to unnoticed failures. Vaulting enables businesses to identify and address these payment issues proactively. By maintaining a digital record of payment details and ensuring they are regularly updated, merchants can minimize declines and prevent customer churn. As Spreedly’s Joe Meuse noted, vaulting helps provide clarity and transparency in payments, reducing unnecessary chargebacks and ensuring a smoother customer experience.

Enhance Personalization with Vaulted Data

Beyond its security and cost-saving benefits, vaulting unlocks the potential for personalized customer experiences. In today’s competitive market, personalization is crucial. Eighty-five percent of customers expect brands to recognize them as individuals, and 82% believe these brands actively build relationships with them. Personalized interactions not only enhance customer loyalty but also translate into increased spending, with 63% of customers willing to pay more for brands they are loyal to.

Vaulting facilitates this level of personalization by providing detailed insights into customer behavior and payment patterns. The Payment Account Reference (PAR), introduced in 2014, helps link customer data across various payment methods, enabling a more comprehensive view of their preferences and habits. This data allows businesses to offer tailored experiences, cross-sell and upsell effectively.

Additionally, Bank Identification Number (BIN) metadata can reveal critical information about payment methods, helping merchants optimize processing costs and enhance their service offerings. For example, recognizing when a customer uses a gift card for recurring transactions can prompt suggestions for more reliable payment methods.

Integrating vaulting into payment strategies offers a significant edge for merchants. By securely managing payment data, merchants can streamline transactions, reduce failures and deliver personalized experiences.

Vaulting elevates payment data from a compliance necessity to a strategic asset, providing valuable insights into consumer behavior. This not only addresses payment issues, but also enhances customer interactions and revenue potential. As businesses harness the full benefits of vaulting, they position themselves for enduring success in a data-centric market.