Broken Payments: How to Keep More Recurring Revenue

stack of credit cards September 12, 2016 By: Darrell Dick

As associations increasingly offer recurring payment options to their members, customers, and donors, they face the accompanying challenge of declined credit cards due to expiration or reissuance. Some payment processors, however, are beginning to offer solutions to easily update cardholders' data and maintain their recurring payments.

Recurring payments and donations are what they sound like: payment transactions that occur over repeated, periodic cycles without interruption. They're not new when you think about it—utility providers and many nonprofits have been driven by them for decades.

But today recurring payments have become a staple of online payments made for a range of subscription services. And it's online that their tendency to "break" has become particularly apparent. A recurring payment breaks, for example, when a credit card that is authorized month-after-month is updated or replaced, let's say, after a data breach. Organizations who don't receive updated information can find themselves without payments.

The Rise of the Subscription Economy

Businesses of all types, including nonprofits, are extending the so-called "subscription economy" model because it supports predictable revenue streams, can accelerate growth, and help maximize cash flow and planning.

Since the dawn of eCommerce, consumer buying habits have moved aggressively toward simpler, hassle-free online experiences catering to very busy lifestyles across generations and across channels. We're at that point of commerce on demand. Establishing fully integrated online payment and subscription services could help convert one-time donors to recurring patrons.

At a minimum, you should be using the account-updating features offered by card brands and payment processors.

Rooted in consumers' desires to receive products they love without interruption, subscription services today span a gamut of needs: razor blades (Dollar Shave Club), high-end beauty (BirchBox), nutraceuticals (Healthy Direction), and snacks in a box (NatureBox), to name just a few. Long-standing retail leaders, such as Target (monthly diaper shipments) and Walmart (Goodie service) are in on it too.

Meanwhile, over the last few years, card reissuance has accelerated for a few reasons. First, there are data breaches. In the aftermath of breaches, issuers—either as a function of real fraud or as pre-emptive move against it—have taken to large-scale reissuing of cards. Then, of course, there is the mass reissuance associated with the introduction of EMV enabled chip cards, which began heavily in 2015. These reissuance events have involved both debit and credit cards.

Minimize Broken Payments

So, how do you keep up with all of these changes and minimize broken payments?

At a minimum, you should be using the account-updating features offered by card brands and payment processors. In some instances, these services are available in an automatic mode, requiring little energy from you to maintain up-to-date card data information.

For example, a "recovery" solution can help with recurring payments by obtaining cardholder information from the card networks so that payment authorizations automatically use the most up-to-date card information. From the nonprofit's standpoint, the ability to update information should be included in the cardholders' enrollment forms and privacy statement, eliminating the need to continually notify them. This may require a minor edit to cardholders' forms but not require reenrollment.

Based on experiences with some merchants, including retailers and donor-driven nonprofit organizations, here's what merchants tell Vantiv they have observed for their organizations and value about recovery solutions:

  1. Workload of maintaining current card information was shifted off of the organization and onto the payment provider.
  2. Card update requests were made automatically to the networks and subsequently processed.
  3. Most-current card information is used on authorization attempts and turned declined authorizations into approvals.
  4. Card data exposure is minimized through end-to-end data protection.
  5. Customer lifetime value was maximized by retaining highly-prized recurring payment customers.

As the subscription economy continues to expand, ensuring reliable payment streams becomes increasingly critical. Associations that put processes and tools in place to minimize broken payments will see their revenue grow and boost their bottom line.

A version of this article was originally published at Vantiv is a registered trademark of Vantiv, LLC. Copyright 2016, Vantiv LLC. Republished with permission.

Darrell Dick

Darrell Dick is director of marketing for Capital One Merchant Services, powered by Vantiv. For more information, contact Scott O'Brien.