Top 5 Ways to Optimize Your Payment Retry Strategies

As of July 2021, 1.12 billion credit cards were circulated within the United States, while the global volume stood at 2.9 billion. An average of 15% of recurring payments are regularly declined, while the average credit card decline rate is 7.9%.

Credit and debit cards face various declines, ranging from soft to hard declines. The reasons might vary, but online payments are affected by both these decline categories. While 80% of soft declines fall into the addressable category, the remaining 20% is non-addressable, as there isn’t much possibility of recovering and rectifying these issues.

Instead of losing your revenues, you can define your retry payment strategies and follow a few common steps to ensure your bottom line continues to boom. 

What Are the Common Root Causes of the Payment Failure?

Understanding the various root causes behind payment failures is essential. Each reason impacts payments differently, and to enhance payments, you need to employ different methodologies. 

• Insufficient Funds 

When customers have insufficient funds, payment declines occur. Customers might be oblivious to the shortage of funds in their accounts, which directly impacts their recurring payments. 

• Do Not Honor

In simple terms, as the name aptly suggests, the Do Not Honor message means the customer's issuing bank will not allow any transactions to pass. 

There are different reasons for a Do Not Honor message; the most common reason might be suspected fraud on the account or a block placed on the customer's request, amongst many others.

• Incorrect Card Details

The payment is declined when a customer enters incorrect card details using their payment method. Incorrect card details could include potential typos, expired card details, and incorrect CVV numbers, among other errors.

• Card Expired

The issuing bank often declines transactions made using an expired card. In such scenarios, a customer needs to speak to the issuing bank to get a new card issued. Otherwise, they can even make payments using an alternate payment method.

• Fraud/Suspected Activity

As expected, during a fraud or suspected fraud case on a customer's account, the transactions are frozen until the investigations are completed. Fraud activity can lead to endless issues, as these investigations can block payment-related transactions until a resolution is devised.

• Technical Issue With the Processor

Finally, since multiple parties are involved during an online payment, another possible reason for the decline is related to the payment processor. During technical downtime, payments are often declined due to ongoing issues with the payment processors.

How Do Payment Retries Work?

Regardless of the reason for the decline, merchants always have the option to retry failed payments and salvage lost payments. As a thumb rule, your business should always look towards retrying payments. Did you know that a single payment retry can help you recover approximately 32% of the failed payments?

1. Retry Timing

Guided by previous records, statistics, and potential volumes, merchants can confidently rely on intelligent retry methodologies. These methodologies, proven effective in the long run, testify to their reliability and success. 

For instance, if payments decline during a specific time window for a particular payment processor, merchants should refrain from retrying their failed payments during that flagged period. 

Conversely, merchants can leverage these same methodologies to optimize and retry their payments during a more favorable time window, increasing the chances of successful transactions.

2. Error Reason-Based Retry

Every reason for the decline has error codes associated with it. Since one size doesn't fit all, rectifying the issues at the grassroots level is essential for a positive retry experience. By targeting and driving reason-based rectifications, merchants can increase payment conversions and prevent future payment declines.

3. Customizable Retry Limits

Depending on the nature of the business, the customer type, the demographic, and ongoing prevalent payment policies, merchants should set customized retry limits for each failed payment type. 

With these customizations in place, you can ensure a positive transaction experience for your customers and prevent any further financial obligations for your customers with their issuing banks.

What Are the Advantages of Retrying Payments?

Payment retries are a must-have since you deal with failed payments that directly impact your bottom line. By retrying declined payments, you can achieve the following benefits for your business: 

• Reduce involuntary churn:

  Involuntary churn is a silent killer, as it has a massive impact on a business's revenue model. Some potential reasons include expired cards, incorrect card details, etc.
  
  The biggest problem of involuntary churn is that it impacts both the merchant and the customer. A timely service delivery dents the customer's expectations of the business. However, proactively identifying and addressing payment-related issues can ensure a smooth experience and keep your revenue returns intact.

• Improve Customer Retention

  Customers like businesses to be proactive, especially when customer loyalty is at stake. However, when a merchant overlooks customer experiences during checkout, the entire process can go from a boon to a bane in seconds.
  
  Proactively contacting customers for alternative payment methods, payment retries, and payment intimations can positively impact customer experiences and increase customer retention.

• Minimize Customer Disruption
  

  What causes customer disruptions? The answer is simple: payment failures. You must be on your toes to avoid distraught customers and enhance customer relationships, especially when providing services online.
  
  With payment retries in tow, you can successfully reduce involuntary churns while improving customer retention rates and CLTV.

• Maximize LTV
  

  Lifetime Value (LTV) is an important metric that evaluates a business's revenue volumes from a customer throughout their association. Now imagine a situation wherein your customers are leaving your company and terminating their association due to unforeseen circumstances.

  As soon as your business begins to lose customers, your LTV ratio nosedives since you are losing potential revenue options. By optimizing your payment standards and standardizing your payment options, you can retain customers for longer periods, thereby maintaining/improving your LTV.

What Are the Top Ways to Optimize Your Payment Retry Strategies?

To optimize your payment retry strategies, you can follow a few tailored methods to help you succeed substantially.

1. Segregate Decline by Soft and Hard Declines

Segregating addressable and non-addressable decline error reason codes for soft and hard declines can enable customizable retry strategies for soft declines.

Let's understand this strategy with an example. 

Assume a payment transaction fails with an error code indicating insufficient funds. This error is a soft decline if the customer's account balance is close to zero but not empty. 

However, if the error code specifies an expired or invalid card number, it's a hard decline as it's typically not addressable through a simple retry. You can prioritize soft declines for retries by segregating soft and hard decreases. For hard declines differently, such as prompting users to update their payment information.

2. Analyze Payment Data and Payment Retries

It's essential to analyze payment data at a transaction level to understand approval rates, decline reasons, and transaction volumes related to each retry attempt and trace out the success rates of individual retry attempts for failed transactions.

For example, when a payment transaction fails due to a declined card, you can use the data to analyze your payment data. 

Similar declines have a higher success rate upon retrial if attempted within 24 hours. By tracking transaction volumes and approval rates related to each retry attempt, merchants can identify patterns and determine the optimal timing for retry attempts to maximize success rates. 

3. Identify Ineffective Retry Attempts

As a starting point, you can identify patterns in specific declines with low retry success rates. Adjust retry logic accordingly to save time and money on retries that are unlikely to succeed.

After analyzing payment data, you notice that transactions declined due to address verification failures rarely succeed upon retry, especially for international customers. 

Adjusting the retry logic, such as not retrying these declines immediately but instead prompting the customer to verify their billing address, can improve overall success rates and prevent ineffective retry attempts.

4. Implement Smart Retry Logic

Assessing decline codes assigned to initial transaction declines and subsequent retry attempts can help understand the likelihood of success upon retry of specific declines.

When a merchant bills its customers every month, a customer's card may be declined due to insufficient funds when the subscription fee is due. 

Instead of immediately retrying the payment, you can redesign the system to retry the transaction at strategic times, such as the beginning of the month or the start of the week when many people receive their salaries.

5. Understand Retry by Timing, BIN, Issuer, and Customer Segmentation

Analyzing payment data on a transaction level gives merchants a deeper insight. Detailed analysis also provides segmentation broken down by time, BIN, Issuer, and customer base. These parameters are crucial to drilling down and identifying potential payment failure issues, which can help understand and tailor retry strategies.

By thoroughly analyzing payment data segmented by timing, BIN (Bank Identification Number), issuer, and customer demographics, merchants can identify transactions originating from specific geographic regions with higher decline rates during particular times of the day. 

Tailoring retry strategies, such as adjusting timing or implementing region-specific payment methods, can help mitigate these issues and improve overall success rates.

Conclusion

inai, as a payment orchestrator platform, is well-equipped to provide you with some of the best reporting and retry strategies to enhance your revenues. Since you deal with experts, you get extensive reporting and insights into your payment failures, consolidated error codes, root cause analysis, and problem-solving. 

As your business focuses on enhancing customer service and attracting customers, you can trust our services to effectively solve payment failures and conduct payment retries.