How to Handle Hard and Soft Billing Failures

Dunning doesn’t have to be a big a headache. Things happen. Cards fail. With the increasing occurrence of reissued cards due to data stolen from big box stores (Target and Home Depot are two examples from last year), dunning can become a significant part of the subscription process. The most cost-effective responses are to arrange an automated system with simple schedules to retry cards after soft failures, or generate the appropriate emails to customers whenever there are hard failures.

Defining Soft Failures

A soft decline is anytime that a card doesn’t go through due to a problem with the account or system failures, such as:

• Gateway error or unavailable
• Exceeds daily limit (do not honor)
• Insufficient funds
• Processor declined (too much or unusual activity)
• Temporary hold

All of these are reasons to retry the card after three days or so, up to four times. These are all situations where the customer doesn’t want to be contacted because all the information on the card is correct, but something that is not their fault is holding up the process. On average, around five percent of online charges go through on the second or third attempt, according to the Bayard Institute. After that, it is very unlikely the card will ever be processed.

Defining Hard Failures

Unless they are resolved, all soft failures eventually become hard failures, usually after four attempts. Hard failures mean that the customer has to provide another form of payment. Errors that mean the card never has to be retried include:

• Lost or stolen card
• Invalid card
• Expired card
• Declined CVV
• Not allowed (may have rules like business expense restrictions)

At this point it is necessary to contact the customer, but craft your email carefully. There are many cases where hard failures are not the customer’s fault, such as when their bank renews the card automatically and the expiration date is wrong, but the customer is not aware of the change yet. Remember that this may be their only interaction with the company’s customer service, so it must be positive and professional. Get marketing involved in writing an email that says “Sorry, your credit card didn’t go through,” in a way that supports your brand image. If your business is fun, it’s OK to treat the subject lightly, but be professional.

What Could Go Wrong?

The fact is that the longer the period between customer bills, the greater the chance that the card has expired or changed. On the other hand, more frequent billing means more chances for things to go wrong. It is important to think through everything that could go wrong, and have an easy process for suspending, restarting and reviewing customer accounts. n nIf managing all the billing issues is taking away from the company’s core business, subscription billing software like Rebilly can help automate these processes. Contact us for personalized assistance with proper handling of dunning procedures.

Want a step-by-step strategy to decrease involuntary churn? Our Retry Strategy guide teaches you exactly how to use data like decline codes to reduce churn and increase your CLV: