When billing customers electronically, it’s inevitable that some payments are going to fail from time to time. It can be frustrating for a business, as it represents a lost opportunity to earn revenue and can even add further costs to recover the lost funds.
Whether it be due to insufficient funds or invalid payment details, there are several reasons why payments fail, and having a good understanding of these reasons can help minimise their occurrence and improve your collection rate.
Failed payments: Here are 6 reasons why payments fail and how you can prevent it from occurring
Should your customer not have funds available in their account or have reached their account limit prior to billing, the payment will fail. This type of failed payment can easily be avoided by notifying your customers prior to billing and advising them to ensure they have funds available.
Incorrect account details
Payments will decline when payment details are entered incorrectly. This commonly occurs when collecting payment details manually using sign up forms or over the phone. A simple way to prevent this is to give customers a way to enter or update their banking details from their own device.
For security reasons, credit and debit cards only have a limited validity period, and once expired the payments will decline. One positive of this is your business will know exactly when the card is due to fail, so you can remind your customer to update their details before the next billing cycle. Recent tokenisation technology, which replaces the use of the credit card number and expiry date with a token, has also allowed businesses to continue billing customers after the card is expired. Using a billing platform that offers this technology would also help to prevent this.
Closed bank accounts
From time to time your customers may choose to close their bank account. Currently, bank direct debit processing is unable to tell if a bank account is closed for 3 working days, however PayTo, launching later this year, will know in real time when the bank account has been closed. PayTo’s mandates can also be moved from one bank account to another, making it significantly easier for customers to update their payment details.
For security reasons, banks are able to block transactions they may deem as suspicious. Even well-known businesses can be denied if the payment is out of the ordinary for the customer. Informing your customers to contact their bank and advise them of the upcoming payment/s can prevent it from being blocked unexpectedly.
Similar to the banks, customers have the ability to remove authority or even request a chargeback if they see an unfamiliar charge on their account. The easiest way to avoid this is to keep your customers informed of what they will be charged and how the charge will appear on their bank statement.
How Ezypay can help with Failed Payments
With over 26 years of subscription payments experience, Ezypay’s billing solution is built to maximise your collection rates by preventing payments from failing. Offering online sign-up forms, pre-debit SMS reminders, Mastercard tokenisation, and PayTo launching later this year, our solution will give your business the tools needed to improve your collection rates.