Consumers continue to evince an insatiable appetite for subscriptions of all kinds. But millions of subscriptions are hitting a wall when payments fail to process for any number of reasons, and these declines pose a threat each time it happens, causing subscribers to question whether they need that service or can go without.
That’s a risky moment for subscription brands, but the problem is being addressed.
In Optimizing Subscription Payments: How Providers Can Take the Sting out of Payment Declines, a PYMNTS and FlexPay collaboration, researchers surveyed nearly 2,200 consumers about subscription satisfaction and related issues, finding that declined payments are an unnecessary danger in a market seeking growth and consumer satisfaction at once.
Noting that “the average consumer had 2.3 types of subscriptions as of July 2021, nearly twice as many as the average consumer held in February 2020,” and that “this is prompting subscription service providers to examine how they can entice and retain consumers who already have at least one subscription,” researchers found payments filling the gaps.
“Subscribers are inclined to tap traditional banking products when paying for their services,” per the study, with 38% of consumers who pay for subscriptions using debit cards, “making it far and away the most common payment method. Credit cards come in second place (28%), followed by PayPal (17%), digital wallets (9%) and bank account transfers (7%).”
As researchers found that 45% of consumer services subscribers experienced declined payments over the past year, the Optimizing Subscription Payments study states that “payment declines are not uncommon in the subscription services space, and our survey shows that a broad range of subscriptions is affected.”
Communications Are Key
While consumers are generally pleased with their subscription services, glitches in the payments experience can sour even the happiest subscriber relationships.
“Payment declines can significantly affect subscribers’ satisfaction with their service providers, often leading to customer churn,” per the study. “Payment declines drove 27% of affected subscribers to cancel or change providers, with 17% canceling and 10% switching to a competitor.”
Communication plays a crucial role when consumers decide to keep or cancel.
According to the findings, “subscribers whose services are interrupted terminate their contracts 30% of the time, whereas just 11% of subscribers who are notified of declines via email do the same. Even a sizable share of consumers who are at least relatively satisfied with their subscriptions will abandon them if their service is stopped due to a declined payment, with 14% of ‘very’ or ‘extremely’ satisfied subscribers and 26% of those who are ‘somewhat’ satisfied saying so.”
Managing Failed Payments to Retain Subscribers
Strategies for communicating payments declines to subscribers and taking subsequent action vary between service providers, with the study finding that “37% of subscribers who faced payment declines were notified via email, while 16% were alerted via text message and 12% received phone calls. Eighteen percent of subscribers said their services were simply shut off, however, and an additional 18% were forced to reenter their payment or account details when the problem occurred.”
Unsurprisingly, service cut-off is regarded as being the most hurtful approach.
“An abrupt cutoff of service does the most damage, as 39% of the subscribers who endure a service cutoff cancel their accounts,” per the study. “When subscription providers are more proactive, the customer runoff is less severe. Thirty-one percent of subscribers who get phone calls about declined payments cancel the subscriptions, for example, and 27% of text message recipients cancel,” while PYMNTS found that 23% of subscribers who receive emails cancel.
As Optimizing Subscription Payments concludes, “providers who manage declined payments with skill and minimize the disruption subscribers face can keep customer relationships strong and position themselves for future growth.”