Subscription-based businesses have a big problem that often goes unnoticed: false declines caused by card issuers. While merchant fraud teams focus heavily on stopping fraud and managing chargebacks, they frequently miss another critical issue—legitimate payments being wrongly declined. These false declines not only result in lost revenue but also drive involuntary churn, which can significantly impact recurring revenue.
The good news? Fraud teams already have the expertise needed to solve this problem. By expanding their scope to include failed payment recovery, businesses can retain more customers, reduce churn, and improve profitability. Let’s break it down.
The role of fraud teams today
Fraud teams play a crucial role in protecting businesses from fraudulent activity and managing post-transaction disputes. Typically, they focus on six core areas:
- Fraud detection and prevention
- Developing strategies to stop fraudulent activities before they occur.
- Payment operations oversight
- Ensuring secure transaction processing and compliance.
- Data analysis and reporting
- Tracking fraud rates and assessing prevention effectiveness.
- Policy and system development
- Optimizing fraud detection systems and policies.
- Chargeback management
- Handling disputes efficiently to limit costs.
- Team collaboration
- Partnering across departments to resolve fraud-related issues.
These efforts provide immense value, but they’re only part of the picture. Most fraud teams focus on preventing fraud before a transaction and managing disputes after a payment fails. What they often miss is the middle ground: recovering legitimate payments that were incorrectly declined.
Why false declines matter more than you think
False declines occur when card issuers reject legitimate transactions in their efforts to minimize fraud. This risk-averse approach is understandable—after all, their money is on the line. But it leads to major problems for subscription businesses.
- High decline rates for subscriptions
- According to Visa, only 1% of in-person transactions are declined, but that number jumps to over 20% for recurring subscription payments. This happens even when customers have successfully billed multiple times before.
- Customer churn
- Failed payments aren’t just an inconvenience; they’re a leading cause of customer churn. FlexPay’s research shows that 27% of subscribers cancel their service after being notified of a failed payment.
- Revenue loss
- Beyond the immediate lost payment, businesses lose out on the lifetime value (LTV) of those customers. Each churned subscriber represents months—or years—of lost revenue.
The impact of false declines is too big to ignore. Recovering these payments and preventing churn needs to become a top priority for fraud teams.
Why fraud teams are perfectly positioned to help
Expanding the fraud team’s role to include failed payment recovery makes perfect sense. Here’s why:
- Existing expertise
- Fraud teams already have the technical knowledge and analytical skills to identify and resolve payment issues.
- Collaboration skills
- They’re used to working cross-functionally with customer service, compliance, and engineering teams—skills that translate directly to recovery efforts.
- System optimization
- Just as they optimize fraud prevention tools, fraud teams can evaluate and implement failed payment recovery solutions that deliver the best results.
- Tracking and reporting
- Fraud teams are skilled at building metrics and reporting systems. This makes them ideal for monitoring recovery performance and measuring the revenue impact of recovered payments.
By taking on this expanded responsibility, fraud teams can help businesses close the gap on false declines and keep more subscribers onboard.
How to recover failed payments effectively
FlexPay’s failed payment recovery solution offers a two-pronged approach:
- Invisible Recovery™
- This AI-powered tool works directly with the payment system to retry failed transactions in the most effective way possible. Customers are never aware there was an issue, and their service continues uninterrupted.
- Engaged Recovery™
- For payments that can’t be resolved invisibly, targeted outreach—via email or SMS—guides customers to resolve the issue themselves. Messages are personalized, empathetic, and focused on helping the customer take action.
By combining technical solutions with customer-friendly outreach, businesses can recover more failed payments, reduce churn, and maintain a positive subscriber experience.
The long-term value of fixing failed payments
Recovering failed payments isn’t just about short-term revenue. It’s about creating lasting value for your business:
- Higher Retention
- Subscribers stay longer, contributing to predictable revenue streams.
- Improved Profit Margins
- Recovered payments deliver higher margins than new acquisitions, which are weighed down by customer acquisition costs.
- Stronger Relationships
- A smooth recovery process keeps customers happy and reduces the risk of churn.
When fraud teams take on failed payment recovery, they don’t just solve a problem—they unlock opportunities for growth.
What this means for you
Failed payments are a hidden challenge that subscription businesses can no longer afford to ignore. While fraud teams have traditionally focused on preventing fraud and managing chargebacks, they’re uniquely equipped to tackle false declines and recovery efforts.
By expanding their role to include failed payment recovery, fraud teams can help businesses:
- Reduce involuntary churn
- Recover lost revenue
- Improve subscriber satisfaction and retention
Ready to tackle false declines and recover more revenue? FlexPay offers the tools and expertise you need to solve this problem for good.
