When you recover a failed payment you’re recovering a customer, not simply a transaction. This means the way you recover your failed payments must give you the longest uninterrupted lifecycle following recovery. You want to keep the customer for many months to come. To do this, avoid methods that contribute to churn, such as ways that give the customer the opportunity to cancel their subscription. Recovery should always be made with the fewest possible attempts, but if customer interaction is absolutely needed, do it with the fewest number of interactions. Every interaction you have makes the customer more likely to churn.
And remember, there’s a direct relationship between how many payment resubmissions you send and their rate of failure. The more attempts you make, the more your merchant account is damaged because banks identify the account as a risk, resulting in higher fees and more declines. Transactions are scrutinized more closely, which increases the chances a payment may fail. It’s a vicious cycle.
The Power of Artificial Intelligence
Artificial Intelligence (AI) is the best way to solve the challenge of failed payments. AI acts silently behind the scenes to evaluate a transaction against the hundreds of reasons why a payment might fail, and the customer never knows there was a problem. Other approaches, such a company’s rules-based system and customer service outreach, just can’t handle this challenge.
There are over 8,000 card-issuing banks in North America alone, all using their own unique algorithms to decide which payment transaction requests are approved and which are declined. There are also hundreds of reasons why a payment might fail, as shown by the hundreds of reason code values returned with a failed payment. Plus, every type of credit card is evaluated using different rules. This means every corporate card, rewards card, or specialty card is evaluated differently. There are literally billions of permutations that must be considered to create a unique recovery strategy for each failed payment.
Clearly, rules-based systems don’t work in such a complex environment. Unfortunately, companies that think rules-based recovery is enough are usually the same companies with very high churn rates. They don’t recognize that almost half of their churn is caused by failed payments.
The Importance of Good Data
AI is the most powerful tool for failed payment recovery, but not all AI is created equal. AI and machine learning are algorithms that must be trained so they can adapt to make independent decisions based on each individual situation. To do this effectively, AI must be trained by industry experts with deep system knowledge and extremely large giga-sized data sets. Machine learning is only as good as the data it’s trained on, but many companies that want to use machine learning don’t have access to the huge amount of data needed to do this properly. Data scientists and businesses must work together to create trained and effective AI solutions and accurate modeling. Applying AI on a poor execution model won’t give dependable results.
The Invisible Recovery™ Solution
The FlexPay Invisible Recovery™ platform is an AI-powered solution that creates individual strategies for each failed payment. Invisible Recovery™ works quickly behind the scenes while completely avoiding customer visibility to the failed payment, which eliminates the churn created when subscription customers are made aware of their payment issue.
FlexPay research shows Invisible Recovery™ delivers the highest rate of failed payment recovery, as well as sustained retention for months to come. The numbers tell the whole story:
• Up to 70% improvement in failed payment recovery rates compared to other recovery solutions
• Up to 45% longer customer retention following recovery compared to using other failed payment recovery methods
To find out the whole story about AI, read our e-book.