Subscription Merchants See Failed Payments Spike Churn Rates

When the subscription industry’s customers experience failed payments, it can directly lead to churn, PYMNTS research reveals, prompting merchants to lose out on hundreds of millions of dollars.

For PYMNTS’ study “Tracking Failed Payments,” created in collaboration with failed payment recovery solution provider FlexPay, we surveyed 200 executives to better understand the relationship between failed payments and customer churn in the subscription industry, among other matters. The results reveal that failed payments do in fact have a massive impact on the subscription industry and on merchants’ relationships with their customers.

In fact, the study notes that a whopping 70% of companies say failed payments negatively impacted their customer churn rates in the last 12 months, such that this issue is far and away the norm rather than the exception in subscription commerce.

Moreover, many providers see an even more straightforward link between failed payments and loss of subscribers. Half of all the companies surveyed reported that they see this issue as a direct cause of customer churn.

Not only are failed payments an issue — many providers believe that they are the single greatest challenge when it comes to retaining customers. More than 1 in 4 survey respondents reported that they see failed payments as the most important contributor to customer churn.

Moreover, failed payments are an issue for merchants not only because they send consumers running straight to the unsubscribe button, but also because they eat away at the value that consumers get from the subscription service over time. The survey results revealed that about two-third of companies say failed payments negatively impacted customer lifetime value (LTV) in the last 12 months.

When failed payments prompt consumers to unsubscribe, merchants lose out.

As the study notes, “Failed payments alone cost the subscription industry hundreds of millions of dollars each year in lost revenue.”

The post Subscription Merchants See Failed Payments Spike Churn Rates first appeared on PYMNTS.com.