Failure Reasons

When working to improve your failed payment recovery process, identifying the specific problem you're addressing is crucial. The first indicator of an issue is a failed payment, often accompanied by a decline code or failure reason that provides insight into what went wrong.

What Causes a Payment to Fail?

When a payment is processed, it either goes through successfully or is declined, with the decline response usually coming from the card-issuing bank. However, other factors in the payment network, like processing errors or network congestion, can also trigger failures.

Recurring payments can fail for numerous reasons, but only a few primary decline codes are commonly used to categorize the failures. One of the most frequent is the "general decline," a vague error that could mean almost anything. Although decline codes are not always precise, they are still valuable for tailoring your recovery approach based on the type of failure.

Expired Cards: No Longer the Biggest Culprit

Contrary to popular belief, expired cards are no longer the leading cause of payment failures. Advancements in payment technology now enable card updater systems to communicate directly with issuing banks behind the scenes, updating expiration dates automatically without customer involvement.

This "card updater" technology, introduced in the mid-2010s, transformed the landscape of failed payment recovery (or "dunning"). Previously, businesses relied on "pre-dunning" techniques, contacting customers 30, 15, or 7 days before their recurring payment if their card was nearing expiration. While meant to be proactive, this approach often disrupted the seamless experience subscriptions were designed to offer.

Churn Buster also offered pre-dunning but analyzed the impact of card updater technology and discovered a majority of expired cards were updated automatically, requiring no customer action. This meant most pre-dunning notifications were unnecessary, disruptive, and sometimes harmful to the customer experience.

Recognizing this, Churn Buster became the first solution to eliminate pre-dunning altogether. Today, expired payment methods typically account for a small percentage of payment failures, thanks to these advances, and if you have an optimized dunning process in place, it works great for these failures as well.

How Accurate Are Decline Codes?

Decline codes can provide a general direction but are often not entirely reliable. They can be vague or even incorrect, and should not be relied upon as the sole guide for your recovery strategy. As best practice, design a failed payment recovery process that is optimized for the most common failure reasons but also includes safeguards for unclear or changing decline codes.

Decline reasons can shift over time—for example, a payment may initially fail due to insufficient funds, but later the customer’s account might be closed altogether. Your recovery process must account for these evolving scenarios to ensure maximum revenue recovery.

Common Decline Codes (Based on Churn Buster Data)

Insufficient funds
General decline/error
Invalid payment method
Expired payment method
Incorrect card number

Beyond these primary reasons, there’s a wide array of less common decline codes that, although individually low in volume, collectively represent a significant portion of failures. These include transient errors, validation failures, rejections, and unexpected errors. Decline codes can also vary across platforms, making categorization challenging.

Soft vs. Hard Declines: The Key Distinction

For effective failed payment recovery, it’s essential to differentiate between soft and hard declines:

Soft Declines: Temporary issues that can often be resolved quietly by retrying the existing payment method. Examples include insufficient funds or network errors.
Hard Declines: Permanent issues that typically require direct action from the customer, such as an invalid payment method or a closed account.

An Adaptive Recovery Process

Churn Buster’s adaptive recovery process dynamically adjusts to each customer’s specific decline reason and behavior, ensuring the right strategy is used for each scenario. By understanding decline codes, leveraging advanced tools like card updaters, and distinguishing between soft and hard declines, you can create a more effective recovery process that minimizes disruption and maximizes retention.