Results: Account Updater Reduces Credit Card Declines Disproportionately for B2C Merchants

It is no secret that in the world of recurring billing, credit card declines are the bane of your existence. We recommend pursuing all available tactics to ensure that your decline rates are held to a minimum. However, when presented with a range of options, it is also super important to understand where to begin, how to prioritize your efforts, and what to expect. This post describes the result of a pre/post study looking at the results of enabling the Account Updater service to ensure continuity in your recurring billing operations.

First off, let's define terms. "What is the Account Updater?"

The Account Updater is a service provided by Visa and Mastercard, which provides the ability for Recurly and other qualified payment service providers to retrieve updated billing information when a card has been replaced, or reported lost or stolen.

Sounds great! "Is it a 'Silver Bullet'?"

Well...in a word, NO.

Is it a 'Best Practice'?, YES...but it would be irresponsible to characterize it as a 'cure-all' for credit card declines. This is for a couple of reasons. First of all, it requires participation by Credit Card Issuing Banks (Chase, Citibank, B of A, MBNA, Wells Fargo, etc). Visa apparently has 35%-40% participation rates from Issuing Banks, and Mastercard is reported to have somewhat less than that. However, since they have the largest banks participating, the effective coverage rate ends up being between 70%-85% for Mastercard and Visa, respectively.

OK, so in what cases should you expect to benefit from the Account Updater?

In many Sales conversations, Recurly receives requests from companies *requiring* Account Updater capabilities. Recurly provides access to the Visa and Mastercard Account Updater. It is simple to enable on your account, but requires your explicit consent to opt-in. The Account Updater provides replacement card data along with updated expiration dates, which can be of benefit to optimize for pending invoices.

We ran a Pre/Post test, in which we observed 50 companies participating in the Account Updater program to augment their recurring billing capabilities. We studied their decline rates 30 days prior to enabling the Account Updater, and 30 days afterwards. (n=~540K transactions).

Our findings indicated that the Account Updater is far more valuable for companies targeting B2C customers than it is for B2B companies. Our interpretation of these results is that B2C services see a higher proportion of matches being retrieved from the Account Updater. (This is due to consumers having cards replaced from major events, like the Target breach, which replaced ~22M cards). B2B customers are typically not purchasing from companies like Target, and have a much lower exposure to pre-emptive replacements being made by Issuing Banks.

Change in Card Decline Rates After Account Updater plot chart

We observed nearly negligible results for B2B merchants using the Account Updater. B2C merchants saw an average reduction in their decline rate of 1.9% (9% percentage improvement from their performance observed prior to enabling the Account Updater).

Now for the victory lap. A 1.9% absolute reduction in any company's decline rate is very significant in terms of 'recovered revenue'. These results are statistically significant, and for an automated service, which requires ~10 seconds to enable in your Recurly account, and requires no additional cost, there is no good reason to not take advantage.

If you are interested in learning more about the Account Updater service, please feel free to contact our team. We'd be happy to speak with you about what you should expect.

-Dan Burkhart

CEO & co-founder, Recurly.