Subscription Benchmarks:
Top Payment Decline Reasons
There are over 2,000 things that can go wrong when a credit card is processed for a transaction–out-of-date or inaccurate card information, insufficient funds or temporary hold, gateway issues, and fraudulent activity–just to name a few. High credit card decline rates mean one thing: Your subscription business is suffering from involuntary churn, and you’re losing subscribers and hard-earned revenue until you put a stop to it.
To reduce this risk of high involuntary churn rates, you need an effective decline management strategy. Recurly Research has compiled comprehensive benchmark data on the top reasons for payment declines and how these impact transaction success rates. This research provides actionable insights on:
- Top reasons for high credit card decline rates broken down by B2C vs. B2B benchmarks
- Transaction recovery timeframes–how quickly declined transactions are recovered through smart retry logic–and how to improve this
- Percentage of transactions recovered, displayed overall, for B2B businesses, and for B2C businesses
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Top payment decline reasons
B2B and B2C businesses experience similar reasons for payment declines that lead to involuntary churn, but in B2B settings, Invalid Card Number is a more prevalent reason than Fraud. This is likely because business credit cards are more commonly used for B2B transactions.
In analyzing the data, three out of the five reasons–Declined, Insufficient Funds, and Temporary Hold–contributing to high credit card decline rates are soft declines, which can be repaired by retrying the card at a later date. For example, if a debit card is declined due to insufficient funds, the transaction may be successful in a few days when the card owner has added funds to their account.
Fraud and Invalid Card Number are hard declines, however, meaning retries will not be effective. Stolen cards and closed accounts are not likely to be successful and will only mean additional transaction processing costs. To repair hard declines, recovery may require contacting the cardholder to get updated payment information.
Time to recovery by payment decline reason
Regardless of the decline reason, the greatest recovery rate for transactions occurs within a short time frame–four to six days when the decline reason is Insufficient Funds. The failure types with shorter recovery timeframes, including Declined and Temporary Hold, are easier to repair as they may just need a few days to update information or funds.
With Fraud and Invalid Card Numbers, however, the longer recovery periods are forced by the technicalities of these declines. Both of these reasons require new credit or debit card information to be assigned to the cardholder, and it may take days or weeks before the cardholder receives a new physical card.
For transactions that aren't repaired through retries, it's necessary to employ a dunning strategy which involves contacting the subscriber directly via automated email communications to collect on past-due payments. With smart dunning management, you can get ahead of potential payment failures to decrease your credit card decline rates. Learn more in our dunning best practices blog.
- DECLINE REASONS
- Declined
- Insufficient Funds
- Temporary Hold
- Restricted Card
- Invalid Card Number
NUMBER OF DAYS
4-8 days
4-6 days
4-7 days
5-10 days
5-9 days
Recovery rate by payment decline reason
Succesful transaction retries help mitigate involuntary churn. Of the top five decline reasons, Insufficient Funds, specifically for B2B businesses, had the highest recovery rate. Again, this is likely the result of additional funds being added to the account at a later date. On the contrary, Fraud and Invalid Card Numbers have the lowest recovery rates because the process to repair these transactions is longer and more complex.
In general, B2B businesses have higher recovery rates across all decline reasons with an average recovery rate of 44% compared to B2C businesses with an average recovery rate of 32.4%. B2B businesses often benefit from a subscriber base that consider the service to be mission-critical and will not let it lapse, which is not usually the case for everyday consumers of B2B businesses who subscribe for convenience, personal entertainment, and cost savings.
- Overall
- B2B
- B2C
- Overall
- B2B
- B2C
- 80%
- 70%
- 60%
- 50%
- 40%
- 30%
- 20%
- 10%
- 0%
Declined
Insufficient Funds
Temporary Hold
Fraud
Invalid Card Number
FAILURE TYPE
Median recovery rates.
Understanding the different reasons for payment declines is the first step, taking action is the next.
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Recurly Research is a team of data scientists and analysts who use an objective approach to analyzing subscription metrics and statistics, using aggregated, anonymized transaction data processed by Recurly.
Methodology
Study examined a sample of over 1,900 subscription commerce sites that used the Recurly platform from January 2021 to July 2022. The data is aggregated and anonymized. The study normalized decline reasons across numerous gateways.
