With the emergence of the "subscription economy," automatically charging customers in exchange for goods and services has become a popular business model. Direct debits have been around much longer than other industries. However, direct debits have their own challenges - direct debits by card have much higher rejection rates than one-time payments, for example. Here are five tips for improving your successful payment rate. 

1. Optimize representations

The most common reason for rejected card charges is that the authorized credit on the account has been exceeded. For this "insufficient funds" scenario, as with technical error cases, you are likely to represent the payment before taking any further action. By analyzing the payment manager response codes, you will be able to identify the different patterns and optimize the number of times, how often and on which days of the month you must represent a payment. For example, a successful payment may vary throughout the month, and understanding this pattern allows you a representation of when the chances of success are highest. Setting automatic representation rules is one of the most effective practices to increase the rate of successful payment. 

2. Keep credit card information up to date

Nearly 3% of credit cards expire each month, resulting in chargebacks. Integration with account update services can help alleviate the problem, but not all intermediaries offer account update services (and account update information is not always available). Alternative actions for expired cards may include following up with customers by phone or email, and suspending subscriptions until new payment information has been retrieved. As with representations, the ability to automate rule-based tracking can dramatically improve efficiency in this area.

3. Anticipate disputes

Chargebacks are disputed credit card payments - for example, because the customer does not acknowledge the charge, or has not received the expected goods, or is suspicious of fraud. Chargebacks are on the rise and result in lost revenue, chargeback fees and higher transaction fees for the merchant. Clear customer communication is key in preventing rejections; to this end, avoid vague or confusing payment descriptions on the card statement so that the customer can easily identify the source of the charge. To prevent fraudulent charges, it's important to have an anti-fraud tool in place that measures things like online authorization, blocking fraudulent customers, and fraud pattern analysis. These types of best practices can help minimize the number of chargebacks.

4. Online customer service

The ease of an online customer service portal makes it easier for customers to maintain their payment data. For example, you can allow customers to update their expiring credit cards, or switch their direct debit to a new preferred payment method. At a minimum, online customer service must allow customers to view the direct debits that have taken place and which payment method will be used for the next one so that they can be proactive in updating their payment information. when necessary. You may also want to allow customers to easily cancel their direct debits, which should help reduce the number of debits

5. Direct debits versus credit cards

And what about your international activity? Depending on the country, direct debit payments may be more popular than card payments. Direct debit can be beneficial to merchants; while credit cards expire regularly, direct debit mandates are valid until the customer voluntarily cancels it. And processing fees for direct debits are generally lower than for credit card transactions. When direct debits are rejected, a similar follow-up is necessary as for card payments: represent the payment if possible, contact or invoice the customer and, if all fails, suspend or cancel the subscription. 

How can we help?

Have you explored all the options Advantage offers to optimize recurring payments? Advantage integrates with many local and international card providers, as well as direct debit systems like BACS or SEPA. We keep track of the number of performances and manage the automatic follow-up of failed payments. Rule-based actions such as sending an invoice, adding customers to call lists, updating and canceling subscriptions are available, as well as several different options for billing descriptions.