In this article, we take a closer look at three key elements of authorization for digital goods and services companies. Read on to discover targeted actions that you can take to optimize your acquiring set-up, helping boost conversion and generate more revenue for your business.
If your business offers subscription payments, there are special factors that you need to take into account in order to maximize authorization rates. One such factor is the timing when you take a payment from a customer.
Specifically, you should ensure that your billing interval coincides with a consumer’s typical salary deposit. In the US, for example, the majority of customers are paid biweekly. This means that payments taken at the beginning and the middle of each month will have the highest chances of success. Conversely, in the UK, consumers tend to be paid at the end of the month, leading to an uplift in successful payments at the beginning of the month.
To determine the optimal time to bill subscribers, consider analyzing transaction refusals due to insufficient funds. As factors such as market, time of day and time of month can all have an impact on success rates, it’s important to drill down to a granular level of detail in order to build the most accurate picture.
Equally, you might want to consider setting a fixed billing date for monthly subscriptions. Rather than just billing a customer in 4-week intervals following initial sign up, with fixed billing you select a specific date in the month on which to take a payment. You can choose to bill all your customers on the same date for consistency or bill individual customers on a specific date.
Using a fixed billing date rather a rolling billing interval can make it easier for customers to remember exactly when to expect a deduction from their account. This means it’s more likely that they will have funds set aside to cover the debit—boosting your chances of conversion success.
Many digital goods and services providers operate business models that depend on regular, recurring payments. If you’re one of them, then it’s all the more important for you to avoid involuntary churn, which is where customers have their subscription canceled due to payment failure.
Involuntary churn happens for many reasons – one of the most common is because a customer’s original payment card expires, gets stolen or is lost. When this happens, the card will be reissued with different expiration dates, CCV code, and card number. This can trigger a decline in the next payment, often without the business or customer immediately realizing it.
When an on-file card stops working, you can reach out to the cardholder directly for updated card information. However, this can take a considerable amount of time and cause a spike in customer service costs.
Most of the major card networks provide a useful alternative, in the form of automated update services, such as Account Updater for Visa, Automatic Billing Updater for Mastercard, and Card Refresher for Amex. Here, card update requests are sent to the card networks, which gather relevant updates from participating issuers and return the updated card details to merchants.
With access to a customer’s latest payment details, your business can minimize disruptions to recurring payments. This will help you reduce the risk of service cancellation, ensuring that customers enjoy uninterrupted access to your offerings and that your business enjoys a steady stream of revenues.
By validating your customer’s card details when they first sign-up, you’ll improve the chances of their next payment being successful. This is especially helpful for businesses that rely on subscription or recurring payments.
So, how do you ensure that a consumer’s card is valid? One way is to use a $0 or $1 pre-authorization. This is a temporary transaction that you can use to confirm a card works, without actually deducting any money from a consumer’s account.
We recommend that you use a $0 authorization where possible. Some customers don’t understand why a $1 charge appears on their account – even though it is not actually deducted – and this confusion could damage their perception of your brand or even lead them to issue a chargeback.
However, it’s important to note that not all issuing banks accept $0 authorizations. Be sure to check before you authorize, and
use the amount that a specific issuing bank prefers in order to maximize your chances of successful authorization.