How to Reduce Involuntary Churn for Your Subscription Business

Churn, or customer attrition, in other words, is a term used to describe the situation where customers stop subscribing to a service or doing business with a merchant. Calculating the churn rate helps organisations determine the percentage of lost customers over a specific period of time since maintaining low churn rates has a direct impact on revenue. While churn is a normal occurrence that merchants across all industries must face, especially in the subscription-based industry, involuntary churn refers to situations in which customers undergo a payment failure and therefore lose access to the service, content or product they were subscribed to. This scenario is also very far from ideal for businesses since they find themselves in a situation where customers who don’t want to leave might end up leaving. 

In this blog post, we explore involuntary churn in more depth, take a look at the reasons behind it, and easy ways to mitigate it!

Reasons behind involuntary churn in subscription businesses

We’ve already established that involuntary churn is caused by a payment failure, leading to the subscription being cancelled and losing access to the content or service. Organisations with subscription business models are especially vulnerable to monthly revenue loss since they hugely rely on credit card payments. So what are the main reasons behind involuntary churn?

• Expired billing information: card payments provide a lot of convenience to consumers in the physical and online world. Storing card information in mobile wallets and computers speeds up checkout processes and makes the customer experience more pleasant. However, debit and credit cards are normally valid for between three and five years, which means customers must update their card information in every service they’re subscribed to. This is easy to overlook, especially with services or products not used daily. 
• Soft declines: card issuers can sometimes decline a payment because of technical issues, or suspected fraudulent behaviour but can be retried after a few hours.
• Hard declines are permanent rejections coming from payment processors or card issuers. Hard declines tend to occur in situations where the banking entity suspects or has detected fraud, or when payment is being attempted from a card or account that has been closed. 

How to reduce involuntary churn for subscription businesses

As we can see in the previous section, involuntary churn is directly linked to credit cards. Therefore, organisations looking to stand up to involuntary churn and minimalise it as much as possible should explore other payment methods. And this is where direct debit comes into play. 

A direct debit is a financial transaction where an organisation withdraws money from an individual’s account on agreed terms. Direct debit is typically used to pay for bills, insurance premiums, and subscriptions. 

At Waytobill, we offer local direct debit methods for Nordic customers:

• Autogiro: Swedish equivalent of direct debit, available for telesales, online and in-field sales. 
• AvtaleGiro: Norwegian equivalent of direct debit, available for telesales, online and in-field sales. 

Thanks to Waytobill’s Digital Autogiro and AvtaleGiro integrated with popular telesales and CRM systems, organisations can not only streamline payments and take control of transactions but also reduce involuntary churn. 

Direct debit payments are withdrawn directly from the customer’s bank account, eliminating the need to use credit cards that expire or can be declined for a variety of reasons by banks and banking institutions. According to Finder, most people have switched banks at least once in their lifetime, while almost 20% of respondents change banks only once every 20 years. This scenario looks much better than credit cards expiring every few years.

Autogiro and AvtaleGiro provide an easy onboarding and checkout experience

Waytobill’s Digital AvtaleGiro and Autogiro are the Nordic equivalents of direct debit transactions and provide customers and organisations with peace of mind and ease when it comes to regular monthly transactions. 

In order to set up an Autogiro or AvtaleGiro mandate, customers don’t need to worry about filling out lengthy paper or online forms. Instead, customers go through an intuitive checkout process available to them in telesales, online and in-field sales. Merchants provide customers with payment links pre-filled with the prospects’ information available in their sales or CRM system, making the checkout experience quicker and easier.

Instead of filling out the information, customers review whether the data provided by the merchant is correct. Then, customers confirm the order and choose Autogiro or AvtaleGiro as their preferred payment method and set up a monthly payment by signing in to their BankID account. Once the payment mandate has been set up, customers and merchants don’t need to take any further steps, unless the customer wants to cancel the subscription. 

Would you like to find out more about Waytobill’s direct debit solutions for the Nordic countries? Contact us today for more information!