Authorization Decline Analysis
SaaS solutions provider: Business communications.
$300 million/year annual sales.
Every month, the client attempted to charge its customers for subscription fees using the customer's payment card that was stored on file. When these charge attempts failed, the customer's account would be suspended and the client might lose all future revenue from the customer. The lifetime value of a subscription customer is a multiple of the monthly subscription fee, so the loss of a customer due to a charge failure can represent a significant and potentially avoidable reduction in overall income for a SaaS company. Our client carefully monitored "account churn" as it's called in the industry but was unable to understand the degree to which payment authorization declines contributed to overall churn. Churn can have many causes. To be successful, a SaaS company identifies the causes of churn then takes action to protect and save as many of its recurring relationships as it can. Our client needed help to understand the reasons why account charge attempts were failing, the extent to which each of these root causes were contributing to account churn, and then what actions they could take to reduce authorization declines and protect their recurring subscription revenue.
We segmented the client's payment data to help the client distinguish between declines associated with new account creation vs. declines associated with failure to process a charge for a recurring subscription fee. We further segmented each of these segments to identify the drivers of both new account sign-up failures and recurring charge failures. We further studied decline data by card type, currency, issuer characteristics, transaction amounts, and card brand. We analyzed this data over time to identify trends and anomalies. We prepared and delivered to the client a presentation that described the results of our analysis and developed recommendations for actions the client could take to reduce payment card authorization declines, reduce churn, and save revenue.
The client gained a clear understanding of how its decline rate varied by segment, by reason, over time. The client discovered that a significant proportion of total declines were due to CVV2 failures and was able to focus on messaging and customer experience to help new customers understand what actions they could take to sign up for new accounts. The client also discovered several unexpected drivers of decline rates and was able to research those further with its processor. The client received a strategic roadmap that documented each of the key drivers of its decline rate and learned what actions it could take to mitigate those declines.