Member Exclusive, Payments

Payments Briefing: How a company’s payment acceptance methods affect its customer retention

  • For subscription-based businesses, up to 40% of customer churn happens because of payment failure.
  • Companies could reduce churn by encouraging more customers to switch to ACH debit, according to a GoCardless report.
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Payments Briefing: How a company’s payment acceptance methods affect its customer retention

In the subscription economy, a company’s payment acceptance strategy plays a key role in its ability to improve customer retention, according to a new report by payments firm GoCardless and subscription management platform Zuora.

The report finds that the annual customer churn rate for subscribers who pay via bank debit – also known as ACH debit – is 4%. In contrast, the annual churn rate for customers who pay via credit card is over three times higher at 14%, and the rate for those who use PayPal or a digital wallet is the highest at 16%.

subscription payments

Source: Zuora

When looking at the revenue lost to churn, the numbers are similar. The percentage of average annual revenue lost to churn is 4% for ACH, and doubles to 8% for credit cards. For PayPal, the annual revenue lost to churn is again the highest at 11%.

Interestingly, the report finds that 20-40% of customers don’t leave a merchant because they’re unhappy with the product or service itself, but simply because their payment didn’t go through. Since this is an unintended outcome for the customer, it’s referred to as involuntary churn.

 


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