Money February 3, 2020

SaaS owners. Do you see a lot of failed payments?

Mick @Primer

I regularly get “payment failed” notifications from Stripe with the API telling me “bank has returned a response of. Insufficient funds”

I see this a lot more than I thought given that my most popular plan is only $8 a month.

Does that stripe response potentially mean something else?

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    We get a few “bank has returned a response of. Insufficient funds” every now and then as we're B to C.

    We put it down to the normal cut and thrust of running a business online. Some customers like what they see but don't have the funds on their card but input their CC details in the hope it go through :(

    Usually, if there's a genuine problem with the card/credit, they'll always contact you :)

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      Thanks. I’ll keep looking into it.

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    My hunch is that an $8/month product is attracting people who struggle with money.

    On my B2B products, we do see this error but it's far less often. I would consider pricing your product for businesses, and I bet you'd see this problem a lot less!

    Also, as others have suggested, it's a great idea to have some custom dunning emails set up that make it SUPER easy for people to update their card.

    Stripe has basic retries built in but doesn't send emails - you can either custom code that using their failure hooks, or you can use a service like https://stunning.co that's designed specifically for this problem. We used Stunning until our software had dunning emails natively, and it works great!

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      Thanks i’ll check out that site.

      However I do struggle with the idea of pricing SongBox for business because it’s not necessarily a business product.

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    The key words for getting help with this are typically "declines" and "dunning". There are tons of products that can help with this, or just best practices you can follow.

    I have worked on products in the past that had very high decline rates, but they were all low-end consumer products or things targeted at very small businesses who might struggle with cash flow. I have not had this problem with StatusGator because we target more like medium sized businesses and start-ups. But if you are going after individuals with SongBox then you might run in this much more frequently.

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    You should check out the following, ProfitWell product--I'm not sure how expensive it is, but it's worth a demo.

    https://www.profitwell.com/churn-reduction-software

    They might have startup pricing too.

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    Mick, I swear I was reading somewhere that this was a huge issue for another IH (or small SaaS). If I can find the article or post I'll share it. The rough solution was they somehow got it to retry or prompt the customer to fix the issue.

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      That would be great, thanks.

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    Are these new customers (trying to pay for the first time) or existing customers with recurring payments that are failing?

    In my experience, if you're seeing a ton of failed payments from somebody trying to sign up, you may have a bad actor attempting to use your service as a way to verify credit cards.

    Not saying you should increase your pricing, but I've found that when you have a lower price point (sub-$10) you are going to run into more of these bad actors because the price point is negligible enough if it does go through successfully.

    If it's existing users, could just be that your customers right now are favoring using pre-paid cards (I see it a ton with my foreign customers). Actually unsure the logistics of why that is, but I'm assuming it probably has to do with access to actual business credit cards in some countries.

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      Hi josh

      Yeah it’s people on recurring payments that I’m seeing it with. It’s pretty odd for sure.

      I hear you about raising my price point. Emotionally I guess I’m scared of putting people off but logically I understand that sometimes raising prices actually raises uptake.

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        Totally feel ya... are you offering up quarterly or annual plans by chance? If nothing else, you could start urging your higher risk customers (the ones you can actually get a dialogue with) to move over to a higher term plan. Could even cite that it's because they are "high risk" if they have lapsed multiple times.

        I've seen higher priced SaaS out there that actually requires multiple forms on payment to be on file (usually 2 different credit cards) to help mitigate those types of things. Really just the nature of SaaS, people will use a burner card because it's EASIER than canceling.

        I'd just be sure to be on top of disabling access for people with lapsed payments (short grace period is nice, but people wills till take advantage). Often times having access quickly disabled (perhaps a dunning email as well) will result in you saving the subscription.

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          Good advice about making sure access is disabled quickly. I’ll go make sure I’m on top of that now.