Recurring billing can be a merchant’s best payment strategy, allowing you to boost revenues through more consistent cash flow.
While some customers prefer the ease of being able to set up recurring payments, there’s always the risk of errors occurring and charges being disputed. Whether a customer unintentionally flags a transaction they forgot they agreed to pay or intentionally disputes a charge, this process can create friction with your customers. Complications with your payment partners can also arise if too many transactions turn into chargebacks.
Thankfully, there are methods that allow you to find a happy medium, enabling you to serve your customers using recurring billing without risking increased chargebacks. We’ve broken down some tips on how to integrate recurring billing policies without incurring unnecessary expenses.
Be Transparent with Recurring Transaction Agreement Terms
One of the biggest reasons a customer disputes a charge — which often quickly turns into a chargeback — is that they don’t recognize a charge. Much of this friction can be avoided by being upfront during your initial terms.
You should always get written consent on the specific payment terms for a subscription service or recurring charge. This should include details such as: How much the transaction will be, if the amount charged each month is fixed or flexible, what date the transaction will post to an account, how payment terms can be altered, and how the customer will receive communication regarding any relevant charges. Your terms should also identify how the transaction will appear on a billing statement so they will recognize the billing descriptor.
Never underestimate how much effort you should put into the recurring billing process to oversimplify the terms that you have customers agree to. There should be no hidden terms, and you should tailor the language to specifically fit what products/services your business is providing — and for what defined time period. Like any customer relationship, transparency will determine how loyal they’ll be to your business.
Allow the Customer to Be In Control Of Their Subscription
Another way to avoid chargebacks is to keep your customer happy. If a customer is satisfied with the relationship, they are more likely to keep the recurring billing subscription. They are also less likely to cancel their membership or dispute a transaction that would trigger a chargeback. This positive relationship can be achieved by empowering customers to feel they have control over the terms.
For example, providing your customer an option to cancel the subscription online lets them feel there’s less of a risk to engage in the service in the first place. Sure, this makes it easier for them to bail on the service, but it also lets them know you value their business and their ability to determine if the subscription service is the right fit for them.
To that same extent, you should allow your customer to maintain control over their own subscription service by notifying them in advance about charges that will be posting to their account. This could be a simple reminder to let them know a trial or promotional rate is ending, or that their regular bill is posting for the month. This helps keep charges transparent and remind them of charges that will post. By notifying customers in advance about payments, there is less of a chance for a dispute. Fewer disputes mean fewer chargebacks.
Make It Easy to Be Contacted
This tip may seem obvious, but it’s one thing that’s often easily overlooked by merchants. You should encourage customers to reach out to you directly with their questions and concerns. Industry data suggests that 86% of customers will reach out to their bank to dispute a charge before even contacting the merchant. You can help overcome this problem by making it easier to be contacted.
Whether it be through a live chat feature, email or phone number, your contact options should allow customers to speak with an actual person quickly so their questions or concerns are solved in a timely manner. Resolving disputes directly with the customer can help keep a positive relationship and reduce the chances of unnecessary costly chargebacks.
Invest in Industry-Leading Security Measures
Another common reason for chargebacks — especially for recurring billing transactions — is security gaps in your payment systems. This can be avoided by investing in subscription-billing software through a third-party payment processing partner.
Since recurring billing requires gathering sensitive personal financial details from your customers, you’ll want to ensure you can securely keep that data on file to properly process the charges on a regular basis. You should rely on data security methods that encrypt all data to create an extra barrier from outside threats. Rely on payments partners who place value on security measures in their software and hardware payment solutions. Any transaction that occurs online should be encrypted to avoid being caught up in chargebacks triggered by fraud. Once a customer’s data is breached on your system, this creates a negative brand experience. Increased fraud leads to more chargebacks, which are costly and cut deep into your bottom line.
Luckily, this problem isn’t too hard to avoid if you have the right payments processing partner by your side to guide you through this subscription process. That’s the first step in proactively protecting your customers and the profits you can generate by offering recurring billing options.
