What is a SaaS Payment Decline Rate?

A decline rate for a SaaS payment is a metric that determines the percentage of attempted customer payments that are rejected by a payment processor or issuing bank. This is a key metric when looking at the health of your subscription business.

The formula to calculate it is:

Decline Rate=(Total Attempted Transactions by Number of Declined Transactions​)×100

But remember, you must always distinguish between these two declines:

• Soft Declines: These are temporary failures, usually because of issues such as insufficient funds or network problems. These are often resolved by simply retrying the transaction.
• 硬拒绝: These are permanent failures due to issues such as a stolen or lost card, or invalid card details. These require direct customer intervention so that their payment information can be updated.

Payment declines are consequential because they directly affect the core of a SaaS business model. Their negative impact is felt across the company and causes:

• Direct Revenue Loss: Each failed transaction is lost revenue for the billing cycle in which it occurred. When compounded across thousands of customers, this deficit can be substantial.
• Increased Involuntary Churn: Involuntary churn occurs when a customer’s subscription is canceled because of a failed transaction, not because the customer decided to leave. This erodes your customer base and negatively impacts Customer Lifetime Value (LTV), and is the most damaging consequence.
• Higher Operational Costs: Your finance and customer success teams will need to spend valuable time and resources researching failed payments, contacting customers, and managing dunning processes, which adds to overhead and further impacts revenue negatively.

SaaS payment declines happen for a variety of reasons, originating from the customer’s bank, the card itself, or regional processing rules.

• Customer & Card Issues (Hard Declines): These are the most common and include expired cards, incorrectly entered card details (CVV/address), or cards that have been reported lost or stolen.
• Bank & Processing Issues (Soft Declines): These are usually temporary and can be due to insufficient funds, generic “Do Not Honor” messages from the bank (often due to their own fraud filters), or suspected fraudulent activity.
• Regional & Cross-Border Factors: Decline rates are higher when processing international payments due to strict local banking regulations, currency conversion issues, or restrictions on cross-border transactions imposed by the issuing bank.

While this depends on the industry, customer base, and price point, you can consider these general benchmarks to measure your performance:

• Excellent: A decline rate below 5% is outstanding. It suggests you have a strong customer base and excellent prevention and recovery systems in place.
• Average: This is a typical range for many SaaS businesses. There is room for improvement, but it is not necessarily a red flag.
• Poor: If your decline rate is consistently above 10%, it should be treated as a significant concern. This rate indicates serious revenue loss and a high risk of involuntary churn and should be prioritized immediately.

To successfully lower the rate, use a two-part strategy: proactively preventing declines before they occur and strategically recovering from them when they do.

Prevention Strategies to Stop Declines Before They Happen

• Use an Account Updater Service: This is a service (often provided by payment gateways) that automatically communicates with card networks (Visa, Mastercard) to update expired card numbers and expiration dates in your system before they trigger a decline.
• Analyze Decline Codes: Don’t treat all declines the same. By analyzing the specific decline code returned by the processor, you can take relevant action.
• Code 51 (Insufficient Funds): Retry the payment a few days later, perhaps after a typical payday.
• Code 14 (Invalid Card Number): This is a hard decline. Immediately ask the customer to update their payment method.
• Use Multiple Payment Gateways: A transaction declined by one 支付网关 might be approved by another. An intelligent routing system can retry a failed payment through a secondary gateway to increase the chance of overall success.

Recovery Strategies to Rescue Failed Payments

1. 实施 Smart Retries: Rather than retrying a failed payment randomly, a “smart retry” engine uses data to re-attempt the transaction at the most optimal time. For example, it learns the best days of the week or times of day to retry charges based on past success rates for different banks and card types.
2. Deploy a Dunning Management Process: Dunning is the process of communicating with customers when payments fail. A good dunning strategy is automated and user-friendly and should include:

• Automated Emails/SMS: A series of messages with a clear call-to-action.
• Personalized Message: The tone should be helpful, not accusatory.
• A Secure Update Link: Allow customers to update their payment information with a single click directly from the email, so it is not necessary to log in.

While some businesses build their own logic, several specialized tools are designed to handle decline prevention and recovery automatically.

• 支付处理商 Features: Most major systems have built-in tools. PayPro Global offers sophisticated, customizable dunning campaigns, smart retries, and account updater services included in their platform.
• Third-Party Recovery Tools: These are dedicated platforms that integrate with your payment gateway. They specialize in payment recovery, using advanced analytics and proven messaging templates to reduce 非自愿流失.