Gabriel Lucas, Director at Redbridge Debt and Treasury Advisory, shares insights on how to understand and reduce payment-related churn for the subscription model.
The subscription model: from recurring revenue to long-term value
The subscription economy has transformed how digital products and services are delivered. In sectors like streaming, SaaS, gaming, and digital media, recurring models offer clear advantages: predictable revenue for providers and uninterrupted access for consumers. But acquiring subscribers is only the beginning. Long-term value stems from retention, and in subscription businesses, retention hinges on whether payments go through.
Each billing cycle brings a new risk. When a payment fails and is not recovered, customers may leave even if they did not intend to cancel. This involuntary churn is often overlooked but can make up to 50% of total churn, according to Stripe. Focusing on this area offers a practical way to improve profitability without needing to increase marketing or change the product or service.
Why payment strategy is critical
Many payment failures are recoverable. Improving retry logic, payment routing, and customer communication can significantly reduce failed transactions and keep users active. Several levers are particularly effective.
1. Clear customer journey and proactive communication
Not all failed payments are permanent. A transaction that was declined today may be processed successfully a few days later due to changes in available funds or issuer authorisations. Proactive dunning communication is essential, as clear and timely notifications by email, SMS, or push messages should encourage customers to update payment details or resolve issues quickly. Additionally, providing direct one-click links to update cards or complete payments improves recovery rates while preserving a positive user experience.
2. Smart retries and innovations
Smart retry logic, often enhanced by artificial intelligence (AI) and machine learning (ML), adapts dynamically to the specific reason a payment failed, whether it is due to insufficient funds, a temporary issuer-related issue, or another cause. It also considers optimal retry timing, such as immediately after payday, as well as issuer preferences, retry windows, and historical success patterns. This data-driven approach improves recovery rates while preserving a smooth customer experience.
At the same time, technologies like network tokenization replace static card details with secure tokens that remain valid even when cards are reissued or expire. Card account updater services automatically refresh stored card information with the latest issuer data, minimising disruptions without requiring any action from the customer.
3. Routing and redundancy
Relying on a single payment service provider (PSP) or acquirer exposes businesses to unnecessary declines, as authorisation success rates vary by geography, issuer, and transaction type. Temporary outages or updates to fraud rules can also cause spikes in payment failures.
Routing transactions through multiple providers or setting up fallback options reduces dependency and improves approval rates. This is especially important for international businesses because local acquirers often perform better in their own markets than in other ones. In many cases, payment orchestration becomes not just a nice-to-have, but a strategic necessity. Orchestration can play a key role in supporting digital transformation efforts, helping organisations overcome legacy technology constraints and enabling more agile, future-proof payment infrastructures.
Ultimately, the goal is to make payment recovery simple and seamless, treating customers as valued users rather than penalising them for payment issues. Since no single payment system design fits all business models, conducting a thorough assessment before defining the target payment architecture is essential for most merchants.
Payments as a driver of growth and retention
Reducing churn is not just about retaining customers. It also directly affects profitability, marketing efficiency, and company valuation. In subscription businesses, small improvements in churn or recovery rates can have a significant cumulative impact, especially when applied to large user bases or high customer acquisition costs. Investors are increasingly scrutinising metrics such as:
- Gross revenue retention (GRR),
- Net revenue retention (NRR),
- Customer lifetime value (LTV).
Each is influenced by how well payment failures are handled.
To understand and reduce payment-related churn, businesses need the right metrics. These should go beyond traditional finance KPIs and capture the dynamics of failure and recovery. Key indicators include:
- Involuntary churn rate (as a share of total churn),
- Approval rates,
- Recovery rates,
- Average time to resolution for failed payments.
Conclusion: design for renewal, not just acquisition
Subscription payments are recurring moments of truth. Each billing cycle is an opportunity to confirm value or lose customers silently. Robust payment systems using smart retry logic, flexible routing, network tokenization, card updater services, and customer-centric communication form a vital strategic lever for growth.
In today’s competitive environment with rising acquisition costs and fragile loyalty, treating payments as a strategic growth tool rather than mere plumbing is essential for sustainable success.
About the author
Gabriel Lucas heads the European payment practice at Redbridge, advising global merchants on payment transformation and optimisation since 2020. Previously, he served as Chief Operating Officer at a France-based Electronic Money Institution specialising in digital wallets and alternative payment methods.
About Redbridge
Redbridge Debt and Treasury Advisory is a leading financial management partner to corporations around the globe. It is committed to providing each client with all the information required to make the best decisions and optimise their financial performance. Redbridge’s teams are located in Houston, New York, Chicago, Paris, Geneva, and London.
