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Payment failures cause 40% of customer loss amid stricter security rules – report

payment failures

Online payment failures are the reason for up to 40% of customer loss, according to a report from GoCardless and Zuora.

The data comes as new Strong Customer Authentication (SCA) rules come into full effect in the UK. GoCardless claims these stricter checks could increase the number of payment failures for businesses that are unable to adapt to the new requirements.

The new SCA regulations require companies to carry out additional security checks to verify customers’ identities when they make online purchases over £25.

GoCardless was one of several fintechs that warned of reduced payment reliability as a result of SCA regulations deadline day on Monday.

GoCardless director of product marketing, Siamac Rezaiezadeh, told UKTN at the time that “paying by card is about to get a lot more painful thanks to the implementation of the new Strong Customer Authentication rules”.

The new report from GoCardless reaffirms the company’s position that SCAs pose a risk of customer loss to businesses.

GoCardless – whose business model revolves around charging transaction fees on purchases and circumventing card payments with direct debit payments – competes with credit card companies such as Visa and Mastercard.

“With Strong Customer Authentication rules now fully enforced, enhanced security measures increase the risk of failure when payers sign up to subscriptions using credit cards,” GoCardless said in a blog post.

The report had a particular focus on companies operating with a subscription model. It suggests a loss of up to 6% of customers every quarter from subscription businesses is down to failed payments.

The report puts significant blame on card payments. Duncan Barrigan, chief product and chief growth officer at GoCardless said: “It doesn’t have to be this way. Shifting from card to bank payments will result in immediate and material benefits.”

Data from the report was derived from Zuora’s subscription economy index database, which tracks subscription business volumes.