SaaS Failed Payments: Why Are You Losing Revenue and How To Fix It

SaaS Failed Payments: Why Are You Losing Revenue and How To Fix It

Out of the many roadblocks to keeping customers happy with your SaaS business, the one that hurts the most and deserves your immediate attention is failed payments.


Because that is money left on the table.

Did you know that 48% of subscription churn comes from failed payments?

Yes, SaaS payment declines are the bully that makes your customers switch products.

As a service to your customer, it’s crucial to put a stop to this, and the perfect way to do that is with a Merchant of Record. An MOR can be your ally in securing the revenue that rightfully belongs to your business.

Read on and find out:

What are SaaS Payment Declines 
8 SaaS Payment Failure Reasons 
4 Ways to Reduce SaaS Failed Payments
Is the Merchant of Record the Right Solution? 
How Can PayPro Global Help?

What are Saas Payment Declines? 

When a financial transaction involving credit cards or other payment methods cannot be processed due to various reasons, it is known as a payment decline. These payment declines are essentially failed transactions, which for SaaS businesses is a loss.

To effectively address payment failures and minimize their occurrence, you must first understand why these situations happen in the first place.

Otherwise, how will you know what needs fixing? 

8 SaaS Payment Failure Reasons

Processing a transaction involves multiple components, including a payment gateway, payment processor, shopping cart, card network, and issuing bank, all perfectly synchronized.

In order for the payment process to be successful, each of these moving parts should independently approve the transaction.

However, considering the sensitive nature of payment data, plus the wide range of fraud measures taken to secure customer information, it’s entirely possible this may not happen.

Any break in the sequence will ultimately lead to a payment being declined, and that can include a legitimate one.

With that being said, here are some of the most common reasons why failed payments appear:



All online transactions are Card-Not-Present (CNP), undergoing thorough scrutiny and having a greater chance of failing than those made in person due to the increased probability of fraudulent activities taking place. 

Because of this reality, banks generally take the if in doubt, decline approach, which, of course, leads to legitimate transactions being denied. 

This constitutes a serious problem for subscription-based businesses, especially during times of renewal. In those instances, neither the card nor the customer is present, making it extremely difficult to react to a payment decline quickly, causing customer churn and revenue loss.

But if you partner with a reseller like PayPro Global, relying on the accumulated experience in managing the payment process, as well as benefiting from built-in fraud detection and prevention, this would keep your transaction from being flagged as fraud. 

Lack of funds

The reason for 26% of all failed payments, insufficient funds certainly qualifies as one of the most common reasons why transactions are declined, especially those made using credit cards.

Failed transactions due to lack of sufficient balance are a major concern for subscription renewals, not necessarily because of losing immediate revenue but because it can increase the likelihood of customer churn. 

Currency Conversion

Exclusively supporting transactions in a single currency across all your operational regions could affect your payment acceptance rate. Plus, the customer's cards may be in a local currency, and the bank might not approve the transaction because of this.

Fluctuating currency conversion rates can complicate payment chains, making them longer. This, coupled with bank policies regarding international transactions due to fraud concerns, could cause significant challenges, leading to increased payment declines.

Compliance Issues

As cross-border commerce faces increasing regulatory scrutiny, SaaS businesses are now obligated to conform to a diverse array of policies and security standards that directly and often negatively impact the flow of their payment processes.

For example, selling B2B SaaS in Europe requires businesses to follow PSD2 regulations, including the multi-factor authentication system. This means that unless SCA (Strong Customer Authentication) is approved during the checkout phase, the transaction will fail.

Also, it’s relevant to point out that for recurring revenue, you still need to to SCA from time to time, not only the first time.

Not complying with mandated financial regulations when selling internationally can and will lead to a low payment authorization rate, affecting your overall business profitability. 

Invalid or Missing Payment Information

30% of failed payments happen because incorrect payment information has been entered, and 24% are due to expired credit cards.

Surprising, isn’t it?

Expired cards, credit card numbers, CVV, expiration date, billing addresses - there are a lot of details that customers need to enter when reaching the checkout page.

Because of this, there is a high probability that customers might get some things wrong. Unfortunately, when that happens, and because processing payments is complicated, the transaction process fails.

For recurring businesses, this can be a major revenue problem, to put it mildly. 

Payment Request Formats

In the payment processing landscape, a detail that holds significant importance is the standardization of information messaging.

Unfortunately, there is no universal approach among banks for sharing information with one another, amplifying the risk of false declines in cross-border transactions, particularly those with longer payment pathways.

While the problem has been recognized and steps have been taken to resolve the issue by introducing common standards like ISO20022 for 10,000 banks, it is still not enough because there are still a substantial number of banks facing complexities.

Suspicious activity 

Astoundingly, in 2021, eCommerce payment fraud resulted in a $20 billion loss.

Both banks and card networks are intensifying their scrutiny of suspicious activities. But as security standards heighten, unfortunately, there is a growing risk of genuine payments being wrongly flagged as fraudulent and subsequently declined.

Therefore, it comes as no surprise that payment failure due to suspicious activity accounts for 28% of all declines

Merchant Account Configurations 

Another relevant reason for declined payments is your merchant account configuration.

You might be surprised to find out that in the contract you have with your payment provider, there are merchant account settings referring to the maximum number of transactions per item, region, day, or month, as well as for certain credit card types or currencies.

Anything above those transaction limits will not be processed.

In this particular situation, the only solution is to reevaluate the agreement with your payment provider. 

4 Ways to Reduce SaaS Failed Payments

When you consider the list of reasons for payment failures we’ve covered, it's obvious that the root causes aren't always within the payment system's control.

And this is precisely why it's essential to adopt a well-rounded approach that addresses payment declines from multiple angles.

It's really the only way to ensure a steady and sustainable revenue flow in the SaaS business model.


Offer Multiple Payment Methods

Make sure to have a wide portfolio of payment methods your customers can choose from, including anything from credit/debit cards to digital wallets or direct debit. 

This will help accommodate their preferences and reduce the risk of transaction declines due to either payment method limitations or lack of funds.

Implement card validation and pre-dunning messages 

To allow your SaaS business to overcome payment challenges caused by invalid information, thankfully, there are some specific measures you can take. 

By implementing data validation, you can ensure that customer payment information is accurate and up-to-date. Make sure you regularly validate and update payment details to prevent declines caused by expired cards or incorrect information.

Additionally, if you are running a subscription business, it's actually recommended by the credit card schemes and mandatory for transactions with free trials to use pre-dunning emails. Simply put, these are proactive communication means between you and your customers. 

Notifying your shoppers about upcoming payments and giving them the opportunity to update their payment information and bank balances not only helps you to reduce payment failures but also helps you build trust among customers.

A feature called Account Updater that automatically requests updates is also a relevant tool you can use, allowing you to keep card credentials on file so charges for recurring payments can still be made. 

Consider Payment Retries 

Having a built-in retry logic in your payments and billing system is one of the most common solutions for recovering lost transactions, specifically because it can immediately fix your problem. 

A payment retry process allows the SaaS company to automatically retry a declined online transaction at various intervals, such as retrying immediately after the initial payment failure or after a set amount of time.

However, keep in mind that using payment retries excessively can raise fraud alerts and lead to additional fees. Also, there have been strict rules from the credit card schemes in the past few years, defining what transactions can be retried and when depending on different parameters and responses. 

To effectively manage this technique, it’s important to avoid having an infinite loop of transaction retries. To do so, you will need to have a retry strategy in place, meaning setting up rules and configurations for your system. 

Also, it’s very important, when using this tool, that you make the distinction between soft declines and hard declines. 


Soft Declines. The concept of soft declines refers to a scenario when a payment fails due to operational hiccups. Soft declines can be solved by simply retrying the transaction.

Hard Declines. Hard delines are the instances in which a transaction was declined by the customer’s bank due to fraud concerns, invalid payment information, and so on. Hard declines cannot be resolved without customer intervention, which usually begins with them reaching out to the issuer of the customer’s card to find out why it was not authorized.


Use Cascading Systems 

Cascading payments is perceived as a smooth and highly beneficial method to fight payment failures. And that’s a fair assessment. 

Because cascading systems work. 

They enable the automatic rerouting of declined payments through alternative payment channels. 

Cascading systems are usually triggered by soft declines because, unlike hard declines, these are temporary authorization failures. 

Once triggered, the predefined criteria are followed to determine the order and priority of available payment options. The process starts with a retry of the original payment method, and if this fails, alternate channels will be used. 

Cascading systems represent a smooth and automated solution to maximize declined payment conversion, making it an absolute must in each approach to payment recovery. 

Is the Merchant of Record the Right Solution? 

Sadly, due to the many different root causes, there is no simple answer to SaaS payment failures. 

Making sure your SaaS business does not leak revenue requires ongoing effort and the use of extensive resources. 

Recognizing the impact an increased payment decline rate can have on present and future revenue, as well as the complexity of the solution, is what makes most SaaS companies seek the assistance of a reputable Merchant of Record

how merchant of record works

Due to its innovative payment infrastructure and industry expertise, a Merchant of Record can provide businesses with a strategic approach to avoid failed payments, which can lead to a successful outcome even when selling internationally. 

Combining local acquiring and billing, alternative payment methods, and compliance management with dedicated tools such as smart routing, a cascading system, and dunning management, you can significantly reduce your payment failures. 

Joining forces with a trusted Merchant of Record allows you to tap into a full-functional, innovative, and scalable payment infrastructure. When partnering with an MOR, not only are you fixing payment failures, but you are also offloading operational burdens and optimizing the allocation of your business resources.

Meet PayPro Global.

The Merchant of Record that helps you grow

PayPro Global takes away the headache of selling your products worldwide. From local payment methods to simplified subscription handling and tax management, we give you the eCommerce tools you need to scale your business smoothly into the global market.


How Is PayPro Global Different?

In today's highly complex payment environment and competitive SaaS market, PayPro Global's unique Merchant of Record business model offers a simple, straightforward route to success.

Having over 15 years of experience in the industry, we work with a perfect network of acquirers and payment processors to achieve the best results in terms of revenue recovery and growth.

Combining over 140 currencies with localized processing routing, followed by a dynamic cascading system that effectively guides your customer’s transactions throughout our extensive infrastructure, PayPro Global takes care of all the behind-the-scenes payment technicalities, significantly boosting your approval ratio.

Additionally, our robust AI-trained cascading system is capable of increasing your acceptance rate, and fast-tracking your global expansion. 
optimizing costs.

Through our well-developed cascading purchase path, PayPro Global can help fast-track your global expansion while significantly reducing friction for your shoppers.

As a certified PCI-DSS Level One partner committed to global compliance, we uphold the most rigorous payment security standards, ensuring that payments are not declined due to compliance issues.

Thanks to PayPro Global’s best-in-class dunning and retention tools, you can proactively manage customer accounts and automate the payment collection process to reduce involuntary churn in just a few clicks. 

Find out more about our all-inclusive solution and how you can access a broad platform that will allow for a successful recovery of customers, as well as help you scale your business in global markets strategically.

Final Thoughts

We are living in uncertain times. SaaS businesses are struggling to offer value in return for gaining new customers. And while this is a formidable challenge, it has also become a highly expensive one. 

With CAC costs going through the roof, SaaS companies are also forgetting to prioritize customer retention. Churn is silently killing businesses with failed payments as its modus operandi.  

Losing customers is just as big of a deal a gaining them. 

It’s time you battled payment declines strategically, understanding the root causes and implementing highly targeted approaches. 

Quick fixes are no longer an option for a sustainable business expansion.


Frequently Asked Questions

What are SaaS Payment Declines?

A SaaS payment failure occurs when online transactions aren't successfully processed for a number of reasons, such as insufficient funds, suspicious activity, compliance issues, or incorrect payment details. Unfortunately, this translates into lost revenue for SaaS businesses, especially when considering recurring payments.

What are common reasons for SaaS Payment Failures?

There are multiple reasons why online payments fail to be successfully processed. Among them, we can mention incorrect payment details, anti-fraud measures, compliance issues, merchant account settings, and so on.

How can SaaS businesses reduce failed payments?

There are a number of ways through which a SaaS business can achieve payment success. For example, you can implement card validation, pre-dunning messages, strategic payment retries, and cascading systems, as well as provide customers with multiple payment methods.

What is the role of a Merchant of Record in handling payment failures?

Since the Merchant of Record offers access to a complete and innovative payment infrastructure, SaaS businesses are provided with compliance management, smart routing, dunning management, and a wide range of alternative payment methods. Provided as an all-in-one solution, the MOR model considerably reduces payment decline instances.

How does PayPro Global help SaaS businesses with payment issues?

Offering access to a unique Merchant of Record model and with over 15 years of experience in the payment industry, PayPro Global’s solution streamlines and boosts your online transactions. Through a wide range of tools like AI-enhanced cascading systems, dunning management, compliance management, localized payment routing, plus a smart mix of preferent local payment methods and currencies, we help reduce payment declines and grow your SaaS business anywhere in the world.


Meir Amzallag

Co-founder and CEO of PayPro Global

Ioana Grigorescu

Content Marketing Manager at PayPro Global

more authors

Know first. Act fast.

It doesn’t take luck to make it, but it does take knowledge. Be the first to learn the latest industry insights and must know marketing tips and tricks. Sign up and enjoy! Always informed. Never Spammed.

Join our newsletter

Subscribe to our newsletter and stay up to date with the latest news!