- Involuntary churn, also called accidental or passive churn, occurs when a customer’s legitimate credit card is falsely declined resulting in their subscription being canceled.
- It’s estimated that 5% of subscription customers are lost each year when these legitimate payments fail, leading to lower revenue, decreased profitability and unhappy customers.
- This typically directly results in 2-5% ARR lost which is especially frustrating given how expensive and difficult it is to acquire customers.
- As a whole, involuntary churn costs companies more than $440 billion a year, an amount that could increase to nearly $650 billion in five years at the current growth rate, dwarfing revenue lost to fraud by 10 times.
- Technology powered by artificial intelligence and machine learning has proven to be a highly effective way to fight accidental churn, leading to higher revenue and better customer retention.
How many times have you received an email or text message telling you that there was a problem with your credit card and you need to update it —even though you used the same card a few minutes before without an issue? When you get these messages, you may be annoyed or frustrated with the company, and rightfully so. But the underlying issues creating this is actually a huge problem. Legitimate payments failures as a whole cost hundreds of billions (with a “b”) of dollars in lost revenue for subscription companies. This often “hidden” problem has very real effects on every subscription company’s bottom line.