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This article describes payment failure reasons, ways to handle failed payments, and what notifications to use.

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Situations

There are various situations and reasons why recurring payments can fail. For some payment methods they are easier to recognize and handle than for others. The following aims to provide a summary per case so you can be informed on how these work for your business.

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Failing recurring payments

A common reason why recurring payments fail is that there’s insufficient funds on a card or bank account. Firmhouse treats these failures as “normal” failures in the sense that there’s a good chance that when retrying the payment a couple of days later, the problem may be resolved. It’s also possible a payment fails because a credit card expired, the bank account was shut down or blocked, or because the customer was deceased. It’s good to realize that sometimes even when your payment service provider (PSP) marks a payment as a chargeback, it is still because of insufficient funds on a bank account. This mostly happens with SEPA payments where chargebacks are sometimes needed to handle insufficient funds cases. Firmhouse is smart about this and treats chargebacks within a certain set of failure reasons as a normal payment failure.

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Chargebacks and disputes

Chargebacks are a different kind of failure that means something special is going on. A chargeback can typically mean either of two things:
  1. The card company or bank of your customer automatically rejected or reverted the payment based on some security setting or other reason. Sometimes this also happens when the customer needs to explicitly approve every automatic debit in their bank interface or app, and they forget to do so within a certain timeframe.
  2. The customer deliberately disputes the payment because they don’t recognize it on their statement or because they disagree with your services. In some cases, the customer may be attempting fraud.
It’s important to note that a chargeback status doesn’t always mean the customer deliberately reverted the payment. It is a common misconception in our industry that a chargeback automatically means a customer is committing fraud or is unhappy. Firmhouse understands the difference in potential chargeback reasons and lets you handle them accordingly with its failed payment and dunning features.

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Non-paying customer status

According to the payment dunning settings in your Firmhouse project, your customers will automatically be marked with a non-paying status. Typically customers that fail a payment due to a chargeback will get marked as non-paying immediately. If you have automatic retries enabled in your project, customers will be marked as non-paying after 3 failed retry attempts. This special non-paying status is used in several ways. Certain exports and overviews will expose this status so that you can easily get an overview of customers who are currently non-paying. The non-paying status also has a special meaning in certain features. For example, recurring orders are not generated for customers that are currently in this status. And the outstanding invoices reminder email is only sent to customers with a non-paying status.

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Retry and dunning options

By default, payments that fail due to insufficient funds will be retried up to three times. Alternatively, it’s possible to disable these retries and immediately mark the payment failed and subscriber as non-paying. This might make more sense if your subscription offer is more time sensitive. If you want to send invoice reminders for overdue invoices, set the payment term and reminders in the Payment dunning menu. This is useful when you want to send overdue invoices to a collection agency after a certain period and for instance 3 reminders.

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Reminders and email notifications

In case of a failed payment, three email notifications can be set up. For all these notifications, Liquid tags can be used to show the invoice details and payment links. In some cases it’s also recommended to add the “update payment method” link, to allow a subscriber to link a new payment method.

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Failed payment notification

This notification is sent right away after a payment fails. It informs the subscriber of the failed payment and whether a retry is scheduled or they can pay directly.

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Outstanding invoices notification

A weekly notification sent to subscribers that are marked as non-paying. A list of all outstanding invoices is available in this email template.

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Invoice reminder

This notification requires the payment terms and automatic reminders to be enabled in the Payment dunning menu. Based on the Payment dunning settings, this invoice reminder will be sent per overdue invoice. An example use case is to add a warning after the second reminder that extra collection costs will be added and the invoice will be given to a collection agency. For this notification, the liquid tags {{invoice_reminder.reminder_number}} and {{invoice_reminder.final_reminder}} are available.

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Frequently asked questions

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Will all failed payments receive invoice reminders?

Invoice reminders are only sent when payment terms and automatic reminders are enabled in the Payment dunning menu. Invoice reminders can be sent for overdue invoices even when automatic payment retries are still scheduled or in progress. This ensures customers are notified about overdue invoices while retries continue, and allows customers to manually pay their invoice if they prefer. Payment retries will continue until they either succeed or are exhausted (after 3 attempts), at which point the customer will be marked as non-paying.