Case Study: Merchant-Initiated Transactions (MIT)
The Challenge
For the Head of Payments at a leading streaming company, payment declines, particularly those due to insufficient funds (NSF), were a persistent issue. Customers often didn’t understand why their payments failed and unfairly blamed the merchant, leading to involuntary churn. With little visibility into the reasons behind these NSF declines, the merchant needed a way to try and avoid these declines.
Pain Points
1. Revenue Loss
Every declined payment meant immediate lost revenue, but the real cost ran deeper. For a subscription-based merchant, a single failed transaction didn’t just mean losing one payment – it meant losing months of future recurring revenue and an impact on their churn % – a KPI closely tracked by the company’s investors.
2. Customer Frustration
Customers expected uninterrupted service, yet NSF declines often disrupted their experience without warning. They often don’t see this as a banking issue and instead blame the merchant. As a result, support teams faced a growing number of complaints from frustrated subscribers who expected an immediate resolution
3. Erosion of Trust and Loyalty
Failed payments don’t just lead to immediate cancellations – they weaken the long-term relationship between the merchant and the customer. Even subscribers who intend to stay may cancel out of frustration, questioning the reliability of the service. Over time, these repeated declines erode trust, making customers more likely to explore alternatives and reducing overall lifetime value.
Results
With Kipp, this merchant saved 33% of transactions that were about to be declined, ensuring uninterrupted access to content for subscribers, even during temporary overdraft or over-the-limit situations. Every saved payment translated into another month of customer engagement, boosting retention and revenue.
Kipp facilitates direct collaboration between merchants and card issuers to prevent NSF-related declines in real time. When a transaction is about to be declined, the issuer sends an API call to Kipp to check whether the merchant is prepared to pay the issuer’s predefined % premium, for the issuer to accept the overdrawn/overlimit transaction.
Number of declined transactions saved by Kipp (%)
Entertainment
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%
Benefits:
- Significant conversion uplift: Higher transaction success rates ensure more payments are approved, reducing involuntary churn.
- Cost efficiency: Merchants only pay fees for saved transactions that would otherwise have been declined, maximizing ROI.
- Seamless implementation: No technical integrations required, making Kipp’s solution easy to adopt.
- Prevent declines upfront: Ensure more purchases are approved on the first attempt, minimizing disruptions and eliminating the need for post-decline recovery efforts.
Bottom Line
By partnering with Kipp, subscription merchants can overcome the challenges of declined payments, delivering uninterrupted service and fostering greater customer satisfaction and loyalty.
In today’s competitive market, where retaining customers is paramount, Kipp empowers merchants to ensure seamless transactions without any integration needed.
