[TZubiri]

So the standard solution is:

1- Notify client of failed payment 2- Activate a grace period 3- Notify of grace period. 4- Cut service after grace period. 5- Reinstate account after user corrects payment data. 6- Make sure there are no system bugs in the reinstatement.

In my personal preference, I like the system very much. It is the responsibility of the client to keep payment methods up to date, I don't think chasing a client to fix their credit issues is appropriate. But definitely not treating them like criminals and allowing them to fix the issue is due.

Going after this lost revenue is going after bad clients in a sense. Barring expired cards, usually what happens is that the client has low liquidity, high debt, or is spread too thin across multiple accounts, and is unlikely to have a high LTV.

Can say as a user that paid 12$ subscriptions on a month to month basis and was regularly late to the point of waiting until service is cut to move money around to pay it. Don't chase me, let me fix it, if at all, it's ok.

[iddan]

To give another point of view on this: many times there are essential services I use and I just forget to update my credit card after switching it or for some reason the charge didn’t pass. I would much rather get proper emails (or even better to have the charge recovered) than losing the service

[Animats]

> 1- Notify client of failed payment

Which seldom includes the full error information from the transaction. There are about fifty error codes, and they can come from various places in the merchant to issuing bank chain.[1] Dumber web sites tend to assume it's the customer's problem. Once or twice I've had that happen. I call up the bank, and they usually tell me the transaction never reached them. This is sometimes a problem with low-end point of sale systems. Speedway Express gas stations seem to have a terrible system.

[1] https://corepay.net/articles/decline-codes/

[JakeVacovec]

It definitely depends on the type of customer and type of product. There is a % of recoveries that will churn in the following 1-2 billing cycles and there's a larger % that will stay longer. Ultimately increasing recovery rate across the board means more revenue, which is good for a business.

Error type is also not indicative of customer quality. For example, businesses and consumers set limits on their cards all the time so an insufficient funds error doesn't mean they have no money.

If the customer doesn't want the service they have the option to cancel. This is why the LTV of customers recovered after a payment failure (involuntary churn prevention) is significantly higher than those saved from cancellation prevention flows (active churn prevention).

[benatkin]

> Ultimately increasing recovery rate across the board means more revenue, which is good for a business.

Not if it isn't ethical. You're painting those with the failed payments who didn't cancel of being the ones in the wrong to justify the action taken against them, but heavy handed payment collection of a SaaS they likely weren't using doesn't sound great to me either. How about just doing the honorable thing that also isn't chasing bad clients?

> If the customer doesn't want the service they have the option to cancel.

Would you take Adobe as a customer, with their infamous cancellation dark patterns?

[JakeVacovec]

Our Merchants can configure the recovery period and messaging to their liking and we ensure there's strict adherence to the compliance and regulatory rules set by card networks.

Ethics and honor are great things but keep in mind we're not a collections agency that's buying bad debt off companies for pennies on the dollar to chase, which sounds like the experience you're referring to.

[chowells]

You can choose not to be ethical, but you should advertise it loudly.

Or at the very least, stop protesting when people call it out.

[benatkin]

It depends on their customers ("merchants"). I'm sure some of their customers will be fine. They could attract others like a foreign language teaching service that lures people in with a single price but somehow they're accidentally enrolled in something that has a 6 month commitment. It says subscription-based but it doesn't say anywhere that they exclude ones that have a commitment to multiple billing cycles, so "they have the option to cancel" probably won't even technically be the case with some services.

[anon7000]

Why on earth would it be unethical? They are creating a process for retrying a payment for which the customer is already responsible. Maybe the customer ultimately decides to cancel, maybe not, but a business is free to take into account whether a user is “active.”

[michaelt]

California introduced a 'click to cancel' law a month or two back - because a large number of subscription companies engage in a lot of sketchy behaviour, like making it almost impossible to cancel.

So this is already a pretty seedy area of business.

Now add to that the fact that the customer has ignored the payment-failed e-mail, and ignored the warning banners on the site during the grace period, and doesn't mind when they get cut off entirely. Clearly, this subscription isn't producing much value for the customer.

And then consider the ethics of offering expensive services to people who can't afford them. If a person lives in such abject poverty that their bank account has literally zero dollars in it, should I be pushing them to keep their subscription? Even when the service has so little value to them?

It's not technically illegal though.