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What is online dunning?
Online dunning is a payment recovery method with the help of various software that uses a preprogrammed process that takes various steps to contact the customers (debtor), reminding them about the collection of payments that are due on subscription-based business. Collecting the failed payment is a critical part of any business.
Traditionally, dunning has been defined as the methodical process of collecting the specific receivable amount of owed money or credits from the customers. Dunning has been derived from the word “Dun” which means to make demands for payments. Therefore, it is a process of attempting to retry the payments and sending reminder of payment to the customers with the help of various medium such an invoice, text messages, reminder by mail, etc. when a transaction gets declined.
In this time, digital finance has become very common and with multiple online transactions taking place around us, payment failures are unexpected and bound to happen which is always not in our control. Dunning can be applied for online payment, offline payment, debit card payment, and one-time payment.
An organization or a business can go through various series of communication with the customer to remind them of the failed or unpaid payment and their receivable management. It can range from a gentler reminder like sending invoices, emails and text messages to a more assertive process. The laws on dunning are different in every respective state and country. The ultimate goal is to let the customer know that there is a problem with their online payment and provide them a way to tackle with the issue while strengthening the relationship with the customer (debtor) using receivable management. They write reminder free of charge.
Why does the payment fails?
There are various reasons why our credit card payments fail and why online Mahnungen is necessary. We can eliminate those problems and initiate the dunning procedure online. They are:
- Expiration of credit or debit cards.
- Cancellation of credit or debit cards.
- The information of the credit card numbers is keyed incorrectly.
- If the credit card has been stolen or lost.
- If the bank has blocked a specific transaction.
- Sometimes the bank also believes that the transaction made is fraudulent.
- If there are not sufficient funds available in the account.
- Connectivity issue.
- Multiple retries in payment causing a higher decline in ratio.
- Non-compliance to the card related association rules.
- Fraud alert on the credit or debit cards.
- If the customer’s billing address has changed.
- If the account number of the customer has changed.
- The invoices do not reach the customer.
Dunning tactics
There are several different dunning letter tactics that software employs pre and post card due as bill reminder for payment. Most of the dunning tactics deals with reminder by email. Online dunning procedure before the account’s payment becomes past due are and we can initiate the dunning procedure online are:
- Emails before card expirations
As a proverb says “prevention is better than cure”, emails before card expirations is a reminder by mail to the customers about their expiration of the cards and the need to take further actions. These specific emails are set to automatically trigger at different points to contact the customer or the cardholder after a certain number of days before the card expiration to make sure that the collection of the accounts is received.
- Retries
Retries is a tactics that is used after an account is past due to the date of the payment. At this stage, the dunning letter software sends emails to the customers. The emails include the information about the amount of money owed to the company by the customers, the time it will take to again retry the payment of the card, and the steps with which they can update their payments. This increases the accessibility and possibility of success.
Smart retry is an intelligent, built-in logic used in dunning letter that helps in initiating payment retries based on the type of gateway transaction errors in payments. The gateway transaction errors has been classified into hard decline error code and soft decline error codes. Hard declines are errors that includes the customer or the company’s intervention. Hard decline can only happen if there is any update in payment method. And soft declines are the smart retries which happens because of some temporary issue, for example, connectivity issue, etc. Soft decline happens based on the category of error and its chances of recovery. This helps in recovering the revenue in the best and safest possible way.
