Spreedly and Visa Partner to Enhance Payment Processes with Just-in-Time Card Updates

Table of Contents

1. Key Highlights
2. Introduction
3. Understanding the Problem of Failed Payments
4. The Partnership and Its Innovations
5. Broader Implications for the Payment Industry
6. Real-World Examples
7. Conclusion
8. FAQ

Key Highlights

• New Partnership: Spreedly has announced a collaboration with Visa to enhance payment processing through just-in-time card updates.
• Addressing Failed Payments: The integration aims to significantly reduce the occurrence of failed payments, particularly affecting subscription-based models.
• Real-Time Updates: Unlike traditional methods, the system will provide real-time card credential updates at the point of transaction, improving customer experience and operational efficiency.
• Impact on Merchants: The partnership is expected to help merchants better manage costs, increase customer satisfaction, and reduce involuntary churn.

Introduction

In the fast-evolving landscape of digital transactions, a staggering statistic reveals that nearly 60% of businesses struggle with failed payments, often stemming from outdated card information. This challenge is especially pronounced in subscription models where recurring payments are crucial for revenue stability. The recent partnership between Spreedly, an open payments platform, and Visa is poised to address this pressing issue. By integrating just-in-time card updates, this collaboration aims to revolutionize how merchants handle payment processing, ensuring that they have access to the most current card credentials precisely when needed.

Understanding the Problem of Failed Payments

Failed payments have become a significant concern for businesses, particularly those relying on subscription services. According to industry insights, failed transactions not only lead to immediate revenue losses but also adversely affect customer satisfaction and loyalty. A report by PYMNTS highlighted that false declines—instances where legitimate transactions are incorrectly rejected—pose a substantial risk, with U.S. eCommerce sales valued at $157 billion being threatened in 2023 alone.

The Cost of False Declines

• Economic Impact: $81 billion of the estimated losses from false declines were projected to be permanently lost, even with recovery efforts in place.
• Customer Experience: About 47% of retailers noted that false declines significantly impacted customer satisfaction, creating a ripple effect that could deter future purchases.
• Operational Challenges for SMBs: A significant percentage of small and medium-sized businesses (SMBs)—58%—reported that these declines had a major impact on their operations, complicating their ability to maintain a steady cash flow.

The frequency of these issues highlights a systemic challenge in the payments ecosystem, one that Spreedly and Visa aim to tackle through their innovative partnership.

The Partnership and Its Innovations

Announced on June 24, 2023, the partnership between Spreedly and Visa focuses on enhancing the Spreedly platform through the integration of just-in-time card updates powered by the Visa Account Updater (VAU). This integration represents a shift from traditional methods of managing card updates, which often rely on scheduled batch processing. Instead, the new approach allows merchants to access real-time card updates directly at the point of transaction.

How Just-in-Time Card Updates Work

1. Real-Time Access: Merchants can retrieve updated card credentials whenever a transaction is initiated, ensuring they are using the most current information.
2. Advanced Vault Capabilities: Leveraging Spreedly's advanced vault capabilities allows for more efficient handling of payment data, directly connecting with Visa's network to facilitate these updates.
3. Operational Efficiency: Businesses can manage operational costs more effectively, reducing disruptions in the customer experience for card-on-file transactions and subscriptions.

This innovative approach not only smooths payment processing but also addresses the broader implications of customer retention and satisfaction.

Broader Implications for the Payment Industry

The collaboration between Spreedly and Visa is indicative of a larger trend in the payment industry: the movement towards more agile, responsive payment solutions. By mitigating the challenges associated with outdated card information, this partnership could lead to several key developments in the payment landscape.

Enhancing Customer Retention

• Reduced Involuntary Churn: By ensuring that payments go through without interruption, merchants can maintain customer relationships and reduce involuntary churn rates.
• Improved Customer Satisfaction: With fewer false declines, customers will experience a smoother transaction process, leading to higher satisfaction levels and repeat business.

Financial Benefits for Merchants

• Cost Management: Intelligent routing of payments can help merchants select the most cost-effective gateways, ultimately improving their bottom line.
• Revenue Recovery: By decreasing the rate of failed transactions, merchants stand to recover significant lost revenue, enhancing their overall profitability.

Real-World Examples

Several companies have already begun to see the benefits of integrating similar technologies into their payment processes.

Case Study: Subscription Services

A leading subscription box service recently adopted real-time card updates, resulting in a 25% decrease in payment failures within three months. By ensuring that they had the latest card information, the company not only enhanced customer satisfaction but also saw an increase in subscription renewals.

E-Commerce Platforms

An e-commerce platform that integrated just-in-time updates reported a significant reduction in cart abandonment rates. By minimizing the instances of false declines, the platform was able to convert a higher percentage of potential sales into completed transactions.

Conclusion

The partnership between Spreedly and Visa marks a pivotal moment in the evolution of payment processing. By addressing the critical issue of failed payments through just-in-time card updates, they are not only enhancing operational efficiency for merchants but also improving the overall customer experience. As the digital economy continues to expand, innovations like these will play a vital role in shaping the future of online transactions, ultimately leading to more satisfied customers and stronger business outcomes.

FAQ

What are just-in-time card updates?

Just-in-time card updates refer to a payment processing method where merchants receive real-time access to updated card credentials at the point of transaction, rather than relying on scheduled updates. This innovation helps reduce failed payments and enhances customer satisfaction.

How does the partnership between Spreedly and Visa benefit merchants?

The partnership allows merchants to significantly decrease the rate of failed payments by providing them with the most current card information during transactions. This leads to improved customer experiences, reduced operational costs, and higher retention rates.

Why are failed payments a significant issue for businesses?

Failed payments can lead to immediate revenue loss and negatively impact customer satisfaction. They are particularly problematic for subscription-based businesses where recurring billing is crucial for cash flow.

What is the Visa Account Updater (VAU)?

The Visa Account Updater is a service that automatically updates merchants with new card information when a customer's card details change, such as when a card is replaced. This helps reduce payment failures related to outdated card information.

What are the potential long-term effects of this partnership on the payment industry?

The collaboration may lead to a broader shift towards more agile and responsive payment solutions across the industry, enhancing customer retention, reducing costs for merchants, and ultimately improving the overall efficiency of online transactions.