Why it matters
A failed payment is revenue you have earned and not collected. Subscriptions charge on a schedule, so every failed charge sits on a customer who did not plan to leave, and it is one of the few leaks you can measure directly.
The failed payment rate is where the work starts. It shows how large the problem is before you look at causes, and watching it over months shows whether changes to billing or card handling are helping. It is a measure of the problem. The part you collect again is the payment recovery rate.
The formula
In words: failed charges divided by attempted charges over the same period, then multiplied by 100.
In symbols:
failed_payment_rate = failed_charges / attempted_charges x 100- Decide whether a retry counts as a new attempt. Counting only first attempts shows how often a card fails the first time, while counting every attempt mixes retries into the figure.
- Pool the counts across a period instead of averaging monthly rates.
- Keep one-off purchases and subscription renewals apart if they behave differently.
A worked example
Example numbers (made up for illustration): a subscription business attempted charges over three months and counted how many failed.
| Period | Attempted charges | Failed charges | Rate |
|---|---|---|---|
| Month 1 | 4,000 | 200 | 5.0% |
| Month 2 | 5,000 | 350 | 7.0% |
| Month 3 | 6,000 | 480 | 8.0% |
| Three months | 15,000 | 1,030 | 6.9% |
Over the three months, 1,030 failed charges out of 15,000 attempted is 6.9%. Averaging the three monthly rates gives 6.7% instead, because the busier months count for more in the pooled figure.
How to improve it
Failures come from cards that expire, accounts that run short and checkouts that go wrong, and each has its own fix.
- Email customers before a card expires and give them a simple page to update it.
- Use the card update services your payment processor offers, so new card details reach you without action from the customer.
- Show clear error messages at checkout, so a mistyped number is fixed on the spot.
- Offer a second payment method for customers whose first one keeps failing.
- Test different billing dates and watch the rate by date before you change anything for everyone.
Common mistakes
- Averaging the monthly rates instead of pooling the counts, which gives a small month the same weight as a large one.
- Counting retries as fresh attempts without saying so, which dilutes the rate.
- Mixing one-off payments with subscription renewals, which fail for different reasons.
- Counting refunds or disputes as failed payments. They are separate events with their own measures.
Work it out with your own numbers
The failed payment recovery calculator starts from your failed payments and shows what recovery is worth. Open the failed payment recovery calculator and enter your own figures. It runs in your browser and shows each step of the sum.
Read next
- Card decline rate: the part of failures where the issuing bank said no.
- Payment recovery rate: how much of the failed revenue comes back.
- Dunning: the process that does the recovering.
Questions
Is a failed payment the same as a declined card?
Not quite. A decline is the issuing bank refusing the charge. A failed payment also includes errors such as an expired card or a processing problem, so the failed payment rate is the wider measure.
Should I count retries as attempts?
Choose one rule and keep it. Counting only first attempts shows how often a card fails on the first try, and counting all attempts includes the retries.
What period should I use?
A month is common. Pool the failed and attempted counts across the period rather than averaging smaller periods.