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Why “has cancelled a billing agreement with you” may hurt your business
If you`re an online merchant or service provider, you may rely on recurring payments from your customers to keep your cash flow stable and predictable. To automate these payments, you may use a payment gateway that supports billing agreements, which allow customers to authorize you to charge their payment methods repeatedly without requiring them to enter their payment details every time. Billing agreements can help reduce friction in the checkout process, increase customer loyalty, and improve your revenue visibility. However, if you receive an email notification that says “has cancelled a billing agreement with you,” you may lose more than just a recurring revenue stream. Here are some reasons why:
1. You may lose the customer`s trust and business.
When a customer cancels a billing agreement, it may indicate that they don`t want to be charged anymore for your product or service. This may signal that they are dissatisfied with your offering, found a better alternative, or experienced a financial hardship. Whatever the reason, if the cancellation comes as a surprise to you, it may also signal that you didn`t communicate clearly enough about your billing terms, refund policies, or value proposition. If the cancellation happens repeatedly or across multiple customers, it may also raise red flags for your payment processor or bank, who may view you as a high-risk merchant or a potential fraudster. Losing the trust of your customers and financiers may harm your reputation and future sales opportunities.
2. You may face chargeback disputes and penalties.
When a customer cancels a billing agreement, they may still have the right to dispute any charges that were processed before the cancellation. If the customer claims that they didn`t authorize the charges, didn`t receive the product or service, or didn`t get a refund when requested, they may file a chargeback with their bank. A chargeback is a forced reversal of the payment that puts the burden of proof on you to demonstrate that the charge was legitimate and authorized. If you fail to provide sufficient evidence or respond in time, you may lose the revenue, the product or service, and a penalty fee that can range from $20 to $100 or more per chargeback. Chargebacks can also damage your payment gateway`s or bank`s relationships with their card networks, which may impose fines, restrictions, or termination of services.
3. You may violate compliance regulations and face legal consequences.
When a customer cancels a billing agreement, you may still be required to retain certain payment and customer data for auditing, reporting, and tax purposes. Depending on your industry, country, and payment methods, you may need to comply with various regulations and standards, such as PCI DSS, GDPR, HIPAA, or SOX. Failure to comply with these requirements may expose you to legal liabilities, fines, lawsuits, and reputational harm. For example, if you store cardholder data insecurely or transmit it unencrypted, you may face penalties of up to $100,000 per incident and exclusion from the card networks. If you disclose or misuse customer data without their consent, you may face fines of up to 4% of your annual revenue or €20 million, whichever is higher, under GDPR.
To avoid the risks associated with cancelled billing agreements, you should:
– Communicate your billing terms, refund policies, and value proposition clearly and prominently on your website, emails, and invoices.
– Provide an easy and secure way for customers to cancel their billing agreements, update their payment details, and manage their subscriptions.
– Monitor your payments and customer feedback regularly to detect patterns of cancellations, chargebacks, fraud, or dissatisfaction.
– Keep accurate and complete records of your payments, customer data, and compliance activities, and update them as needed.
– Seek professional advice from a lawyer, an accountant, or a compliance expert if you`re not sure about your legal obligations or best practices.
In conclusion, a “has cancelled a billing agreement with you” email may seem like a minor inconvenience, but it may have serious consequences for your business if you don`t handle it properly. By being proactive, transparent, and compliant, you can minimize the risks and maximize the benefits of recurring payments.