Dose #199: Why Your Dunning Strategy Is Sending Customers to the Wrong Door

Matt here with your weekly Subscription Prescription 💊

This week we’re talking dunning and payment processing, because it is literally the lifeblood your business is built on. We’ll dive into why a healthy processing score matters, how you should optimize your retries, and why sending people to the right door matters more than you think.

This week’s newsletter is also a podcast, so you can listen or read at your convenience:

Payment processing is one of those topics that feels like it requires a PhD to fully understand. And honestly? You don't need to understand all of it.

But there are a few things you do need to know. Because right now, many subscription brands are leaving real revenue on the table due to failed payments. Not because customers don't want to pay, but because the recovery process is broken.

Today, I'm breaking down three things that will improve your payment recovery without needing a degree in machine learning.

Why This Matters

When you have 10,000 active subscriptions and a 91% payment success rate, that's 900 failed orders every month. Move that to 92%? That's 100 more successful orders. At a $50 AOV, that's $5,000 in recovered revenue per month.

That's why payment processing and dunning are one of the first things we audit when reviewing a subscription brand. The upside is real and often faster to capture than most other growth levers.

1. Your Processor Health Score Matters More Than You Think

Think of your processor health score like a credit score for your business. It signals to banks and payment networks how legitimate your charges are likely to be.

When a customer's card gets declined, it's not always because the card expired or the person moved. In many cases, the bank is flagging the charge as suspicious. Your health score plays a direct role in how often that happens.

A few things that hurt your score: chargebacks, operating in a high-risk industry (supplements start at a disadvantage), and processing patterns that look unusual to banks.

You can't control every factor. But you can protect your score by giving subscribers a great experience, setting expectations clearly, and keeping disputes low. And if you're in the supplement space, understand you're already starting behind. That makes every other piece of this more important.

Takeaway: A healthy processor score means more payments go through on the first try. It compounds over time. Protect it. Avoid chargebacks and bad CX at all costs.

2. Optimize How You Retry Failed Payments

Most brands treat dunning like a hammer. Try the card. Wait three days. Try again. Repeat.

That works to a point. But there's more sophistication available to you now, and it's worth using.

Start with what your subscription app already offers. Many platforms have rolled out AI-based retry logic that adjusts timing dynamically based on card behavior. If you haven't tested that against your standard rules, that's a good place to start.

If you want to go further, look at third-party tools like Fly Code, Redux, or Butter Payments. These tools aggregate retry data across all their clients, which means they can tell you things like: this card type, issued by this bank, in this region, has a higher success rate if you retry on Tuesday at 10am instead of Sunday at 2am.

Something as simple as time zones can make a difference. If your business is based in New York and you're processing orders at 5am Eastern, that's 2am for your California customers. The bank flags that. A third-party tool catches it. You don't have to figure it out yourself.

The pricing model for most of these tools is performance-based. They charge on the delta between your baseline and the improvement they generate. Low risk, meaningful upside.

Takeaway: Don't set it and forget it. Test your retry cadence, explore what your platform offers natively, and evaluate whether a third-party tool is worth the upside for your volume.

3. Send Customers to the Right Door

This is the one I want you to walk away with today.

When a payment fails and you send a dunning message, most brands send everyone to the same place: a Shopify link to update their credit card.

The problem is that not everyone is paying with a direct credit card.

If a customer is paying through PayPal and they click your Shopify link and update a card there, nothing changes. The subscription is still tied to PayPal. The payment will fail again.

Same with Shop Pay. Shop Pay is a wallet. The credit card lives inside that wallet. If the payment is failing through Shop Pay, you need to send customers to Shop Pay to fix it, not to Shopify.

Here is what a better dunning flow looks like:

Credit card subscribers: Send them the standard Shopify link to update their card OR look at your subscription app’s process for updating those payment methods. It may be more efficient.

PayPal subscribers: Tell them to log into PayPal and update the card on file there. Or, give them the option to switch the subscription to a direct credit card, with clear step-by-step instructions on how to make that change.

Shop Pay subscribers: Direct them to update within Shop Pay.

When you route people to the right place, you eliminate the confusion. And confused customers don't fix their payment. They cancel.

One more lever here: use incentives. If you want customers to move off PayPal entirely, offer a $10 store credit or a loyalty point bonus to make the switch. Give people a reason to take action, and more of them will.

Takeaway: Segment your dunning flows by payment method. Send people to the right door. The instructions you give after a failed payment are more important than how many times you retry.

Bottom Line

You have more control over your dunning than almost anything else in payment processing. Your processor health score matters. Your retry strategy matters. But the fastest win for most brands is in the messaging.

Segment by payment method. Give customers clear, correct instructions. Use incentives when you need a nudge.

Get those three things right and you will recover more revenue without changing anything about your product.

Until next Tuesday, that’s your Subscription Prescription. 💊

 - Matt Holman 🩺

The Subscription Doc