Latest / eCommerce Podcast / The $600 Billion Payment Problem Secretly Destroying Your Bottom Line | Frank Arellano

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The $600 Billion Payment Problem Secretly Destroying Your Bottom Line | Frank Arellano · eCommerce Podcast

• 0:04
  . Hello, my name is Edmundson and you are listening to the eCommerce Podcast.
• 0:09
  Yes, you are.
• 0:09
  Now, I've been an ecommerce since 2002, and these days I partner
• 0:15
  with ecommerce brands to help them grow scale, and finally exit.
• 0:19
  And if you'd like to know more about how that works, and if we could work together,
• 0:23
  head over to our website, eCommerce podcast.net, where you will find.
• 0:28
  All of that information now today I am joined.
• 0:33
  By the wonderful Frank Ano, the CEO and founder of Revolv3, a payment
• 0:39
  optimization platform, which is based in Laguna Beach of all places.
• 0:44
  'cause if you're gonna base a company, why not base it in Laguna Beach?
• 0:48
  Uh, we're tackling what I think is a massive, hidden problem
• 0:52
  for subscription businesses.
• 0:54
  Involuntary churn.
• 0:55
  Now we're gonna learn what this phrase means, but it's the thing, you know,
• 0:58
  that sort of painful situation where your loyal customers aren't actually choosing
• 1:03
  to leave, but they just can't pay you because of some payment processing glitch.
• 1:09
  Uh, and you know what?
• 1:10
  I wonder if we realize just how much money this is costing subscription commerce.
• 1:16
  Now, most merchants I speak to, we sort of seem to have
• 1:19
  the hope for the best strategy.
• 1:20
  You know, when it comes to payment providers, we pick one
• 1:24
  and we just hope it's gonna work.
• 1:25
  Uh, but Frank has actually built his own solution after years of frustration.
• 1:30
  With existing systems that couldn't minimize false declines or even maximize
• 1:35
  payment approvals before founding Revolve.
• 1:38
  Three.
• 1:38
  He spent over 20 years as an executive at Ingram, uh, Ingram
• 1:44
  Micro and Experian, which probably means he knows your credit score.
• 1:48
  Uh, and now he's on a mission to reshape the recurring payment market.
• 1:52
  Frank, welcome to the show.
• 1:54
  Let's jump into it.
• 1:56
  What.
• 1:57
  What was it that kickstarted this?
• 1:58
  What made you realize that payment processing, uh, was such a critical
• 2:03
  issue for subscription businesses and why weren't the existing problems, uh,
• 2:07
  existing solutions fixing it, I guess?
• 2:10
  Yeah, great question Matt.
• 2:11
  Thank you so much for having me on the show.
• 2:12
  So honored to be here.
• 2:13
  Love everything that you guys have done.
• 2:16
  Um, so I longtime ecommerce person, right?
• 2:19
  And I, I consider myself super sort of savvy with respect to payments, um,
• 2:24
  until I actually got into Experian.
• 2:28
  Yeah.
• 2:28
  Um, and just to give you some perspective, I ran business operations
• 2:31
  there for their consumer business.
• 2:33
  Um, lots of subscriptions, right?
• 2:36
  Yeah.
• 2:36
  But a lot of churn related to it.
• 2:38
  Now you could say, well, you know, probably a lot of
• 2:40
  insufficient funds perhaps.
• 2:42
  Um, consumers with credit issues or things like that, but as we dove into it, it
• 2:47
  was a lot more nuanced than that, right?
• 2:49
  So a couple things to consider.
• 2:52
  Um, on average 10 to 14% of ecommerce orders decline.
• 2:57
  Yep.
• 2:58
  Here's the crazy thing.
• 3:00
  About two thirds of those declines are what the industry calls false declines.
• 3:04
  Oh wow.
• 3:05
  So those are valid transactions that should have been approved.
• 3:09
  Um, if you wanna put that in perspective, last year, 2024, that was
• 3:13
  $600 billion worth of transactions.
• 3:16
  So, and that was just on my website,
• 3:18
  Frank,
• 3:19
  probably.
• 3:21
  Um, um, so it was interesting when I got to Experian and looking through
• 3:24
  the churn and yeah, we wanted to do.
• 3:27
  Get better at the voluntary side, right?
• 3:29
  Do we have the right offers in place?
• 3:31
  Um, is it, you know, a value to the customers and that sort of thing.
• 3:35
  But a large majority of those, of that churn issue was related
• 3:40
  to that involuntary side and the majority of it on the payment side.
• 3:45
  Um, so hired some management professional payments people in, had them show me
• 3:51
  all of the data, the decline codes.
• 3:53
  We did a bunch of analysis.
• 3:55
  And we weren't effectively managing that, right?
• 3:58
  We had right, tried to implement a Dunning solution, which is just, you
• 4:02
  know, maybe brute force trying to retry those transactions that they
• 4:06
  declined that was not effective.
• 4:09
  Lots of different things, and ended up ultimately building our own bespoke
• 4:13
  system to help manage and optimize it.
• 4:15
  Now here, here's a bit of secret around this stuff, the quality of data.
• 4:21
  That you pass in, that transaction matters significantly.
• 4:25
  Payments is a, is uh, built on a game of trust, right?
• 4:28
  Yeah.
• 4:28
  So the issuing bank has to trust that that consumer is buying that product
• 4:32
  and that region for that price point, um, to approve that transaction.
• 4:38
  Yep.
• 4:38
  And there's a lot of different, um, parts of that.
• 4:41
  Um, ecosystem, right?
• 4:42
  You got the merchant, they're using some sort of platform, typically going
• 4:45
  through a payment gateway, then to the acquirer and processor through
• 4:49
  the networks, to the issuing bank.
• 4:51
  Everybody has a different set of fraud rules along the way.
• 4:54
  Yep.
• 4:54
  Right?
• 4:55
  Um, and, and so there's a lots of different steps in
• 4:58
  where that can go wrong.
• 5:00
  Um, we found that.
• 5:02
  Owning all of that transaction throughout, um, and establishing
• 5:06
  that trust with that issuing bank significantly improved our numbers.
• 5:11
  And also having raw response code data from those issuers
• 5:15
  to know how to optimize.
• 5:17
  Everybody has different error, uh uh, or decline codes or things like that,
• 5:21
  and knowing what that actually means and how to process that, that transaction.
• 5:26
  So does that mean then, Frank, if I'm listening, if I'm getting this right and,
• 5:30
  and, and help me understand one of the big problems that we have with our payments
• 5:36
  then, and I mean, these stats are, are horrific in the sense that it's 10 to 14%
• 5:40
  of our transactions will get declined.
• 5:42
  Um, it's not because of insufficient funds.
• 5:45
  I've, I, I must have had two or three declines this week on a
• 5:48
  card, which I know is fine, right.
• 5:50
  For whatever reason, uh, my, uh, Monzo card wasn't working.
• 5:55
  Um.
• 5:57
  So that creates annoyance.
• 5:58
  Do I keep going or do I do something else?
• 6:00
  Is, you know, is another question that totally amounts
• 6:04
  to $600 billion in lost revenue.
• 6:06
  So two thirds of the declines are because of what you call false declines.
• 6:11
  Now is this, because there are too many, too many wheels that are trying to turn,
• 6:18
  there's too many people involved too.
• 6:19
  There's that phrase, isn't there too many cooks spoil the broth kind of thing.
• 6:23
  Um.
• 6:24
  Is that what is happening?
• 6:27
  I mean, you know your system aside, but is, am I hearing that right?
• 6:30
  This is predominantly what you were having experience.
• 6:32
  You've got three or four people in that daisy chain all with different
• 6:35
  thoughts, all with different ideas, all with different codes, all with different
• 6:38
  fraud mechanisms, and at some 0.1 of those goes wrong and so it gets declined.
• 6:45
  Yeah, there there's a number of different things that can go wrong, right?
• 6:48
  So.
• 6:49
  Um, everybody in the business wants to protect against fraud, right?
• 6:53
  So there's a lot of sort of pre-auth sort of stuff that
• 6:56
  mm-hmm.
• 6:56
  We utilize to make sure that we're, we're protecting the consumer.
• 7:00
  Right.
• 7:01
  Um, that stuff is great.
• 7:03
  Um, um, sometimes too much of that data.
• 7:06
  Can, can cause a little bit of concern, right?
• 7:08
  So we wanna be careful around that.
• 7:10
  Um, but everything, uh, in that transaction matters.
• 7:13
  So how the transaction is coded, um, what token are you using?
• 7:18
  Um, what MCC code is the merchant configured for?
• 7:21
  I. All of that informs us on what data is required, who the issuing bank is
• 7:25
  on, what data is required in order to get that transaction approved.
• 7:29
  I wish it was as simple as every issuing bank thinks about it in the
• 7:33
  same way and has the same fraud rules.
• 7:35
  Right?
• 7:35
  That's not the case.
• 7:37
  It's an imperfect science.
• 7:38
  So knowing what.
• 7:40
  Matt's buying a subscription, um, streaming service, and he wants to pay
• 7:46
  monthly and he's using a Chase card.
• 7:49
  How does, what does Chase need to know about Matt and this
• 7:53
  product and this service to feel comfortable in improving that?
• 7:56
  You can spend years analyzing data and trying to figure that out.
• 8:00
  And you can get incremental lift for sure.
• 8:02
  But that's expensive, right?
• 8:04
  Yeah.
• 8:04
  Um, and what we've done is sort of built that platform in place.
• 8:08
  That uses AI and lots of data and fraud rule input and decline code
• 8:13
  input from the issuing banks to figure out what the best, um, data
• 8:17
  package to send to get that approval.
• 8:20
  So it sounds it, and this is why I, I, I, I think it's what we said right
• 8:25
  at the start, the sort of the, the hope for the best strategy, right?
• 8:28
  Because all of a sudden you've opened Pandora's Box.
• 8:31
  It's got really complicated in many ways.
• 8:34
  Um, at least for people like me that maybe don't know about your service or, or
• 8:38
  I'm using a different service, I'm like, actually, I've got enough trouble thinking
• 8:45
  about the changes to the meta algorithm.
• 8:48
  And now actually what I'm hearing you say is actually, you should really
• 8:53
  focus on this as well because this is affecting 10, 15% of your sales.
• 8:57
  Right?
• 8:57
  So, um.
• 9:00
  It, it, it, it feels like it's kind of getting complicated quick.
• 9:04
  Um, if that makes sense.
• 9:06
  Um, I dunno if it is, I dunno if I'm maybe a little bit too
• 9:10
  afraid of, of, of the problem.
• 9:13
  Um, but I, I, I, am I the only one that sort of feels that way or is this the, a
• 9:17
  common thing that most people feel like when they're faced with this problem?
• 9:22
  Yeah, I would say, and, and I talked to lots of companies out there, I would
• 9:26
  say that there's a significant amount that don't un don't have enough insight
• 9:32
  to know that there's a problem, right?
• 9:34
  Or, or, um, and once they identify the problem, like how to fix
• 9:37
  it or solve it sort of thing.
• 9:39
  And, and I did not, right?
• 9:40
  Mm-hmm.
• 9:41
  Um, you know, running a very large sort of enterprise, I had no idea this
• 9:44
  hidden sort of issue that was going on and, and, um, you know, hired some.
• 9:50
  Um, people that can help me sort of understand what that
• 9:53
  is, but more importantly, how do I sort of solve this issue?
• 9:58
  And it was fairly significant.
• 9:59
  Um, uh, one company I was at, um, our, well, we used to use a metric
• 10:04
  called effective collection rate.
• 10:06
  Okay?
• 10:06
  So this is exclusive of the, um, voluntary return side of things, right?
• 10:11
  Customers that are on our platform.
• 10:14
  That are still active and signed up, how much of those dollars are we collecting
• 10:18
  versus what they're, what was owed?
• 10:19
  And we call that effective collection rate.
• 10:21
  Right.
• 10:21
  We were kind of low, mid sixties.
• 10:24
  Oh, wow.
• 10:24
  Which is
• 10:24
  not very good.
• 10:25
  No.
• 10:26
  Um, fast forward, having gone through this sort of payment analysis,
• 10:30
  resolving the issue, um, that was like 98, 90 9% once we've identified
• 10:35
  it and solved it sort of thing.
• 10:37
  Right.
• 10:37
  That is a significant gain.
• 10:40
  On a current customer base, right?
• 10:41
  No new marketing.
• 10:42
  Mm-hmm.
• 10:43
  Um, no new offers presented, just solving a payment problem, um, on the backend.
• 10:48
  So it, it can be super effective.
• 10:51
  Um, on average, our revolve customers improve their, uh,
• 10:57
  uh, approval rates by about 14%.
• 11:00
  Some, some businesses are higher, particularly those that are.
• 11:03
  Sort of in the digital goods or high risks, um, sort of spaces.
• 11:08
  Yeah.
• 11:08
  Um, lower for large enterprises that already have sort of
• 11:11
  robust systems in place.
• 11:14
  Um, but we've got one customer doing multi-billion dollars and they're
• 11:18
  getting 5.8% lift on their approvals.
• 11:23
  That's a lot of money.
• 11:24
  $10
• 11:24
  million a month of net new revenue by solving this type of problem.
• 11:29
  Right?
• 11:29
  Yeah.
• 11:29
  So it, it is impactful.
• 11:31
  Um, and I definitely encourage all of your ecommerce, um, folks to, you know,
• 11:35
  at least check it out and get informed.
• 11:37
  Well, I guess that this leads nicely to my next question, uh, Frank.
• 11:42
  Um.
• 11:44
  Before I, before I ask that question, lemme just take a little
• 11:47
  minute to mention about cohort.
• 11:50
  Now, if you dunno what cohort is this is, it's the new version of cohort.
• 11:53
  Actually, you may have, if you're a long time listener.
• 11:55
  There was an old version.
• 11:56
  Now there's a new version of cohort.
• 11:58
  Uh, cohort is where we have monthly, I. Get togethers on Zoom.
• 12:02
  So we just get together, shoot the breeze, talk about ecommerce,
• 12:05
  what's working, what's not working.
• 12:06
  Uh, we've got a cohort in the a NZ region or a NZ region, as I would
• 12:11
  like to say, uh, we've got a brand new UK cohort starting as well.
• 12:15
  So if you'd like to come join that.
• 12:17
  Um, like I say, it's free, it's pretty easy.
• 12:19
  We just go on Zoom.
• 12:20
  We'll just chat.
• 12:20
  Great to meet you.
• 12:21
  Great to talk about ecommerce.
• 12:22
  So if you wanna know more about that, head over to eCommerce podcast.net.
• 12:26
  Now, Frank, my, uh, question for you.
• 12:31
  Is how, is there a difference between what I would call straight
• 12:37
  ecommerce, right, and subscription recurring revenue with churn?
• 12:42
  Or is it it, it doesn't really matter actually whether you are
• 12:46
  straight ecommerce or whether you are doing subscription commerce.
• 12:49
  You've got the same problem.
• 12:52
  Yeah, anything that, what we call credential on file, right?
• 12:56
  Where you're having to store, um, a payment type or payment method.
• 13:01
  Yeah.
• 13:01
  Um, significant value there.
• 13:03
  Whether they're one-time payments or recurring payments, it doesn't matter.
• 13:08
  We all know there's a difference between retail approvals, right?
• 13:11
  You got your card, you're physically there, you're swiping it or tapping it.
• 13:16
  Those approval rates are significantly higher, although
• 13:18
  there is sort of declines there.
• 13:21
  Yeah.
• 13:21
  Um, it's much different than online, right?
• 13:23
  So anytime there's an online order is where we can effectively help, um, you
• 13:29
  know, manage that integrity and, you know, create the highest approval rate possible.
• 13:34
  Tell you.
• 13:36
  So it's pretty similar then whether you are straight ecommerce or
• 13:39
  whether you are membership recurring.
• 13:42
  Where does things like, um, apple Pay and Google Pay, where do they impact this?
• 13:47
  Do they make it better?
• 13:48
  Do they make it worse?
• 13:49
  Do they not really have any difference?
• 13:51
  Like if I've got, you know, a, a Shopify site and it's got, you know,
• 13:54
  pay by Apple, um, rather than putting your credit card details, which is
• 13:58
  obviously becoming more and more popular.
• 14:00
  Um, certainly for me 'cause I'm lazy, right?
• 14:03
  And so, um.
• 14:05
  Does that make a difference?
• 14:08
  It's the same results.
• 14:10
  I mean, if think about what a di a digital wallet is, right?
• 14:12
  You're just storing those credentials in that wallet.
• 14:15
  Um, and, and the digital wallets are, are significantly rising, right?
• 14:20
  Hmm.
• 14:20
  I, I saw a world pays a global payment report, uh, which came out
• 14:24
  this week, talked about the rise and the use of digital wallets.
• 14:27
  Um, but that's just effectively just a card that's stored
• 14:30
  there that's being used.
• 14:31
  So whether you put your Chase card there.
• 14:33
  Um, you use your Apple Wallet or Apple Pay to sort of tap, um, I'm still
• 14:38
  taking that Chase issuing card mm-hmm.
• 14:41
  Running that, um, account through, you know, a processor and such.
• 14:45
  So the rules don't change that or help that in any way.
• 14:48
  So they, I, which, that surprised me a little bit because
• 14:50
  obviously with um, uh, apple Pay.
• 14:55
  There's the whole biometric thing isn't there?
• 14:57
  You've gotta do your face ID or scan your thumbprint for Apple to go,
• 15:01
  yes, this can actually be taken.
• 15:03
  There's sort of, I mean, going back to your original comment about trust,
• 15:07
  there's that where I would've thought there was more trust in the system
• 15:11
  by doing that versus just putting in a random credit card number.
• 15:16
  Yeah, the fraudsters know that they can get the cred, the credit
• 15:19
  card number and the expiration date and even the CVV in some cases.
• 15:22
  Right.
• 15:23
  Mm.
• 15:23
  Load that into an Apple wallet.
• 15:25
  That doesn't mean it's an auto approval.
• 15:27
  Right, right.
• 15:27
  I still, Matt's credentials.
• 15:29
  I take a photo of your card without you looking.
• 15:32
  I save that in my Apple wallet, um, and then I, you know, fly somewhere
• 15:37
  else and try to buy a product.
• 15:38
  I mean, that's still, you know, a fraudulent order
• 15:40
  that the bank wants to, um,
• 15:42
  to find out.
• 15:42
  Yeah.
• 15:44
  I didn't even think of that as a, as I didn't, wouldn't have entered my mind.
• 15:49
  Uh, but now I've got a new hobby for when I go on holiday.
• 15:53
  Let photograph as many cards as we'd like.
• 15:56
  So, uh, what you are talking about then, Frank, obviously you, you've got your
• 16:00
  own technology, um, which I, you know, is, is, is, is I'm sure is wonderful.
• 16:05
  I don't personally use it.
• 16:06
  I, but I not out of.
• 16:08
  Choice is just 'cause I've, I've really just found out about it recently, but, so,
• 16:11
  um, you've got your technology out there.
• 16:14
  What other options do we have for our e-com businesses?
• 16:17
  What, let's take, um, let's do this in chunks.
• 16:20
  Let's talk about SMEs.
• 16:21
  Let's talk about a guy who's running e-com business turning over half
• 16:25
  a million a year, maybe a million.
• 16:27
  Um, what can they do?
• 16:28
  Because obviously they've not got the budgets to go and employ the, uh, the,
• 16:34
  uh, you know, very clever people, which you employed when you're Experian.
• 16:37
  Um.
• 16:38
  So what?
• 16:39
  What's good for them?
• 16:39
  Do they go to companies like yours do?
• 16:42
  Are there other things that they should think about first?
• 16:45
  Yeah, and that's effectively what we've built with Revolve is if you think about
• 16:51
  us, we're sort of this payments platform that does orchestration optimization.
• 16:56
  We're connected to all of the major payment processors out there.
• 17:00
  Um, but we also bring a, a wealth of industry knowledge that's kind
• 17:04
  of built in that platform, right?
• 17:06
  Mm-hmm.
• 17:06
  So the, the whole goal with Revolve was to kind of replace those deep payment
• 17:11
  experts that you had to hire, um, and, you know, build it within a platform.
• 17:17
  Um, so that, um, certainly large enterprises benefit, right?
• 17:20
  We, we have a lot of those types of customers, um, but really make
• 17:24
  it available for those SMBs and those mid-market type of companies,
• 17:28
  which is why we built a lot of.
• 17:30
  Plugins to like Salesforce, commerce Cloud, a lot of those ecommerce platforms
• 17:35
  that are out out there, our Shopify plugin is and worked on, gonna be launched soon.
• 17:40
  Um, but that allows you to sort of utilize, revolve with just a
• 17:44
  selection in your configuration.
• 17:46
  Mm. And then start processing and, uh, the level of sort of analytics
• 17:50
  we ha we have behind all the metrics that we're talking about.
• 17:54
  Right.
• 17:54
  To see how effective.
• 17:56
  Um, your businesses and managing those, uh, those sort of
• 17:59
  declines and that sort of thing.
• 18:01
  Um, but also get a lot of insight to what others may be doing in
• 18:04
  other industries like you as well.
• 18:07
  Yeah, no, that's fair.
• 18:08
  So you, you, uh, you actually cater to all markets, don't you?
• 18:11
  Then it's, it doesn't matter how big or small you are, it's just gonna,
• 18:14
  it's gonna be helpful to get, to get somebody like you involved to help with.
• 18:19
  The declines or is it a case of, I mean, I, I'm, I'm actually
• 18:24
  thinking out loud here, Frank.
• 18:25
  I, what I can't tell you may be embarrassingly slow actually.
• 18:30
  Um, I'm sure I could figure it out in the next 20 minutes if
• 18:32
  I was really inclined to do so.
• 18:35
  I can't tell you off the top of my head on our e-comm sites, what our.
• 18:40
  Decline rate is for payments.
• 18:42
  And actually, I think I probably, I'm not the only one, but I
• 18:45
  probably should not, I mean, you're laughing at me, which is fair play.
• 18:47
  You know, I think I probably should know this, um, number.
• 18:51
  Um.
• 18:54
  What's the tipping point?
• 18:55
  So let's say I have for whatever reason, a, a low decline, right?
• 18:59
  Uh, like two, 3%.
• 19:01
  Should I, should I go?
• 19:03
  Well, okay, I'm okay with that.
• 19:05
  That's kind of it is what it is.
• 19:06
  Um, at, at what point on that percentage scale is the tipping point?
• 19:12
  I think if you are in, um, and it, it all depends on the type
• 19:16
  of business that it is, right?
• 19:17
  So it, it'll vary significantly.
• 19:20
  Mm-hmm.
• 19:21
  Um, super high risk businesses with a 20% decline rate is probably about
• 19:27
  normal super low risk businesses with a 15 to 10% is probably about normal,
• 19:33
  but is there still opportunity there?
• 19:35
  The, the key is to eliminate the, the false declines, right?
• 19:41
  You want the real declines are okay.
• 19:43
  Whether that's, you know, uh, a fraud fraudulent order, perhaps,
• 19:48
  um, an insufficient funds.
• 19:50
  I mean, there's not much you can do with that, right?
• 19:52
  If they've maxed out their card or something like that.
• 19:55
  Um, but there, there's usually always an opportunity, even if your, uh,
• 20:00
  approval rates are fairly decent.
• 20:01
  But I, I do encourage you to know what your approval rates are.
• 20:04
  Right.
• 20:04
  So,
• 20:04
  yeah.
• 20:05
  Yeah.
• 20:05
  I, I'm gonna find out.
• 20:06
  Yeah.
• 20:06
  I was laughing.
• 20:07
  Not at you, but that is very common.
• 20:09
  Mm-hmm.
• 20:10
  Um, we, I've gone into large companies, you know, talking to heads of
• 20:13
  ecommerce, and I'm like, what, what's your effective, um, approval rate?
• 20:17
  Or how much do you pay for processing?
• 20:19
  And I get the, I don't know.
• 20:21
  But I'll look into it, you know, sort of thing.
• 20:23
  Yeah.
• 20:23
  And those things should matter to you, right?
• 20:25
  As you have, and
• 20:27
  it's interesting that they, um, uh, that you say that because.
• 20:32
  They should.
• 20:33
  And I, I'm, listen, I'm talking to you now going, I should really know
• 20:36
  these numbers and, and you know, I coach people for crying out loud.
• 20:39
  I, I, I partner with other e-comm businesses in some, so I, I should
• 20:43
  probably know these things and in the back of my head I do.
• 20:46
  Right.
• 20:47
  But I, I think I'm probably a bit like.
• 20:50
  We mentioned before we started recording that you went to Sub
• 20:54
  Sumit last year I was at Sub Submit.
• 20:55
  You're going this year?
• 20:56
  I'm going this year.
• 20:57
  Um, so if you're gonna sub Sumit, by the way, dear listener, come
• 20:59
  say how's, it's both me and Frank.
• 21:01
  We'd love to meet you.
• 21:02
  Um,
• 21:05
  and I'm sort of, I. I'm aware that you've, you've, you've created this,
• 21:09
  um, this dichotomy between involuntary churn and voluntary churn, right?
• 21:14
  And so voluntary churn is things that, that I guess I can
• 21:18
  control on my website, right?
• 21:20
  So, um, I can look at the value of the offering.
• 21:24
  I can look at those kind of things.
• 21:25
  And, and, and, you know, this is where the customer is voluntarily
• 21:28
  choosing to stop its subscription.
• 21:31
  Um.
• 21:31
  I can look at the reasons why and the psychology and the offer and the
• 21:35
  value and all that sort of stuff, and try and work on that, which they
• 21:37
  cover really well at Subs Summit.
• 21:39
  Yeah.
• 21:39
  And you mentioned involuntary churn is.
• 21:42
  Is sort of a less identified problem and a less talked about problem.
• 21:47
  And I guess I'm thinking that most ecommerce entrepreneurs like me
• 21:53
  are very aware of the voluntary, the, the voluntary things, right?
• 21:57
  Why people aren't buying.
• 21:58
  We focus on that optimization rates and all that sort of stuff.
• 22:02
  We rarely think about.
• 22:03
  And maybe everyone listening to the show shows going, Matt, shut up.
• 22:07
  It's just you mate.
• 22:08
  Um, but I, I don't think it would be, but we, we rarely look at these involuntary
• 22:13
  things and I wonder why that is.
• 22:17
  I think, yeah.
• 22:18
  I mean, it's great, right?
• 22:19
  There's a lot of focus on that and, um, you know, uh,
• 22:23
  like you talked about, right?
• 22:24
  Is the, is the value there?
• 22:25
  Mm-hmm.
• 22:26
  What's the onboarding experience like, is, you know, um.
• 22:30
  I, I, I was in the same, um, had the same problem for years, right?
• 22:36
  Where that's where my focus was.
• 22:38
  Um, I used to think about payment declines or failures is just all
• 22:42
  insufficient funds and, you know, the, those customers just naturally churn out.
• 22:47
  You know, it is what it is, was kind of my common theme to dealing with that.
• 22:52
  Yeah.
• 22:54
  And, but there, there's, there's a significant amount of customer
• 22:59
  service potential, right?
• 23:01
  Because if you turn someone out and they get a notification that they
• 23:04
  can no longer use your product, but yet they want to use their product,
• 23:07
  that's a very frustrating thing, right?
• 23:09
  Yeah.
• 23:10
  Um, for them.
• 23:11
  Um, so we've seen our customers, um, success, success metrics go up.
• 23:15
  Mm-hmm.
• 23:16
  Um, also, um, in, in dealing with this, right?
• 23:18
  So there's a lot of other, um, adjacent sort of metrics that can be.
• 23:23
  Um, enhanced with, you know, solving these sort of payment related,
• 23:27
  um, issues that are going on.
• 23:29
  Yeah, that's interesting, isn't it?
• 23:31
  Because you're, I dunno if you've, um, come across the sub platform, um,
• 23:36
  great platform there again, they were at, uh, sub Summit, um, last year.
• 23:40
  Uh, great guys that worked there, you know, and.
• 23:44
  They have just released a, a, a study, their sub comprehensive 2025 study saying
• 23:50
  the subscription price has virtually no correlation with churn rates.
• 23:55
  Um, the correlation coefficient of average order value from churn
• 23:58
  rate is actually insignificant.
• 24:00
  What truly drives retention on the involuntary side, according to
• 24:03
  the research, is perceived value, experience, and product relevance.
• 24:07
  And I'm guessing when it comes to the involuntary issues like payment issues, I.
• 24:14
  What you are doing is you are damaging, I suppose, the customer
• 24:17
  experience out of those three things.
• 24:18
  That's what you are hitting, isn't it?
• 24:20
  It's like, it's a really, really negative customer experience and I, I'm sure
• 24:25
  there's some interest in psychology around this because I, I know that when
• 24:28
  I go to a website, it declines my card.
• 24:30
  I'm like, what's wrong with you?
• 24:31
  I know there's money on the card.
• 24:32
  I'm not blaming me, I'm not blaming the bank.
• 24:35
  I'm blaming your website for some bizarre reason, even though I
• 24:39
  understand the technology behind it.
• 24:42
  Well, and, and there's a lot, so banks are super concerned about this, right?
• 24:46
  'cause there, there's a term called top of wallet.
• 24:48
  Mm-hmm.
• 24:48
  And they know what happens.
• 24:49
  And I was just in New York, um, uh, in, in January, which I don't encourage
• 24:54
  everybody to go to New York and.
• 24:58
  I was there.
• 24:59
  I stopped to buy a bottle of water at a bodega, swipe my Chase card, tapped it.
• 25:05
  It got declined.
• 25:06
  Uh, my wife and I share the same account, right?
• 25:08
  Mm-hmm.
• 25:08
  So she's getting notifications on her phone going, are you purchasing
• 25:11
  this from some random name?
• 25:14
  And she's declining it.
• 25:15
  Like, Nope, not me, not me, sort of thing.
• 25:17
  So ultimately you declined.
• 25:18
  What did I do?
• 25:19
  I put that in the middle of my wallet.
• 25:21
  I took out my wells card.
• 25:23
  It approved and that's, that's now still on the top of my wallet.
• 25:27
  Like it's literally right here.
• 25:29
  Right.
• 25:31
  It's fascinating.
• 25:32
  There's a big concern
• 25:33
  and yes, I was upset that I was being declined 'cause it was me.
• 25:37
  It's, you know.
• 25:37
  Mm-hmm.
• 25:38
  Simple bottle of water.
• 25:40
  Yeah.
• 25:41
  That's fascinating.
• 25:42
  And I, I, I'm, I'm, I'm, I, I mean, I, I don't carry a wallet anymore,
• 25:46
  Frank, I have to be honest with you.
• 25:47
  But you can order the cards in your digital wallet.
• 25:50
  Yeah, same thing, right?
• 25:51
  Yeah.
• 25:52
  Um, top of wallet.
• 25:52
  It's like, uh, the, the cards at the bottom of my list.
• 25:56
  I don't even know what me, just check.
• 25:57
  Actually, I'm gonna open up, uh, apple Pay.
• 26:02
  So my Monzo card is definitely at the top, right at the bottom, is now my
• 26:06
  American Express, uh, which I rarely use.
• 26:08
  You know, I use it a 10th of what I used to use it as.
• 26:12
  Um, for whatever reason.
• 26:14
  And I, I find this quite, uh, quite fascinating because American
• 26:18
  Express is making a lot less money out of me these days.
• 26:20
  I'm surprised they've not called me and gone.
• 26:22
  Is everything okay?
• 26:23
  You know, are we, are we still friends?
• 26:25
  Yeah.
• 26:26
  It's, it, it's a real issue.
• 26:28
  I had a, um, I won't name the subscription that I had.
• 26:32
  Um.
• 26:33
  And I had a card that was stored there with them, you know,
• 26:36
  loved the service subscription.
• 26:37
  But I got a note, a nasty note saying your service is being stopped
• 26:41
  because the card is declined.
• 26:43
  And it was just the expiration date, right?
• 26:45
  Yeah.
• 26:46
  Which told me as a payments person, that they're not
• 26:48
  subscribing to the account update.
• 26:50
  Right?
• 26:50
  Which would've updated that.
• 26:52
  So with their credential on file order, um.
• 26:57
  I didn't have time, you know, to sort of go and update and stuff like
• 27:00
  that, so I used another service.
• 27:02
  Right.
• 27:02
  Mm. Sort of thing.
• 27:03
  Um, and that, that's a real sort of issue for a lot of merchants out there.
• 27:07
  So, um, there's, there's a lot of different things that you can do.
• 27:10
  I. As a business, as an ecommerce business to ensure that, um, all of those
• 27:16
  customers that you have with payment methods, um, you know, are you updating
• 27:20
  those accounts on a regular basis?
• 27:21
  Are you using some level of optimization to deal with these
• 27:24
  sort of decline issues out there?
• 27:27
  Is it cost effective?
• 27:28
  You know, there's a lot of front end fraud strategy that you want to do as an
• 27:31
  ecommerce organization that, you know, compliments sort of what we do, chargeback
• 27:35
  management, all of that sort of stuff.
• 27:38
  But that, that whole view around managing those payments needs to be comprehensive.
• 27:42
  That would be my first advice.
• 27:44
  Yeah.
• 27:45
  I mean, yes.
• 27:47
  There's no other way to, to sort of talk about it really.
• 27:49
  I, I think you're totally right and I, I, it's such a critical part of our business.
• 27:55
  I mean, fundamentally, I have to take the money off you before I be,
• 27:58
  you know, for the sale to occur.
• 28:01
  Um, and so it, it's such an important, I just as a random curiosity, I, I, as you
• 28:06
  were talking there, I. Um, every credit card I've got, every debit card I've got
• 28:11
  has got an expiration date on it, right?
• 28:13
  It expires at, in one year, two years, three years or whatever, which in some
• 28:18
  respects never really made sense to me.
• 28:21
  And I, I wonder if do, are we gonna keep them, do you think?
• 28:25
  Are we gonna get rid of them?
• 28:25
  Do they serve a purpose other than, you know, I get a new card every three years.
• 28:29
  I'm, I'm, they seem a little bit pointless to me, but maybe I'm missing something.
• 28:35
  That's a really good question.
• 28:36
  I've never really thought about it in that way and we're, we're not an issuer, right?
• 28:41
  So I can't speak to sort of why Chase is still requiring it.
• 28:45
  Um, I think the Apple card, right?
• 28:47
  Doesn't that not have an expiration date now?
• 28:49
  I think they may be the only card out there.
• 28:51
  There's, could be others.
• 28:52
  I, I don't know.
• 28:53
  And, um.
• 28:54
  So I agree with you though, there's probably not a tremendous amount of
• 28:57
  value, particularly since all of the issuers are doing account updates, right?
• 29:01
  Mm-hmm.
• 29:02
  Um, yeah.
• 29:03
  And, and most of the card usage is, um, e-comm related, right?
• 29:07
  Yeah.
• 29:07
  So probably less reason why to keep it going forward, but that,
• 29:11
  that's a great question for them.
• 29:12
  Well, it's how you, how do you, if you're, if I'm a credit card issue, I'm like,
• 29:15
  well, how do I stop somebody putting a new credit card in when this one expires?
• 29:18
  Or I'll just take the expiry date off.
• 29:20
  Uh, but then I, like I say, it's just a random thought that occurred into my head.
• 29:25
  Yeah, good question.
• 29:26
  Uh, if I'm honest with you, um, Frank, whilst we're here,
• 29:30
  let me, let me do this thing.
• 29:31
  Well, whilst I remember I've, I, I like to ask my guests for a question, right.
• 29:36
  And, uh.
• 29:37
  This is where you're gonna ask me a question.
• 29:39
  I'm gonna take that question and I'll answer it on social media.
• 29:42
  So if you're listening to the show and wanna know how I'm gonna answer for
• 29:44
  Frank's question, or in fact any other question I've been asked from my past
• 29:47
  guests, uh, come follow me on LinkedIn, uh, connect with me on LinkedIn.
• 29:51
  Even don't, just follow me, connect, say, how's it, uh, you
• 29:53
  can find me at Matt Edmundson.
• 29:54
  So, Frank, what is your question for me?
• 29:58
  What's your approval rate?
• 30:02
  You know what?
• 30:03
  I should have seen that one come in.
• 30:05
  What's wrong with me?
• 30:08
  Brilliant.
• 30:09
  If you wanna know, my approval rate is come find me on LinkedIn and I will tell
• 30:13
  you exactly what we've talked about.
• 30:16
  Then the um, false declines.
• 30:20
  Frank, what are some of the things that we should be thinking
• 30:23
  about around real declines?
• 30:25
  Because I know for a lot of merchants, um, chargebacks are an issue.
• 30:29
  For me, it's always, I remember the first time we sent an order out to somebody
• 30:33
  and we found out it was a fraud, and I was just, I was just really angry.
• 30:38
  I, the injustice of it, not the money, but just how dare they, you know,
• 30:42
  um, what, what sort of things can we do on that side of the equation?
• 30:47
  Yeah, great.
• 30:48
  Great question.
• 30:49
  Um, I I, I, I always encourage our, um, merchants or customers, which
• 30:55
  are ecommerce businesses to have, uh, multiple payment methods, right?
• 31:00
  Because the, you, you're gonna have a problem.
• 31:01
  Mm-hmm.
• 31:01
  You're gonna max the card or something, but you still want to
• 31:03
  keep the service in some sort of way.
• 31:05
  Mm-hmm.
• 31:06
  Or the expiration date issue comes up.
• 31:09
  To have a secondary form of payment, that's always helpful, right?
• 31:13
  Um, I encourage them to make that voluntary with their customer base.
• 31:17
  Um, but that is something that can be super effective, having other
• 31:21
  forms of payment methods, right?
• 31:23
  Mm-hmm.
• 31:23
  Debit is a great solution.
• 31:26
  Um, you know, other options out there, some of the, uh, BNPL
• 31:30
  stuff, um, as, as an option, right?
• 31:32
  Because that, that can help, um, you know, keep that customer retention going.
• 31:38
  So look at many ways like that.
• 31:41
  Yeah, that makes a lot of sense.
• 31:43
  Makes a lot of sense.
• 31:44
  Have multiple methods.
• 31:45
  'cause I, I, again, I just from experience, I, I can tell you if a
• 31:49
  credit card doesn't work, I'll just use PayPal, you know, or, um, whatever,
• 31:54
  you know, it makes sense for us.
• 31:55
  I appreciate how we do it in the UK is different how you do it in the States.
• 31:59
  Um, slightly in, in some respects, but, um, I.
• 32:06
  I'm just thinking on our websites.
• 32:07
  We definitely have, I, I do know we have multiple payment methods.
• 32:11
  I'm gonna check.
• 32:12
  Yeah, and we always include those.
• 32:14
  It's really interesting actually.
• 32:15
  I dunno if you've seen this in the States as much as we see it.
• 32:18
  I've seen it here.
• 32:20
  Um, but the rise of people or companies like Klarna, where you'll go onto the
• 32:26
  site and instead of paying a hundred bucks, I can go and sign up to like four
• 32:30
  payments of 25 bucks, and Klarna charged me a percentage fee to, to offer this.
• 32:35
  But it, it helps with conversion with clients.
• 32:38
  Um.
• 32:39
  So obviously then Klarna paid me.
• 32:41
  This just another form of method.
• 32:43
  It, I make slightly less money, but it, you know, it, does it
• 32:46
  increase conversion enough?
• 32:48
  Um, I, I do you have those in the states?
• 32:50
  I mean, I'm assuming you do, I'm assuming we rob the idea from, from our American
• 32:54
  cousins, which is normally what we do.
• 32:56
  Um, how do they, how have they impacted, I guess, what you guys do?
• 33:02
  Uh, I mean, they still, um, utilize sort of credit rails
• 33:06
  for, um, some of their products.
• 33:08
  Right.
• 33:08
  So it doesn't really sort of affect us anyway.
• 33:11
  And, and I'm a big proponent of having multiple payment
• 33:14
  methods out there, even mm-hmm.
• 33:16
  It something that doesn't sort of run through our rails.
• 33:18
  I think it's an effective customer strategy and, um,
• 33:21
  I use them as a consumer.
• 33:23
  Mm-hmm.
• 33:24
  Signed up for, um, uh, my son's in club basketball.
• 33:29
  Which is very expensive, right.
• 33:31
  And I'm like, oh, I can spread this stuff out for four months
• 33:34
  instead of it sort of a lump sum.
• 33:36
  So it was fantastic.
• 33:36
  I loved it.
• 33:37
  Yeah.
• 33:38
  Yeah.
• 33:39
  And in some respects, from the consumer's point of view, it's a no brainer.
• 33:41
  I've just got an interest free line for four months, even though if I've
• 33:43
  got the money, I'm just, you know, um, not that you know you Well, I say
• 33:48
  you're not gonna wear an interest.
• 33:49
  Of course you are, but it's gonna be negligible.
• 33:50
  But, you know, I was, I was, um.
• 33:54
  A, a good friend of mine who, who passed away a few years ago, uh,
• 33:57
  and he passed away at a good old age, and he made, he made millions.
• 34:02
  Frank and I, when I say millions, I mean millions.
• 34:04
  Um, on the basis of, of this sort of, these minute numbers
• 34:10
  of savings over four months.
• 34:12
  Do you know what I mean?
• 34:12
  He would, he realized he owned supermarkets.
• 34:15
  He thought, well, if I leave the, the beans on the pallet and I don't
• 34:18
  take them off, then I've saved myself a penny a. Tinner beans.
• 34:23
  Do you know what I mean?
• 34:23
  It's simple things like that.
• 34:25
  Really fascinating how his sort of cost mentality worked.
• 34:28
  So before we wrap up, if you have found this episode insightful, I'd like to
• 34:35
  invite you to our weekly newsletter where.
• 34:39
  We, we are gonna, there'll be the show notes, of course, the standard stuff
• 34:42
  in there, but we expand on the topic.
• 34:45
  Uh, we're gonna look at this in a lot more detail.
• 34:47
  I like the podcast.
• 34:48
  I love the podcast.
• 34:49
  I love the format, but it is limited in some respects.
• 34:52
  Um, it's brilliant for big ideas, but the newsletter is where we can
• 34:55
  really break things down step by step.
• 34:58
  And of course, you can sign up for that on the podcast website,
• 35:01
  eCommerce podcast.net, or the link will be in the show notes.
• 35:05
  Uh, but Frank, listen.
• 35:08
  So I, I'm thoroughly embarrassed 'cause I don't dunno, my,
• 35:10
  my, uh, payment decline rate.
• 35:12
  Um, I'm, I'm, I'm assuming that I'm not the only one though listening,
• 35:18
  uh, that, that, that has that problem.
• 35:19
  So we're gonna go away and find it out.
• 35:21
  But if people wanna know more about, you, want to dig into the topic a
• 35:24
  little bit further, maybe got questions for you, maybe they wanna know about
• 35:27
  Revolve, what's the best way to.
• 35:29
  To sort of connect and find out more?
• 35:31
  Yeah, I would say go to our website.
• 35:32
  We got a lot of sort of helpful information, uh, white
• 35:35
  papers, that sort of thing.
• 35:37
  It's revolv3.com, R-E-V-O-L-V-3.com.
• 35:42
  Um, or shoot me off, uh, an email.
• 35:44
  Happy to sort of, uh, you know, assess where you are.
• 35:48
  So frank.arellano@revolv3.com.
• 35:54
  Fantastic.
• 35:56
  We will of course link to those, uh, bits of information in the show notes as well.
• 36:00
  So if you're on a podcast app, just scroll down and click the
• 36:03
  link and you'll go straight.
• 36:04
  Are you on LinkedIn, Frank?
• 36:05
  I am,
• 36:06
  yeah.
• 36:06
  Excellent.
• 36:07
  Well, we'll include that as, do you do LinkedIn or you just, I, I have it.
• 36:10
  'cause you're supposed to have it when you're in business
• 36:11
  or are you a big fan of it?
• 36:12
  Yeah, I'm a big fan.
• 36:13
  I like, I love the messaging in there.
• 36:15
  I use that quite a bit.
• 36:16
  Yeah, yeah, yeah.
• 36:17
  I've, I've, I've definitely been more active in the last six months on LinkedIn
• 36:20
  than I think the rest of my entire life.
• 36:22
  And I, I'm a, I'm a, I'm a quite a big fan.
• 36:25
  Um.
• 36:26
  Frank, listen, thank you for joining us.
• 36:28
  Before you go though, uh, for the listeners that have stayed with us
• 36:31
  this far, we have a new section here on eCommerce Podcast called Saving the Best
• 36:36
  Till Last, and this is where I say to my guests, Frank, what's your one tip?
• 36:40
  Maybe something that we've not talked about, maybe one thing that's gonna
• 36:44
  change our businesses for the better, either in what we've talked about
• 36:48
  or something completely different.
• 36:49
  In your years of ecommerce, if there was like one key tip that you could share.
• 36:56
  What would that be?
• 36:57
  I think it's related to what we talked about.
• 36:59
  I, because to your point, Matt, um, a lot of people just kind of assume
• 37:04
  payments work and you can leave it alone.
• 37:06
  So I would say go through your processing statements.
• 37:09
  I know they're super complicated and all these interchange
• 37:12
  numbers and things like that.
• 37:14
  But understand what your approval rates are, understand how much
• 37:17
  you're, you're paying for it, right?
• 37:19
  Your effective rate.
• 37:21
  They may advertise 2.9, but then you realize after all these
• 37:24
  other fees, you're paying 4%.
• 37:26
  Mm-hmm.
• 37:26
  Um, so get informed, um, know what that is.
• 37:29
  Um, because I, I, I, there's likely opportunity there to either save or
• 37:34
  improve that, um, uh, those decline rates.
• 37:38
  Fantastic.
• 37:39
  Fantastic.
• 37:40
  Frank.
• 37:40
  Thank you so much, brother.
• 37:42
  Thanks for coming on.
• 37:42
  Genuinely, genuinely, uh, loved the conversation.
• 37:46
  Very envious of Laguna Beach, not very envious of Milton Keynes, uh, which is
• 37:51
  where you did live for a little while.
• 37:53
  Um, I, we joked about that before we hit the record.
• 37:56
  Not that I have any issues with Milton Keynes, obviously.
• 37:58
  Um, uh, but I, I can see why you would choose Laguna Beach over Milton Keynes.
• 38:02
  Yeah, for sure.
• 38:03
  Easy to.
• 38:06
  But listen, loved it, loved the conversation.
• 38:08
  Let's definitely stay in touch.
• 38:09
  Let's meet up at Subs, Sumit.
• 38:10
  And of course, like I said, if anyone's listening, uh, thus far do come and
• 38:14
  say how's it to, to us at Sub Summit.
• 38:16
  But thank Frank.
• 38:17
  Thank you, man.
• 38:17
  Appreciate it.
• 38:18
  Thank you.
• 38:19
  Awesome.
• 38:20
  Well, that's it from me.
• 38:21
  That's it from Frank.
• 38:22
  Thank you so much for joining us.
• 38:23
  Have a fantastic week wherever you are in the world.
• 38:26
  I'll see you next time.
• 38:27
  Bye for now.