55.8% of failed transactions are never recovered, and SMEs pay the price

A survey of finance and payment decision-makers has found that UK SMEs are losing tens of thousands of pounds every year due to failed transactions, and that chasing them up has become an incredibly time-consuming administrative chore. 

According to Access Paysuite’s data, 3.4% of all transactions fail and of these, 55.8% are never recovered. The result is an average annual revenue loss of £159,500 per business but nearly one in ten firms are losing out on more than £1 million each year. 

According to new research, more than 70% of the UK’s SMEs are losing between five and 20 hours per week managing payment failures and the administration that goes with them.

Failed payments wreak havoc

Debit card company Access PaySuite surveyed 250 UK SMEs, and found that more than half of the failed transactions they process are never recovered, while the average business spends significant amounts of time every week managing these failures.

Their research found that expired credentials, insufficient funds, authentication friction, UX complexity, trust signals or device-specific issues could all be blamed for failed payments. However, modern payments infrastructure isn’t really “designed to diagnose failure coherently”, Access PaySuite says, making things more complicated.

As Tony Craddock, Director General at The Payments Association, explains, businesses might be suffering from “a whole series of typically quite small failures”. But these small failures end up adding up, and the end results are often eye-watering. 

The problem is aggravated by the fact that payments may pass the desks of several different teams, including those of contracted firms, where “insight becomes partial and accountability becomes diluted”, the payment services firm explains.

Impact not just financial

Along with the raw financial impact that failed transactions are having on SMEs, they’re also taking up finance teams’ precious time, Access Paysuite says.

Constantly hunting down failed payments is simply a form of “firefighting”, which too often has to be performed in place of actually investigating the root causes of failed payments. 

When you’re a small finance team, these tasks often require all hands on deck, so as well as not getting to the root of the problem, it also means there’s significantly less time to be spent on strategic initiatives. 

According to Chris Jones of PSE consulting, “nearly a full working week dedicated to stitching together infrastructure that was never designed to speak coherently”. 

What can SMEs do?

SMEs shouldn’t accept that failed payments are inevitable, nor that retrying them is a pointless task. Instead, payments must be viewed strategically. This culture shift can then drive change, Access Paysuit says. 

They point to AI tools as a possible solution to help refine authentication friction or simplify checkout flows among other points at which the transaction can fail. Indeed, 95% of the UK SMEs the team spoke to said that they are looking at or planning to implement AI-driven tools “to reduce payment-related revenue leakage”. 

Technology might not be able to reduce failed payments to zero, but new strategies will cut down on the time teams are having to spend chasing. 

To put it another way, instead of designing around failed payments, businesses must design against them. As many businesses face the prospect of Making Tax Digital in the coming years, now might be the time to look at where they have inefficiencies and what technology they should budget for to help ameliorate the issues. 

As Access PaySuite states: “Finance teams shouldn’t be spending their weeks chasing avoidable failures; they should be using systems that make them rarer in the first place.”