What is Dunning?
The process of retrying failed subscription payments and notifying customers to update their card before churning them.
Dunning is the structured, automated process of communicating with customers to collect payments that have failed on a recurring or subscription basis.
The primary goal is to recover revenue and prevent Involuntary churn, which occurs when a customer's subscription is cancelled due to a payment failure rather than an explicit choice to end the service.
The process typically begins after a scheduled payment is declined by the customer's card issuer. Common reasons for such declines include insufficient funds, an expired card, or generic 'Do Not Honour' response codes.
A sophisticated Dunning strategy involves a sequence of automated actions. This includes strategically timed payment retries, informed by the specific decline code received, and a series of customer notifications via email or in-app messages.
For instance, a retry for an 'Insufficient Funds' decline might be scheduled for a few days later, whereas a 'Card Expired' decline would immediately trigger a notification requesting updated details.
To proactively prevent failures, many Dunning systems integrate with services like Visa Account Updater and Mastercard Automatic Billing Updater to refresh card details before a payment is even attempted.
The key nuance often missed is the importance of 'smart' logic; naive Dunning that retries all failures identically can increase costs and risk penalties from card schemes for excessive authorisation attempts.
Worked example
Consider a UK-based SaaS company charging £50 per month. A customer's renewal payment on the 1st of the month fails with a Soft decline code '51: Insufficient Funds'.
A smart Dunning system would not retry immediately. Instead, it initiates a pre-defined logic sequence.
Day 1: The system logs the failure and automatically sends the customer a polite email informing them of the issue, without restricting service access. Day 4 (a common payday): The system automatically retries the £50 charge.
This time, the transaction is successful. The customer's access continues uninterrupted, and the Dunning cycle for this user ends.
If the second attempt had failed with the same code, the system might wait another 3-4 days before a third attempt, alongside a more urgent email.
After 3 or 4 failed retries over a 14-21 day period, the system would typically cancel the subscription to avoid further processing costs and potential scheme penalties.
Scheme notes
Dunning itself is a merchant-side process, not a card scheme product. However, its execution is heavily influenced by scheme rules and services.
Both Visa and Mastercard run monitoring programmes, such as the Visa Dispute Monitoring Program (VDMP) and Mastercard's Excessive Chargeback Program (ECP), which can be triggered by issues (like Friendly fraud) arising from poor Dunning experiences.
More directly, excessive authorisation attempts with high failure rates, a hallmark of naive Dunning, can be flagged by acquirers and schemes. The key scheme-provided tools that support Dunning are the Account updater services: Visa Account Updater (VAU) and Mastercard's Automatic Billing Updater (ABU).
These services proactively reduce the number of failures that enter a Dunning cycle in the first place by updating expired or replaced card credentials.
Why it matters for merchants
Effective Dunning is critical for any business with recurring revenue, as it directly combats Involuntary churn and protects the customer base.
By automating the recovery of failed payments, merchants can recover a significant portion of revenue that would otherwise be lost, typically reducing Involuntary churn from over 5% to under 1%. This has a substantial positive impact on customer lifetime value and revenue predictability.
Conversely, poor Dunning processes not only lose revenue but also create negative customer experiences and increase operational workload.
Cardflo's payment orchestration can enhance Dunning by providing granular decline code data from across its acquiring network, allowing for the creation of highly specific smart retry and communication strategies to maximise revenue recovery.
Frequently asked
How many times should a merchant retry a failed subscription payment?
Most industry standards suggest between three and five retry attempts over a 14 to 21-day window.
It is critical to follow card scheme rules, such as those from Visa or Mastercard, which may limit the number of retries per 24-hour period for certain decline codes to avoid excessive processing fees or penalties.
What is the difference between hard and soft declines in a Dunning cycle?
Soft declines, such as insufficient funds or temporary technical errors, are suitable for automated retries as the issue may resolve shortly.
Hard declines, including stolen cards or invalid accounts, should generally not be retried because they indicate the payment credential is permanently unusable and require immediate customer intervention.
What is a typical smart Dunning schedule for different decline codes?
A good schedule differentiates based on the code. For a Soft decline like 'Insufficient Funds' (Code 51), wait 3-5 days before the first retry to align with potential paydays.
For 'Do Not Honour' (Code 05), you might try again in 24-48 hours at a different time of day.
For a Hard decline like 'Invalid Card Number' (Code 14), you should not retry at all and should immediately prompt the customer to update their details, as the card data is fundamentally incorrect.
How much revenue can an effective Dunning strategy realistically recover?
For many subscription businesses, Involuntary churn from payment failures accounts for 20-40% of their total churn. An optimised Dunning process can recover between 40% and 60% of this otherwise lost revenue.
In practice, this often translates to a 5-15% increase in total monthly recurring revenue, depending on the initial rate of payment failures. The ROI is almost always significantly positive, even when accounting for the cost of Dunning management software.
Should I use an Account updater service or just rely on Dunning emails?
You should use both in combination for the best results. Account updater services are a proactive measure, automatically fixing expired or re-issued cards before a payment can even fail.
This reduces the number of failures your Dunning process needs to handle. Dunning is the reactive process that manages the failures that still occur, such as those due to insufficient funds, which Account updater cannot solve.
Together, they form a comprehensive strategy to minimise Involuntary churn.
How do PSD2 and Strong Customer Authentication (SCA) impact Dunning?
SCA predominantly affects the initial Cardholder-initiated transaction (CIT), which must be authenticated to establish a billing agreement. Subsequent automated retries within a Dunning sequence are merchant-initiated transactions (MITs) and are generally exempt from SCA.
However, this exemption is only granted if the initial CIT was correctly flagged to the issuer. If not, Dunning retries may be soft-declined with a request for authentication, defeating the purpose of an automated recovery process and requiring customer intervention.
At what point should Dunning stop and a subscription be cancelled?
Best practice is to stop after a defined period and a set number of attempts, typically 3-4 retries over 14 to 30 days. Continuing attempts beyond this provides diminishing returns and increases risk.
Excessive authorisation attempts can lead to penalties from card schemes and acquirers. It also risks creating a poor customer experience, which can lead to complaints or a chargeback with reason code 'Cancelled Recurring Transaction'.
A clear 'end-of-life' for the Dunning process is essential for operational efficiency and risk management.
See how Dunning plays out in practice
Industries and regions where this term drives real acquiring, routing, or dispute decisions.
Related terms
Rules that re-attempt a declined transaction across time windows, acquirers, or authentication levels to recover revenue.
A scheme service that automatically updates stored card numbers and expiry dates when an issuer reissues a card.
A transient decline (e.g. insufficient funds, do-not-honour, generic) that can usually be recovered with retries.
A transaction initiated by the cardholder in real time, typically the first charge that establishes credential-on-file.
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