Netflix’s $7 Billion Conversion Problem and How You Can Avoid It

Written by: Mike Misasi

Payment conversions are extremely important, just ask Netflix. Last week the company attributed lower than expected quarterly earnings to payment conversion issues. The impact on the company’s quarterly earnings was material, and it precipitated a decline in market capitalization of about $7 billion.

 

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The problem, as explained by Netflix, is that many U.S. subscribers are receiving new credit cards as part of banks’ migration to EMV “Chip” technology. At least some of these cards are being issued with new account numbers and/or expiration dates, which make itimpossible for Netflix to successfully charge these accounts. With this lack of updated payment details, Netflix ran into a huge payment conversion problem.

 

For the unfamiliar, conversions are influenced by several factors. Some happen between the time a shopper clicks “Checkout” and when the shopper clicks “Buy.” For example, eCommerce businesses can increase conversions during checkout by providing shoppers with a localized checkout experience. This means products should be priced in the local currency, checkout pages should be displayed in the shopper’s language, and merchants should support the preferred payment types in each geography. For example, a checkout page displayed in local language can increase the chances a shopper will buy by up to 75%!

 

A frictionless checkout flow will increase the likelihood a shopper clicks Buy, but it only addresses part of the conversion problem. Payment conversions are greatly influenced by processes that occur AFTER the shopper clicks Buy. Here, eCommerce merchants can increase payment conversions by an additional 30% with best practices that include: routing transactions for authorization via a local acquiring bank, stopping fraud before requesting an authorization, retrying failed charges, and maintaining updated payment information for accounts on file.

 

This last practice is especially critical for subscription-based businesses such as Netflix. And the EMV transition is apparently making it particularly difficult for businesses to maintain accurate billing information for U.S. customers. However, there are tools eCommerce businesses can use to minimize payment declines due to outdated account information. Our Account Updater, for example, verifies with the appropriate card network that account information is accurate and up to date. If the account details have changed, we will provide you with the updated card number and expiration date so that you always charge the updated account. The entire processes is automated so that accounts are always updated prior to every recurring charge. An incredibly simple tool, Account Updater can rescue 10% of subscription sales.

 

Sometimes, like in the case of Netflix, thinking of conversion problems before they happen can be hard. However, we’ve come up with 7 tips to help you increase sales conversions. Check out all 7 tips here:

Get the 7 Tips for a Higher Conversion Today!