Part of our process is to ensure this is covered in the terms and we encourage all merchants to explicitly show this in the product for visibility but also because a significant percentage of customers will add a backup to avoid risk of downtime.
The truth is, they probably will in the future. Recurly is one of the leading subscription billing platforms global/enterprise businesses offering more advanced workflows that businesses cannot get from Stripe billing: orchestration, backup payment methods, etc.
It's actually the opposite, we see about 50% of a customers LTV happens after a recovery event. Many services leveraging backup payment methods stem from customer feedback of not wanting downtime (e.g. losing access to wireless or your internet, etc.) it's inefficient and backups are an easy way to address.
Intuitively you'd think that would be the case but in practice once a subscription stops, a large share of customers don’t come back even if they were active. We see three buckets:
1. Customer shops and finds an alternative (Claude instead of ChatGPT)
2. Customer is pissed off about downtime and leaves
3. Nice to have and customer may reactivate later or must have and reactivates/shops
Ultimately, you want to retain customers that want to use your product. If they don't they will actively cancel. We don't prevent or get involved with customers that actively cancel.
That’s a fair concern — we definitely thought about the ethics side. In practice is that most “failed payment” churn isn’t intentional churn. Customers still want the service, but their primary card expired, was replaced, or hit a limit.
When we tested this, refunds and chargebacks were actually lower for the recovered cohort compared to baseline.
For customers who really don’t want the subscription anymore, they can still cancel as usual.