Recurring Payments Tools of the Trade Brief introductions by each Rhiannon Herrmann SVP, Operations Trevor Nies Sr. Director, Payments, Risk Ops & BI

Before We Start…Show of Hands - 9/4/2019 11:47 AM Before We Start…Show of Hands - How many of you belong to a gym? Rhiannon © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Before We Start…Show of Hands - 9/4/2019 11:47 AM Before We Start…Show of Hands - ...or watch movies online? Rhiannon © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Before We Start…Show of Hands - 9/4/2019 11:47 AM Before We Start…Show of Hands - …or maybe use one of these services? Rhiannon © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Congrats! You are making a recurring payment! 9/4/2019 11:47 AM Congrats! You are making a recurring payment! …or as some call it, paying a subscription. Rhiannon © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

A Recurring Payment is - 9/4/2019 11:47 AM A Recurring Payment is - A transaction that is charged to a customer for: Ongoing subscription Membership Recurring Shipments of Goods/Services A transaction that is charged to a customer for an ongoing subscription, membership, or the recurring shipment of goods. A recurring transaction is often set up when you subscribe to a product that you will receive on a periodic basis. © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Challenges Payment method no longer viable Expired Card Lost/Stolen 9/4/2019 11:47 AM Challenges Payment method no longer viable Expired Card Lost/Stolen Customer not present No CVV available Trevor No 3DS capability © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Microsoft sees a 50% recovery rate by recycling charges! 9/4/2019 11:47 AM Opportunity $ Microsoft sees a 50% recovery rate by recycling charges!   Trevor © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Strategies Many merchants manage recycling themselves 9/4/2019 11:47 AM Strategies Many merchants manage recycling themselves Services also available from Acquirers and 3rd Party vendors Recycle strategies vary Predetermined frequencies (3-3-3 or 5-5-5) Different days of week/time of day Only certain days of week/days of month Trevor © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Day of the Month Affects Everything 9/4/2019 11:47 AM Day of the Month Affects Everything Beginning of the Month: Lowest Decline Rate Middle of Month: Lowest Decline Rate End of the Month: Lowest Decline Rate Trevor Source: Adyen © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Testing: A Case of the Fridays 9/4/2019 11:47 AM Testing: A Case of the Fridays First Friday attempt: nothing different Second attempt: Friday clear winner Trevor © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Your New Best Friend: Account Updater 9/4/2019 11:47 AM Your New Best Friend: Account Updater This is a “must have” $ Provides updated account info for major card networks including New account number New expiration date(s) Real-Time updates (Visa) AMEX “Card Refresher” Merchants send registry file Monitors & sends electronic updates Rhiannon © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Account Updater: Behind the Scenes 9/4/2019 11:47 AM Account Updater: Behind the Scenes Proactive Accounts: Requests made several days in advance of a customer billing event If new card data available – merchant updates customer record prior to attempting the billing event Reactive Accounts: Requests sent after failed billing attempt If new card data available – merchant will update the customer record before second attempt Rhiannon © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Reactive Example Work Flow Customer is set to bill Customer transaction sent to acquirer for processing Transaction Approved? <YES> Update transaction in system with 'Approved’ <NO> AU Engine Update Requests Sent Daily Picks up decline records at first attempt; sends to acquirer requesting update. Acquirer provides updates for records (if any) Update Available? <YES> Engine processes responses and updates account info in database. System will continue to bill as per recycling policy. AU Engine Response Received Daily Rhiannon <NO> System will continue to bill as per recycling policy © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Review Transactions Check details small tweaks = large impacts 9/4/2019 11:47 AM Review Transactions Check details small tweaks = large impacts Work with acquirer to understand ins/outs of authorizations Transitioned acquirers? Get into the details to learn nuances (small code changes = negative approval rates) Rhiannon Recurring merchants passing “recurring” in transactions © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Recurring Flag: a Cautionary Tale 9/4/2019 11:47 AM Recurring Flag: a Cautionary Tale After hearing this would improve our authorization rates several years ago, we made the change from Ecommerce to Recurring. Overall, we saw an improvement. But later, we noticed that the very first Billing Event for our customers, had actually seen a significant drop. Rhiannon © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Payment Mix Types: Watch and Learn 9/4/2019 11:47 AM Payment Mix Types: Watch and Learn Mix will affect transaction approval rates Learn your historical mix of debit, credit, & prepaid Monitor and track by channel & client Trevor Learn authorization declines by payment type © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Payment Mix Key: 9/4/2019 11:47 AM Trevor Payment Instrument Mix: Net Approval Rate: © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

A story about whether to accept prepaid cards… 37% bank approved 63% bank declined 18% Retry 4% bank approved 14% bank declined Subs Purchase Allow Prepaid Cards 10% retail Reject Prepaid Cards 27% Retry 22% Try with prepaid 5% Try with other PIs 2.5% bank declined 2.5% bank approved 24% retail Trevor 5 months later, active sub user rate: 25% 5 months later, active sub user rate: 3% 5 months later, active sub user rate: 7% 5 months later, active sub user rate: 16% 5 months later, active sub user rate: 2% Subs Renewals Remained Online and Retail Customers: ~35% Remained Online and Retail Customers: ~18%

Emails Hi Trevor, Communicate 9/4/2019 11:47 AM Emails Communicate Before the customer’s next charge if card is expired After the first bank decline and potentially subsequent declines After you finish your recycling schedule Hi Trevor, Trevor Make it easy for the customer to update their payment method © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Test…Test….Test… Try new recycling frequencies against your Control 9/4/2019 11:47 AM Test…Test….Test… Try new recycling frequencies against your Control Test processing on a new day or time of day Try reprocessing on Fridays, or the 1st/15th of the month Can you test a recycling solution with your Processor or other 3rd Party? Trevor Try different communication practices with customer (emails, texts, phone calls) © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

and Then…Test Some More 9/4/2019 11:47 AM and Then…Test Some More Discover if your Processor can remove the expiration date from transactions when credit card is declined Test “guessing” the expiration year. Try this on any soft decline where the expiration date is in the past Extend expiration date(s) out 3 years  Work with your IT team to understand if transactions are flagged “recurring” or “ecommerce” Rhiannon Analyze acquisition channels, clients, mobile authorizations, and test recycling methods where underperforming © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

What about YOUR Experiences? 9/4/2019 11:47 AM What about YOUR Experiences? Rhiannon © Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

RHIANNON HERRMANN – SVP, OPERATIONS RHERRMANN@CLARUSCOMMERCE RHIANNON HERRMANN – SVP, OPERATIONS RHERRMANN@CLARUSCOMMERCE.COM TREVOR NIES – SR. DIRECTOR, PAYMENTS, RISK OPS & BI TREVORN@MICROSOFT.COM If you have any questions about the presentation, go to our LinkedIn Group (the Payments Education Forum) and request an invitation (this is a closed group specifically for the payments industry).