How do you guys handle failed payments in your SaaS business / software product?

I imagine responses will vary depending on how expensive the product is to run for the user.

Our product is very computationally expensive, and usage rates could balloon to huge levels quickly, so we implement a hard temporary website block on any account where a failed payment is detected.

Then on the "payment processor" side of things, I'm curious how others handle failed payments. Do you keep retrying the payment capture for a set period of time (eg, like via Stripe "Smart Retries" option?) Do you (manually or automatically) trigger an email to be sent to the customer when a failed payment is detected?

I think there's a few key, sometimes contradictory goals to keep in mind here when making a decision on this: 1) collecting the absolute maximum possible amount of revenue; 2) filtering out non-serious users / filtering in higher-quality, reliable, paying customers; and 3) keeping your payment-processor account in good standing (ie, avoiding lots of chargebacks.)

The key thing I've noticed is -- many people, when they sign up for free trials, use bogus sham cards with little to no money on them, OR they use one of those "free trial / payment-evasion" software tools that lets people sign up without being on the hook for payments later if they forget to unsubscribe. Most failed payments appear to be caused by exactly that. Our thinking on this is, there's not much downside to just automatically cancelling their paid subscription if the first due payment fails. If that happens, chances are this isn't an optimal paying customer, and attempts to recapture will likely prove futile. Then even if recapture attempts do prove successful, someone that averse to spending money on a software tool, or someone with so little discretionary income they a small software payment triggers "insufficient funds", is probably way more likely to issue phony chargebacks later.

Definitely that's not a bulletproof argument but it's the sort of "quick-and-dirty rule" we're currently following with this to screen out the poor-quality / non-serious users, and filter in more of the more reliable customers. I will say, it does make everything look a lot nicer to NOT have a bunch of "failed payments" clogging up our payment processor dashboard: just clear those people out and keep a nice clean-looking balance sheet, so to speak. Also note that in our case it's a small percent of such people who, after their first failed payment, even try to change their payment method or reach out to support to resolve the issue -- ie based on what we've seen, we're like 90% correct in our assumption that these people are not seriously interested and are not likely to become real paying customers.

Final thing is, I think there's some room for nuance here, where a good rule of thumb could be: If the FIRST payment fails, when transitioning a free trial user to a paid user, the subscription could automatically be cancelled, but if it's a long-standing user, then in that case the issue is likely just a genuine card expiration that can be remedied via an automated email and/or an account-specific notification they'll get upon logging back in.

Your thoughts / company's approach to this all? Thanks!