Butter Raises $22M to Help Subscription Merchants Combat Accidental Churn

FinTech Butter Payments has raised $22 million in Series A funding to fight accidental churn.

Accidental churn — in which payments are falsely declined in an effort to stem fraud — is the leading cause of subscription churn. It accounts for $500 billion in lost revenue each year, Butter Founder and CEO Vijay Menon said in a Wednesday (Jan. 11) blog post announcing the fundraise.

“Being able to parse through the metadata in real time to make intelligent decisions around which transactions should and should not be authorized is not an easy task, and subscription businesses today are not equipped to handle this challenge at scale,” Menon said in the blog post. “Butter has built a Recovery engine powered by machine learning that automates these decisions in real time so that you don’t have to.”

PYMNTS research has found that only 36% of companies that offer subscription-based services and products track churn — meaning that 64% don’t have data on this performance indicator.

At the same time, monitoring churn is correlated with success: top performers over-indexed, with 40% tracking the metric, while bottom performers under-indexed, with only 23% doing so, according to “The State of Subscription Business: Best Practices and Business Performance Drivers,” a PYMNTS and FlexPay collaboration.

As subscription commerce weathers its current challenges, firms will be all the more impacted if they do not equip themselves with actionable data insights and adapt accordingly, the report said.

Payment declines not only cost companies that one transaction, but also impact their relationships with loyal subscribers, FlexPay Founder and CEO Darryl Hicks told PYMNTS’ Karen Webster in an October interview.

“It’s more critical than ever that merchants really understand that this isn’t about a transaction,” Hicks said. "This is about a relationship with a customer, and you have to get this right in order to protect the relationship.”

Butter, a two-year-old startup, aims to solve this problem that many companies don’t know exists and don’t know how to fix, Menon said in his Wednesday blog post.

Overcoming the challenge of accidental churn that turns away millions of customers can add at least five points to the top line revenue of any eCommerce business, Menon said.

“We’re building a world in which every online business is instantly 5+% more valuable — simply by opening up access to the users who want their service already,” Menon said in the blog post.