A Swiss city is making crypto history. Lugano, a picturesque city in southern Switzerland, has transformed itself into a living laboratory for cryptocurrency adoption. As of late 2025, more than 350 shops and businesses in Lugano accept Bitcoin as payment. Even the city government takes Bitcoin (and the stablecoin Tether, USDT) for certain fees and taxes. Dubbed as “Plan ₿” – it aims to integrate digital currencies into everyday life.

The city partnered with Tether to advance crypto-friendly policies, rolled out Bitcoin payment terminals across the city, and aims to create a circular economy where users can earn and spend crypto locally. Below, we’ll discuss Lugano’s ambitious experiment in detail.

Lugano’s Plan ₿: A City’s Crypto Vision

In March 2022, Lugano’s city government launched Plan ₿ in collaboration with Tether, the issuer of the USDT stablecoin. The goal was clear: make Lugano a European blockchain hub and a pioneer in crypto-friendly living. City officials saw embracing cryptocurrency as an economic opportunity. By positioning Lugano as a “Crypto City,” they hoped to attract fintech innovation, blockchain startups, and tech tourism. This meant weaving crypto into daily transactions and public services, effectively putting Lugano on the map as a forward-thinking digital finance center.

From the outset, the Plan ₿ initiative announced that Bitcoin, Tether (USDT), and the city’s own LVGA token would be accepted for a range of municipal payments. Residents and companies could pay taxes, parking fines, public service fees, and even tuition in cryptocurrency if they choose. This move was not just symbolic – it aimed to demonstrate that Bitcoin and other digital currencies could coexist with the Swiss franc in a modern economy.

To support the plan, Tether and its partners also created a 100 million Swiss franc fund to invest in crypto startups in the region, and a 3 million CHF fund to help local businesses adopt crypto. The message was that Lugano is “open for crypto business,” providing both the regulatory framework and financial incentives to make blockchain technology part of the city’s fabric.

Building a Crypto-Friendly City: From Shops to City Hall

Turning vision into reality required building an entire ecosystem. Over the next few years, Lugano’s administration worked closely with Tether and tech firms to implement crypto payments in practice. A crucial step was distributing free crypto point-of-sale terminals to local merchants. Hundreds of Lightning Network-enabled payment devices were distributed, enabling businesses to accept Bitcoin seamlessly.

By late 2025, more than 350 merchants – from family-run cafes and pizzerias to major retail chains like McDonald’s – had integrated these Bitcoin payment terminals. Shops display stickers or signs indicating they accept Bitcoin (alongside traditional methods), and staff are trained to handle crypto transactions.

Not just shops joined the experiment. Municipal offices also got on board. The city’s IT systems enabled Bitcoin and USDT payments for many services: you can scan a QR code on your tax bill or utility invoice and pay with crypto through your smartphone wallet. Essentially, Lugano began treating Bitcoin and Tether as de facto legal tender for city fees.

While not an official currency (the Swiss franc remains the sole legal tender), these cryptocurrencies are accepted in practice for public payments in Lugano, much like cash or cards. This was a bold policy choice – few places in the world allow taxes in crypto – and it signaled how serious Lugano was about mainstreaming digital currency.

How Does a Bitcoin Payment Work in Lugano?

Suppose you’re grabbing a coffee or paying for groceries at a participating store. At checkout, the merchant’s tablet or terminal will generate a QR code invoice for the amount (converted to BTC at the current rate). You open your Bitcoin wallet app on your phone, scan the code, and approve the payment. Within seconds (thanks to the Lightning Network, which enables fast and low-fee Bitcoin transactions), the payment is confirmed.

If you prefer using Tether (USDT) – a cryptocurrency pegged to the US dollar – many merchants accept that as well, which functions similarly via a QR code scan. For the user, it feels as easy as using any mobile payment app. For the merchant, the Bitcoin payment terminal handles the conversion and confirmation behind the scenes.

Everyday Life with Crypto: Can You Live on Bitcoin in Lugano?

By 2025, Lugano officials proudly claim that a resident can cover most daily needs with cryptocurrency. Walk through the city, and you’ll find coffee shops, restaurants, clothing boutiques, supermarkets, hotels, and even yoga studios that will cheerfully take your sats (the term for small fractions of Bitcoin) or USDT. Want to grab a pizza or pay for a haircut? In many cases, simply scan and pay with Bitcoin. Need to refill your parking card or pay a public school fee? The city’s online portal will accept your crypto payment. Even at the local McDonald’s, you can buy a Big Mac with Bitcoin via a phone tap – a novelty that attracts crypto enthusiasts from abroad.

However, reality is more nuanced than a total crypto utopia. Early real-world tests and experiences show there are still gaps. For instance, public transportation, fuel stations, and some utility providers were not yet accepting crypto as of 2025 – so you can’t completely ditch your francs for every expense.

So, while you can do a majority of your daily shopping in Bitcoin, you might still need traditional money for a few things. The city is working to close these gaps, aiming for an ideal “circular economy” where salaries, bills, and purchases could all occur in crypto if desired.

Public Response: Enthusiasm, Curiosity, and Caution

Lugano’s bold Plan ₿ has certainly put it in the spotlight. The city has hosted numerous blockchain events and conferences, including the annual Plan ₿ Forum, which in 2025 attracted around 4,000 attendees from 60+ countries. This has boosted tech tourism and attracted more than 110 crypto-related companies to establish operations in Lugano, ranging from startups to established blockchain firms. In terms of infrastructure and publicity, the project is a success – few other places can claim an entire city zone where digital currency is so widely accepted.

But what about the average Lugano resident or shopkeeper? Are they embracing Bitcoin in daily life? The response has been mixed and gradual. Many local businesses signed up to accept crypto, enticed by the city’s push and some clear perks. Merchants often cite lower transaction fees as a key advantage: processing a Bitcoin payment via Lightning can cost well under 1%, compared with 2–3% on credit card sales.

For a small café or retail shop, that means keeping more of their revenue. The city’s free provisioning of POS terminals also made it low-risk for businesses to join – they didn’t have to invest in expensive new equipment or software.

Despite the infrastructure, consumer adoption of crypto has been modest so far. Many residents continue using Swiss francs or credit cards out of habit or trust. For now, crypto transactions are sporadic – a novelty rather than a norm. However, merchants like him remain optimistic, viewing this as a long-term play: as more people hold crypto and comfort grows, today’s handful of transactions could grow into a significant share of sales in years to come.

Among the general public in Lugano, sentiments vary from enthusiasm to skepticism. There is a core community of crypto believers excited to be part of this pioneering project – they attend Bitcoin meetups, use the city’s MyLugano app to get cashback in LVGA tokens, and proudly demonstrate living on crypto. A larger portion of residents are neutral: they don’t mind that Bitcoin is accepted everywhere, but they personally haven’t felt the need to use it. There are also skeptics who voice concerns.

Some associate Bitcoin with speculation, volatility, or even crime (given media reports of scams or darknet usage). For example, a local university student interviewed by the media said she was wary of cryptocurrencies due to their volatile price swings and news of hacks – to her, they’re not something “real” to trust for daily spending.

Notably, Lugano has not experienced any major backlash or protests against the crypto initiative. Because Plan ₿ operates alongside (and not replacing) traditional money, most people tolerate it even if they’re indifferent – after all, no one is forced to use Bitcoin if they don’t want to. This coexistence of crypto and fiat in the city is a deliberate strategy to encourage gradual adoption rather than impose change.

Benefits and Early Outcomes

Even with cautious adoption, Lugano’s crypto experiment has yielded some tangible benefits:

• Economic Development:

The city’s crypto-friendly reputation attracted more than 100 blockchain companies, creating jobs and investment. Lugano is now on the map as a go-to destination for crypto startups in Europe, exactly what city officials hoped for.

Conferences and events bring in visitors and business opportunities, diversifying the local economy beyond traditional finance and tourism.

• Financial Innovation for Locals:

Through the MyLugano app, residents who choose to pay with crypto get rewarded. The city implemented a loyalty program where paying at local shops in BTC or USDT earns you cashback in LVGA tokens (Lugano’s own digital token pegged to the Swiss franc).

Users can receive up to 10% of their spending back in LVGA, which they can use for other purchases or to pay for city services. This incentive encourages people to try using crypto and helps keep value circulating locally (a step toward the circular economy vision).

• Marketing and Modern Image:

Lugano has differentiated itself from other Swiss cities with this initiative. The “Crypto City” branding has drawn positive global media coverage and interest from technology circles.

At a time when many governments are cautious about crypto, Lugano’s proactive approach signals that it is an innovative, forward-looking city. This image can yield long-term benefits by attracting young talent, forward-thinking businesses, and tourism.

• Merchant Savings:

As mentioned, lower transaction fees and the lack of chargebacks (crypto payments are irreversible) can help merchants save money compared to card payments. For small businesses, a few percentage points off fees is meaningful.

Some business owners also appreciate the option to accept crypto payments online without complex banking setups.

Of course, these benefits come with caveats – they are contingent on crypto being used and valued. This leads to the key challenges Lugano faces.

Challenges and Criticisms

No bold experiment is without hurdles, and Lugano’s crypto adoption drive has plenty:

1. Price Volatility:

Bitcoin’s value swings wildly at times. This is perhaps the biggest concern for anyone using it as a day-to-day currency. Neither shops nor the city government wants to expose themselves to the risk of holding volatile crypto for an extended period. Lugano’s solution is that most merchants (and the city itself) convert incoming Bitcoin to Swiss francs almost immediately.

Payment processors and services (e.g., a partnership with Bitcoin Suisse) facilitate instant conversion: when you pay 10 CHF worth of BTC for a coffee, the merchant can have it settled instantly as 10 CHF in their bank account or as a CHF-backed stablecoin. This shields them from losses if the BTC price drops later. It means, however, that in many cases, Bitcoin is more of a medium of exchange than a unit that local businesses actually keep.

Some crypto-enthusiast merchants do hold onto a portion of their Bitcoin sale,s hoping the price will rise, but it’s not the norm. The city has also officially adopted Tether (USDT) for payments, precisely because it is a stablecoin pegged to the dollar, reducing transactional volatility. Still, the reliance on instant conversion shows that Bitcoin-as-cash is a tough sell until its value stabilizes.

2. Technical and Custodial Risks:

Using crypto in daily life introduces technical considerations that most people aren’t used to. You must manage a digital wallet, secure your private keys, or trust a service to hold funds. If a user stores their Bitcoin in a mobile app or on an exchange, there’s a custodial risk – if that platform were to fail, get hacked, or go bankrupt, their money could vanish with no recourse (unlike a bank, where deposits are insured by the government up to a certain amount).

Swiss financial safeguards, such as deposit insurance, don’t cover crypto assets. Local experts have warned merchants and users about these risks; for instance, a finance professor at the University of Lugano advised anyone accepting Bitcoin to immediately convert it to fiat and not leave it in an online wallet to avoid being caught in an exchange failure.

Additionally, while the Lightning Network and payment apps are improving, there can be technical hitches – a user might fumble with an unfamiliar wallet app, or a payment might fail due to network issues, causing delays at checkout. These are new headaches that merchants have had to learn to troubleshoot on the fly.

3. Consumer Protection and Education:

Along with technical risks, there’s the matter of consumer rights and knowledge. Crypto transactions are largely irreversible – if you accidentally send Bitcoin to the wrong address or fall for a scammy QR code, you can’t call a bank to cancel the payment.

This means both shoppers and businesses must be extra vigilant, and it raises questions about refunds or disputes. How do you issue a refund for a returned item that was paid in Bitcoin? Likely through crypto as well, which not all customers might handle easily. The city and crypto advocates have been running education campaigns to teach people how to use wallets, how to transact safely, and the associated risks. But it’s a learning curve, and not everyone is comfortable with it yet.

4. Reputational Concerns (Crime and Illicit Use):

Cryptocurrencies have a lingering reputation in some circles as being associated with money laundering, tax evasion, or black-market dealings. By openly embracing crypto, Lugano has had to address these concerns. Critics worry that allowing anonymous digital cash-like payments could attract bad actors or at least raise regulatory concerns. Lugano officials, however, have been quick to point out that all crypto usage in the city follows Swiss regulations – for example, exchanges and crypto services must comply with anti-money laundering rules just like banks.

Furthermore, the mayor has publicly argued that cash is far more attractive to criminals than Bitcoin. Bitcoin transactions are recorded on a public ledger, making large illicit transfers easier to trace in many cases, whereas physical cash can circulate with total secrecy. The city insists that encouraging Bitcoin use does not mean tolerating illegal activity, and so far, there haven’t been any high-profile incidents to undercut their stance. Nonetheless, reputational risk remains if, for example, a major fraud or money-laundering case were ever linked to Lugano’s crypto scene.

5. Adoption Remains Uncertain:

Perhaps the simplest criticism is: Will enough people actually use Bitcoin for this to matter? Skeptics label Plan ₿ as a PR stunt – a clever way to draw attention, but something that might never graduate beyond a niche usage. If the vast majority of residents and businesses stick to familiar francs, then all the crypto infrastructure might end up underutilized. The next few years will be crucial to see if usage grows or plateaus.

To address this, Lugano may consider incentives (for instance, some cities have given small discounts or bonuses for paying in crypto) to nudge people towards trying it. The city is playing a long game, betting that younger generations and the ongoing global digital finance trends will gradually boost everyday crypto use. If that bet fails and crypto interest wanes, Lugano could be left with many terminals and hype, with little to show for in terms of active users.

Lugano vs. Other Crypto Experiments

Lugano’s approach stands out because it’s a municipal initiative without a national mandate. This contrasts with places like El Salvador, which in 2021 went so far as to declare Bitcoin legal tender nationwide. El Salvador’s top-down law generated buzz, but on the ground, adoption by ordinary citizens and retailers has been minimal – most still prefer the dollar for stability. By not forcing Bitcoin use and instead encouraging it alongside fiat, Lugano may achieve steadier, organic growth in usage. People and businesses here have the freedom to opt in or out, which arguably leads to more genuine adoption (or at least, less resentment) than legal mandates do.

Other cities have also tried to brand themselves as crypto-friendly. For example, Ljubljana, Slovenia, has many merchants that accept cryptocurrency, and Zurich, Switzerland, has a vibrant crypto startup scene with some crypto payment options. Lugano is different in that the city government itself is deeply involved – it’s not just startups or independent businesses pushing it, but the public sector leading the charge.

This public-private partnership via Plan ₿ is what enabled the scale (350+ merchants) in a short time, through subsidies and official support. This city-led model could serve as a blueprint for others, provided it manages the associated risks. If Lugano’s experiment shows positive outcomes with manageable downsides, it could inspire other cities or regions to dip their toes into crypto integration in a controlled manner.

Conclusion

As 2025 turns into 2026, Lugano finds itself at the forefront of a financial experiment that the world is watching. The city has successfully built the scaffolding for a crypto-based economy – the payments network, the legal framework, merchant buy-in, and public awareness are all in place. The coming years will test whether usage catches up with infrastructure. City officials remain optimistic that as Bitcoin and crypto become more mainstream globally (and as user-friendly tools improve), Lugano will be ready and ahead of the curve. They see their city as having a first-mover advantage if a blockchain-based economy truly takes off.

For now, Lugano offers a unique case study. It shows that with political will and strategic partnerships, it’s possible to bring crypto into daily commerce at a city scale. It also highlights the challenges of doing so: the work doesn’t end at installing payment terminals – you have to win hearts and minds, ensure security, and bridge traditional finance with the new world of crypto. Whether Lugano’s bold Plan ₿ will be remembered as a visionary success or an overhyped side note of the 2020s remains to be seen.

One thing is certain: this Swiss city has demonstrated that Bitcoin can find a home in everyday transactions, not just in online forums or investment portfolios. In Lugano, the cryptocurrency dream is walking the streets, buying coffee, and paying taxes – even if only a handful of citizens are doing it to start, the very fact they can is historic.

FAQs

Why did Lugano choose to support Bitcoin and crypto?

Lugano launched its “Plan ₿” initiative to position the city as a European blockchain hub. The goal is to attract fintech innovation, startups, and investment by integrating crypto into everyday commerce alongside traditional money.

How can people use Bitcoin in Lugano today?

Hundreds of local businesses accept Bitcoin for everyday purchases, and residents can also pay certain city fees using crypto. Payments are processed via simple QR code scans with a mobile wallet, similar to other digital payment methods.

How does Lugano handle Bitcoin’s price volatility?

Most merchants use payment processors that convert Bitcoin instantly into Swiss francs or stablecoins. This lets them accept crypto without taking on the risk of sudden price swings.

Has Lugano’s crypto adoption been successful so far?

Infrastructure adoption has been strong, with many businesses participating and international interest growing. Actual daily usage is still gradual, but the city views this as a long-term experiment rather than an overnight shift.

What risks or criticisms does Lugano face with this approach?

Concerns include price volatility, consumer protection, and reputational risk tied to crypto markets. The city addresses these by emphasizing regulation, stablecoins, and voluntary use alongside traditional payment options.

Europe is set to witness a major fintech consolidation. Dutch payments firm Mollie has agreed to acquire UK-based GoCardless in a blockbuster deal reportedly valuing GoCardless at around $1.1 billion. This merger will combine two of Europe’s fastest-growing fintech companies into one of the most comprehensive payment platforms in the region.

After the Mollie-GoCardless deal, the combined entity will serve over 350,000 businesses across card payments, bank payments, and local “hyperlocal” payment methods, creating a single solution for merchants to handle a wide range of transactions. The deal, announced in December 2025, is subject to regulatory approval and expected to close by mid-2026. It marks one of the most significant European fintech acquisitions in recent years, underlining the trend of consolidation in the payments industry.

In this article, we’ll explore why this acquisition is happening now, including GoCardless’s path to profitability, its decision to pursue a buyer rather than an IPO, and the implications for merchants.

Mollie-GoCardless Deal: Combining Complementary Strengths

Mollie and GoCardless bring together highly complementary strengths to form a payments powerhouse. Mollie, founded in 2004 in the Netherlands, began as a payment service provider focused on online card payments and local payment methods for small- to medium-sized businesses.

Over two decades, Mollie has grown into a full-scale financial services platform, now offering not only card acquiring but also support for local payment options (such as iDEAL in the Netherlands), fraud prevention tools, financing (Mollie Capital), and robust APIs for integrations. Mollie serves over 250,000 merchants across more than 30 European markets, helping many of them accept payments online and in-store with ease. However, Mollie lacked its own debit payment network for account-to-account transactions.

GoCardless, on the other hand, was founded in London in 2011 with a very different focus: direct bank-to-bank payments. GoCardless built a global network for recurring payments using bank-to-bank debit systems (such as Bacs in the UK, SEPA Direct Debit in Europe, ACH in the US), enabling businesses to collect payments directly from customers’ bank accounts.

This approach offers lower failure rates and costs than card transactions, making it especially useful for subscription and invoicing scenarios. GoCardless today operates in 30+ countries and processes over $130 billion in payments annually, serving more than 100,000 businesses ranging from startups to large enterprises. It has become a go-to solution for companies with recurring revenue models, helping them reduce involuntary churn (from expired or declined cards) and streamline recurring billing.

By acquiring GoCardless, Mollie will integrate this global bank debit capability into its platform, combining cards and bank payments under one roof. Together, they can offer merchants a one-stop shop for payments. This merger creates a single provider serving over 350,000 businesses, integrating card payments, local methods, and bank payments into a single solution. Merchants of all sizes will be able to accept credit/debit cards, take direct bank payments (including recurring direct debits), and support local payment options, all through one unified platform.

GoCardless’ CEO Hiroki Takeuchi noted that by combining their expertise in card, bank, and hyperlocal payments into a single provider, they can better serve customers, accelerate growth, and raise the bar for the industry. Mollie’s CEO Koen Köppen echoed that sentiment, calling the deal a huge step toward fulfilling Mollie’s vision of “one complete platform for sustainable growth”.

Why This Mollie-GoCardless Acquisition, and Why Now?

Several factors explain why Mollie and GoCardless are merging now. One key reason is the changing market environment for fintech and payments companies. After years of rapid growth, fintech firms have faced pressure to achieve profitability and scale amid tougher economic conditions. GoCardless is a prime example: the company had reached unicorn status with a $2.1 billion valuation in early 2022, but the broader tech market downturn in 2022-2023 reset valuations across the industry.

Rather than chasing an IPO at a much lower valuation, GoCardless explored strategic options and began discussions with potential acquirers in 2025 (at one point even engaging with another fintech, Trustly). By late 2025, Mollie emerged as the frontrunner and ultimately the buyer. Market conditions – including lukewarm IPO markets and declining late-stage funding – made a sale to a well-capitalized partner an attractive path.

Just as important, GoCardless had been steering toward profitability, making itself a more appealing acquisition target. In recent years, GoCardless shifted from a “growth-at-all-costs” approach to a focus on sustainable finance. The company reportedly halved its pre-tax losses to ~£35 million for the year ending June 2024, and was on a clear trajectory toward profitability, aiming to post its first full-year profit by 2026.

In fact, CEO Hiroki Takeuchi told reporters in early 2025 that GoCardless was aiming to break even by the end of that year. This financial discipline proved crucial – acquirers value fintech businesses that have a credible path to profit, especially in a climate where investors are less willing to fund heavy losses. By late 2025, GoCardless’s fundamentals (growing revenues, up 38% year-on-year to £126.8M, and improving margins) made it an attractive target, even if its price tag was lower than during the 2021 funding boom. Takeuchi’s decision to sell to Mollie rather than pursue an IPO reflects a pragmatic assessment of these conditions and what would best support the company’s long-term mission.

Another factor is the broader trend of consolidation in the payments sector. Payment providers of all sizes are facing margin pressures, rising compliance costs, and a slowdown in venture capital funding, prompting many to consider mergers to achieve greater scale and efficiency. Combining forces can help them defend market share and offer a more complete suite of services to customers.

Mollie’s acquisition of GoCardless is a clear example of this consolidation trend – it’s one of the largest European fintech deals since the early open banking wave began. By merging, the companies aim to be stronger together in an increasingly competitive landscape.

Importantly, the deal also comes amid a shift in Europe’s payments landscape toward account-to-account (A2A) payments. Regulatory initiatives such as PSD3 and the upcoming Open Banking Regulation are pushing banks to open up account access and to adopt cheaper, faster payment methods beyond traditional card networks. At the same time, industry efforts such as the European Payments Initiative (EPI) are developing a pan-European instant payments network.

These developments signal that bank payments are gaining traction – especially for use cases like subscriptions, digital services, and marketplaces where merchants are looking to cut costs and reduce reliance on card networks.

GoCardless, being a leader in bank-to-bank payments, has benefited from this shift (signing up partners in SaaS and other sectors riding the open banking wave). Mollie, which excelled in card payments and local methods, likely saw the writing on the wall: to remain competitive in the coming years, a payments provider needs to offer multi-rail capabilities (i.e., both card and bank payment rails) on a unified platform. By acquiring GoCardless now, Mollie capitalizes on A2A momentum and ensures it can meet merchants’ growing demand for direct bank payments alongside cards.

Finally, there’s a straightforward synergy argument. Each company gains something it was looking for:

• For Mollie: the addition of GoCardless instantly provides deep bank-payment coverage across Europe (and into North America/Australia, where GoCardless has a presence). It strengthens Mollie’s offering for recurring revenue businesses, a segment Mollie has been targeting, by solving the involuntary churn issue that pure card-based billing faces. It also enhances Mollie’s move upmarket – adding GoCardless’s enterprise clients and capabilities will bolster Mollie’s appeal to larger merchants beyond its SME core.
• For GoCardless: partnering with Mollie provides access to a much larger distribution network of SMEs and mid-market merchants where Mollie is strong. Instead of going it alone or trying to IPO, GoCardless can leverage Mollie’s sales channels, integrations (e.g,. Mollie Connect for software platforms), and established brand among online businesses. It also means GoCardless’s technology can be embedded into many more checkout flows and merchant services via Mollie’s platform. This can accelerate GoCardless’s growth beyond what it might achieve as a standalone company.

GoCardless’s Path to Profitability and the Road to Exit

It’s worth zooming in on GoCardless’s journey in the lead-up to this acquisition, as it illuminates why the company chose this path. Founded in 2011, GoCardless spent much of the 2010s in growth mode, raising over $600 million in venture capital and expanding its reach across the UK, Europe, North America, and the Asia-Pacific. By 2022, it had achieved unicorn status with a $2.1B valuation and processed tens of billions in annual payments. However, like many fintechs of that era, GoCardless was not profitable and instead prioritized growth and market expansion.

Around 2023-2024, the company and its investors recognized the need to shift gears toward profitability. This was partly driven by market conditions (as venture funding became harder to secure, and public markets punished unprofitable tech companies) and partly by the company’s maturation.

GoCardless began tightening its financials: as noted, it cut its losses by 50% (to ~£35M) in the year to mid-2024 and signaled a clear plan to reach profitability by 2026. The firm’s revenue was growing healthily – up 38% year-on-year in its last fiscal report – indicating that its core business (collecting fees on direct debit transactions) was scaling well. In an interview earlier this year, CEO Hiroki Takeuchi expressed confidence that GoCardless could reach breakeven in the near term.

By late 2024, GoCardless’s leadership had to evaluate the best way forward: continue as an independent company (perhaps aiming for an IPO down the line) or combine with a larger partner. The IPO route looked challenging – fintech IPOs had stalled mainly, and achieving a multi-billion valuation again in a public offering was uncertain.

Meanwhile, larger payment players were expanding their product lines, and GoCardless risked being outpaced if it remained a niche specialist. In this context, GoCardless entertained acquisition talks. The company engaged with multiple potential acquirers in 2025. Ultimately, Mollie was the best fit, both in terms of vision and the complementary nature of their products.

Takeuchi’s decision to sell to Mollie rather than pursue an IPO was calculated. In other words, joining forces with Mollie offered immediate scale and resources to GoCardless, plus the opportunity for GoCardless’s shareholders (and employees with equity) to potentially benefit from the combined company’s success (the deal is reportedly a mostly-stock transaction, meaning GoCardless stakeholders will receive shares in Mollie’s expanded business).

Importantly, choosing an acquisition doesn’t signal failure – it can simply be the smarter path in a given climate. Many fintechs that boomed in the 2010s are now finding strategic buyers rather than going public, especially when those buyers can accelerate their growth.

GoCardless’s solid fundamentals, strong product, global reach, and improving finances ensured that it was acquired from a position of strength, not distress. And by aligning with Mollie, GoCardless can aim for an even larger impact than it might have achieved solo, essentially betting that the combined entity will be greater than the sum of its parts.

Mollie-GoCardless Merger – An Integrated Payment Solution for Merchants

For merchants and businesses using these services, the Mollie-GoCardless merger promises a host of benefits. The most immediate impact is the availability of an integrated payment solution that covers virtually all the payment methods a merchant might need – cards, bank debits, and a variety of local payment options – all through one platform. This addresses a long-standing pain point for businesses, especially those that operate online or across borders: traditionally, a merchant might use one provider for card processing, another for direct debit or bank transfers, and yet others for country-specific methods (like iDEAL, Bancontact, Sofort, etc.).

That patchwork approach can be fragmented and complex, requiring multiple integrations and vendors. The combined Mollie-GoCardless platform aims to give SMBs and enterprises a single partner for all these needs, simplifying their payment stack. In practical terms, a merchant can log in to a single dashboard to manage credit card payments, set up recurring direct debit plans, and accept local e-wallets or bank apps, without juggling separate systems. This unified approach can save time, reduce technical headaches, and potentially lower costs through consolidated pricing.

Recurring revenue businesses (subscription-based companies) stand to gain significantly. The card-only approach has its limits for subscriptions. Many subscription businesses struggle with involuntary churn: customers unintentionally cancel when their card expires or their payment fails. GoCardless’s bank debit system offers a more reliable way to collect recurring payments (bank accounts don’t expire like cards, and direct debits have higher success rates), which can drastically reduce failed payments and customer churn.

By incorporating GoCardless, the new platform will enable merchants to easily offer customers a bank debit option at checkout or for subscription billing. Lower failed payment rates mean steadier cash flow for merchants and fewer subscription interruptions for customers.

Additionally, transaction fees for direct bank payments are often lower than card processing fees (since they bypass card networks), so merchants can reduce costs on a portion of their transactions by encouraging bank payments where suitable. All of this contributes to better subscription management and revenue optimization for businesses, a key selling point of the merger.

Merchants pursuing international expansion will also benefit from the powerhouse combination. Together, Mollie and GoCardless cover a broad geographic footprint and support a wide range of payment methods preferred in different regions. The merged platform will support local payment schemes across Europe and beyond, for example, iDEAL in the Netherlands, Satispay in Italy, Twint in Switzerland, and so on, alongside global card schemes and direct debit in major currencies.

This means a business using Mollie-GoCardless can easily accept payments from customers in multiple countries in their preferred local method, increasing conversion rates. The companies have emphasized “hyperlocal” capabilities: integrating with local banking systems and, in some cases, local business software or reporting formats to make operating in each country as smooth as possible.

For a merchant, expanding into a new European market could be as straightforward as enabling a new payment method on the platform, rather than signing a contract with a new local payment processor. In essence, the combined platform offers a frictionless global expansion path for merchants, handling the messy payment infrastructure behind the scenes.

Even smaller businesses (SMEs) stand to gain access to more advanced tools that were traditionally the domain of larger enterprises. Mollie has built features such as analytics, fraud prevention, financing options, and a marketplace for integrations. By folding GoCardless’s capabilities into the mix, those features now extend to bank payment flows as well. Mollie says the combined platform will let big companies unify their Europe-wide payments in one place, while giving smaller businesses advanced capabilities that are simple to use.

A small business using Mollie could tap into GoCardless’s Success+ tool (which intelligently retries failed direct debit payments at optimal times) or offer installment plans by combining card and bank debit options, sophisticated payment strategies that can improve cash flow and customer experience, now available to businesses of all sizes. Additionally, software platforms that use Mollie Connect (Mollie’s solution for SaaS companies and marketplaces to embed payments) will be able to integrate GoCardless’s bank debit network for their end-users with minimal effort.

This opens the door to a variety of apps and services (e.g., subscription management software and billing platforms) to easily offer both card and bank payment options natively to customers through a single integration.

Industry Impact and Future Outlook

The merger of Mollie and GoCardless affects not only their customers but also has broader implications for the payments industry, especially in Europe. For one, the combined company will become one of the largest independent payment platforms in Europe, which could ramp up competitive pressure on other providers. Global players like Stripe, Adyen, and Checkout.com have already been building out multi-rail payment capabilities (supporting both cards and bank payments).

With Mollie-GoCardless joining forces, merchants now have a strong European-based alternative offering similar breadth. This could prompt all players to further innovate and enhance their integrated offerings, ultimately benefiting merchants by providing more choice and better pricing over the long term. The race to build a single, multi-rail payments operating system for Europe is clearly accelerating, and Mollie’s megadeal is a bold move in that direction.

The acquisition also underscores the validity of Open Banking and bank payment solutions in the mainstream payments mix. Just a few years ago, direct debit and bank-to-bank payments were often seen as niche or supplementary methods (useful for utilities or payroll, but not front-and-center in e-commerce). Now, with one of the continent’s major payment firms betting big on bank payments by acquiring GoCardless, it’s a strong signal that account-to-account payments have arrived as a core offering.

As regulators continue to push for open banking adoption (making it easier for licensed fintechs to initiate payments directly from bank accounts), we can expect more merchants to adopt these methods, especially to avoid high card fees and to appeal to customers who prefer using their bank directly. The combined Mollie will be well-positioned to ride this wave, perhaps even influence standards, as it’ll handle a large volume of such transactions.

Of course, integration and execution will be critical in the coming months. Merging two sizeable fintech platforms is no small feat; technology systems need to be integrated, teams combined, and customers kept happy throughout. The companies have stated that the integration of GoCardless’s network into Mollie will be phased to avoid disruption and that they’ll continue to support all existing customers throughout the transition.

Regulators will also scrutinize the deal (particularly competition authorities in the EU and UK), given the substantial share of the direct debit market involved. However, there’s a chance of approval, as the European payments space remains fragmented and competitive, so a Mollie-GoCardless combination should not create a monopoly. If all goes as planned, the two companies will fully merge by mid-2026.

Looking further ahead, this deal could spur additional consolidation. As mentioned, many fintechs are facing similar pressures to expand their offerings and reach profitability. Europe in particular has a patchwork of payment startups specializing in various niches (from Buy-Now-Pay-Later to point-of-sale systems to crypto payments). We may see more mergers where complementary firms join to offer a broader suite, much like Mollie and GoCardless have done. This may be necessary to challenge the scale of US-based giants or to meet merchants’ demand for unified solutions.

Conclusion

Mollie’s acquisition of GoCardless is a major European fintech deal that combines card payments and merchant services with bank debit and recurring payments. Together, they can offer businesses a single platform for cards, bank debits, and local payment methods from day one.

The timing aligns with industry trends toward consolidation and shifting payment preferences. GoCardless gets a sensible exit after reaching profitability, avoiding a risky IPO, while Mollie gains scale and a broader product suite to compete globally.

If executed well, the merged company could reduce payment failures, simplify cross-border selling, and deliver more flexible, cost-effective payment options for merchants across Europe and beyond.

Frequently Asked Questions

Who are Mollie and GoCardless?Mollie is a European payment processor known for simple card and local payment integrations for online businesses. GoCardless focuses on bank-to-bank payments, helping companies collect recurring and invoice-based payments directly from customers’ bank accounts in many countries.

Why is Mollie acquiring GoCardless?The deal combines Mollie’s strength in card payments with GoCardless’s global bank debit network. Together, they can offer merchants one platform for one-time and recurring payments, while lowering costs and reducing failed subscription charges.

How large will the combined company be?The merged business will serve more than 350,000 merchants across Europe. It will support card payments, bank debits, and local payment methods at scale, positioning it as one of the most comprehensive payment platforms in the region.

What does this mean for existing customers?In the short term, services should continue as usual. Over time, Mollie users are expected to gain access to bank debit features, while GoCardless customers may be able to add card and alternative payment methods through a single platform.

Is this part of a broader trend in the payments industry?Yes. The acquisition reflects ongoing consolidation in fintech as companies seek scale, profitability, and broader product coverage. Combining card payments and bank debits under one provider is increasingly seen as a competitive advantage.

After more than two centuries in circulation, the U.S. penny has been retired, with the final one-cent coin minted on November 12, 2025. The decision was driven by cost: producing a penny cost roughly 3.7 cents, creating millions in annual losses. While the vast number of pennies already in circulation will remain usable, shortages have already affected small businesses. Many merchants struggled to obtain rolls of pennies, leading to exact-change policies or ad-hoc rounding at the register.

To address this shift, Square introduced a new cash rounding feature for sellers. As penny shortages increased, retailers asked for a practical way to handle cash transactions without one-cent coins. In late 2025, Square released a built-in rounding function that automatically adjusts cash totals, eliminating pennies while keeping transactions straightforward for both merchants and customers.

Square’s Cash Rounding Solution: How It Works

Square’s cash rounding feature is straightforward but powerful. For any cash sale, the final total is automatically rounded to the nearest nickel (5¢) so that no pennies are required in change. In practice, prices may be rounded up or down depending on the final digits of the amount due. For example, Square’s system follows a symmetric rounding rule (similar to the one adopted in Canada after it axed its penny in 2013):

• Totals ending in $X.01 or $X.02 are rounded down to $X.00
• Totals ending in $X.03 or $X.04 are rounded up to $X.05
• Totals ending in $X.06 or $X.07 are rounded down to $X.05
• Totals ending in $X.08 or $X.09 are rounded up to $X.10

This rounding applies only to cash transactions; electronic payments (card, mobile, etc.) are charged to the exact cents, since no physical change is required. By rounding the final amount due (after applying taxes, discounts, etc.) to the nearest 5¢, Square’s approach keeps item prices, tax calculations, and receipts intact to the cent.

The customer pays a nickel-increment total, and the register displays a nickel change. For instance, if a customer’s purchase totals $10.02, the system would ask for $10.00 in cash; if it totals $10.03, it would round up to $10.05. The goal is to remove pennies from the equation without otherwise altering the pricing structure or shortchanging anyone in a meaningful way.

Behind the scenes, Square also ensures accurate record-keeping despite the rounding. The platform’s back-end transaction reporting continues to log the exact sale amounts and taxes as if pennies still existed, so merchants can report taxes on the true totals.

In other words, even if a merchant collects only $10.00 in cash for a $10.02 sale, Square will still record the 2¢ difference internally. This allows businesses to report the total dollar amount of tax collected and manage their accounts correctly, while the customer-facing side is neatly rounded.

It’s a technical fix that maintains financial accuracy and compliance – no pennies required. Square has emphasized that this is something their system “has always done” – handling sales tax reporting precisely – and the new rounding feature doesn’t change any of those fundamentals.

Square began piloting this cash rounding functionality with select U.S. sellers in December 2025. The timing was intentional: the penny’s end came right before the busy holiday shopping season, when stores often face long lines and hurried customers. By rolling out the feature ahead of the holidays, Square aimed to ensure a smooth shopping season for cash transactions despite the coin upheaval.

Notably, Square wasn’t entering completely uncharted territory with this move. The company had already implemented similar cash-rounding in other countries – Australia stopped using 1¢ and 2¢ coins back in 1992, and Canada retired its penny in 2013 – so Square was able to leverage that experience to deploy a U.S. solution quickly. The technology and know-how were already in Square’s toolkit; it was just a matter of tailoring it to U.S. currency and deploying it at the right moment.

Willem Avé, Square’s Global Head of Product, noted that while removing the penny may appear minor, it has a real effect on daily business operations. He pointed out that large retailers have the resources to plan and adapt quickly, while millions of neighborhood businesses still need practical ways to keep transactions running smoothly. He emphasized that Square’s role is to support those businesses so they can continue serving customers without disruption.

The rounding feature is important because it levels the playing field for small merchants navigating the penny phase-out. Big-box retailers and national chains may have the resources to swiftly reprogram systems or adopt new cash-handling policies. For a corner cafe or a family-run shop, however, figuring out how to handle a penny shortage can be a real challenge. Square’s solution basically hands them a ready-made fix – automatically applied through the point-of-sale – so they don’t have to develop a policy from scratch or worry about unfair outcomes.

Why the End of the Penny Was a Problem for Merchants

For context, cash remains an important payment method for many businesses, even in an increasingly digital age. According to Square, roughly 19% of all Square transactions in the U.S. are paid in cash, and in certain sectors, such as food and beverage, cash usage is highest. In fact, each week, an estimated 16.7 million pennies were changing hands in Square-facilitated purchases before the penny’s retirement.

That’s a lot of copper coins suddenly in limbo. When the U.S. Mint halted penny production, those coins didn’t instantly vanish – but they did become a finite (and quickly diminishing) resource. Banks began distributing fewer pennies, businesses started running low, and it wasn’t guaranteed that customers would bring in enough pennies to make change. This situation led to real headaches: stores unable to break a dollar properly, cash drawers skewed at day’s end, and frustrated buyers and sellers alike.

Small businesses were feeling the squeeze most acutely. By late 2025, some shops put up pleas or policies to cope. Signs appeared at registers saying “exact change only”, effectively urging customers to either fork over the exact pennies or use a non-cash method.

Major retailers and even government offices got in on this; for example, some McDonald’s locations and the Chicago city finance office notified customers they might not get pennies in change anymore.

Others adopted ad hoc rounding: some stores rounded down in the customer’s favor (essentially absorbing the 1–4 cent difference themselves), while others rounded up and asked the customer to pay a few cents more. The approaches varied: Aldi and Goodwill rounded down, while Whole Foods rounded up in at least one area, which only added to the confusion.

From a merchant’s perspective, neither option was ideal. If you always round down, you risk a small loss on each transaction (which can add up over hundreds of sales). If you round up, you risk irritating customers or appearing to nickel-and-dime them (quite literally).

There were also accounting questions and legal gray areas: How should sales tax be reported when the amount charged differs slightly? Could consistent rounding up be considered price gouging, or might it unfairly affect cash-reliant customers? Even organizations like the National Conference of State Legislatures (NCSL) began urging the adoption of standardized rules to prevent businesses from facing lawsuits or audits for improvised rounding practices.

This is the problem Square’s penny-rounding feature was designed to solve. Baking a uniform rounding policy directly into the point-of-sale system removes ambiguity. Every Square seller using the feature follows the same fair rounding rule (nearest nickel), and it’s applied consistently for every cash payer. Back-end accuracy means the books still balance and taxes are remitted correctly, avoiding the accounting pitfalls that worried some retailers.

Square’s solution essentially standardizes what could have been a chaotic, store-by-store experiment. As a result, a small change – losing the lowest-denomination coin – doesn’t spiral into big operational disruptions.

Smoother Sales and Shorter Lines (Pros of Rounding for Merchants)

For many small merchants, eliminating pennies may come as a relief once the transition is complete. One immediate benefit is time saved at the register. Rummaging for pennies or waiting for a customer to check their pockets for an extra cent or two can noticeably slow down checkout. Over countless transactions, those seconds add up. Transactions are a bit smoother when you have less change to count out, and even a tiny time savings per customer can reduce overall wait times when you serve hundreds of people a day.

During busy periods (think holiday shopping rushes or lunch-hour crowds), not accepting pennies can help keep lines moving more efficiently. Small businesses often have limited staff, and anything that speeds up each sale improves customer flow and satisfaction. Square explicitly highlighted this advantage, suggesting that by minimizing the need for pennies, the rounding feature “reduces friction” for cash-paying customers and keeps lines moving. In other words, it eliminates awkward pauses for penny-finding and allows both the customer and the cashier to get on with their day more quickly.

Merchants also see a simplification in cash handling and management. No pennies means one less coin type to stock, count, and roll. Cash drawers can be a little less cluttered (expect to stock more nickels and dimes; at least those are useful in multiple scenarios, unlike pennies, which primarily serve to make change).

Many business owners quietly welcome the penny’s demise because it removes a long-standing source of frustration – pennies often got lost, spilled, or ignored, and employees had to tediously count heaps of nearly worthless coins at closing time. Dropping pennies streamlines end-of-day reconciliation and can reduce the number of bank trips to load coin rolls.

There’s also an argument that ditching pennies could slightly streamline pricing for businesses. While merchants can still set prices at $4.99 or $9.97 if they prefer, they might also choose to simplify to nickel increments (e.g., $4.95 or $10.00) for a cleaner, penny-free pricing structure. Some cash-only businesses have already started doing this – opting for prices that round neatly – which can make cash transactions more straightforward.

Square’s data from Canada and Australia likely gave them confidence that U.S. sellers could adapt without alienating customers. After all, Canada eliminated pennies years ago, and daily commerce carried on with little trouble. In both Canada and Australia, people quickly adapted to nickel-rounding, and economists found no significant negative effects on consumers or businesses. In fact, customers in those countries largely appreciate avoiding nuisance coins, and businesses save time by handling less loose change.

Another pro is that Square’s approach is fair and symmetric – it doesn’t always round in favor of the store or the customer, but rather does whichever is mathematically nearest. This tends to even out over time. Some transactions are rounded up by a few cents; others are rounded down. Statistically, neither side consistently loses. Across many sales, some transactions are rounded up, others are rounded down, so there will be no net burden on consumers or businesses.

In other words, the pennies even out. This should allay shoppers’ fears that they’ll always pay a “rounding tax” and reassure merchants that they won’t lose revenue by rounding down. Square’s system ensures neutrality and transparency – receipts can even show a “rounding adjustment” line, so everyone knows what was done. With trust and consistency established, most folks won’t miss the penny after all.

Potential Drawbacks and Adjustments (Cons and Concerns)

No change (pardon the pun) comes without concerns. Some small businesses and shoppers worry about pricing and fairness once pennies are gone.

One issue is psychological pricing. Retailers love prices ending in .99 because they feel cheaper. If a $4.99 cash purchase often rounds to $5.00, shoppers may start treating $4.99 as “basically $5.” Some call this the “death of .99 pricing.” Over time, more prices may shift to endings like .95 or .00, which can feel less like a bargain.

Another concern is fairness for cash users, especially low-income customers who rely on cash more often. If stores rounded up too often, it would amount to a small fee for the people least able to absorb it. Square avoids this by rounding to the nearest nickel (up or down), not always up. In practice, most customers don’t mind rounding, and many don’t notice, especially when stores explain it clearly.

There’s also a learning curve. Some people still expect pennies in change or get confused by a rounded total. Simple signage and a short script help: “We don’t use pennies anymore, so cash totals round to the nearest nickel.” A few retailers may choose to round in the customer’s favor to protect goodwill, but as people adjust, that usually isn’t needed.

Finally, there are accounting and compliance details. Sales tax is still owed on the exact amount before rounding, so records must reflect that. Programs like SNAP also require equal treatment across payment types, which limits special rounding exceptions. Square’s approach, calculating tax first, then rounding the final cash total, helps ensure consistent, compliant reporting.

Lessons from a Penny-Free World: Canada, Australia, and Beyond

The U.S. may be late to drop the penny, but it has plenty of models to copy.

Canada phased out its penny in 2012-2013, and the change was smooth. Businesses used a rounding system much like Square’s: totals ending in .01-.02 round down, .03–.04 round up, and so on. Over the years, Canada has found no meaningful effect on inflation or consumer spending. Any “rounding tax” was tiny, just a few dollars per person per year at most, and retailers saw only modest gains. Canadians continued to use 99-cent shelf prices, while accepting that cash totals might be a nickel higher or lower.

Australia dropped its 1¢ and 2¢ coins in 1992, and rounding to the nearest 5¢ has been routine ever since. New Zealand followed (1c/2c in 1990, and later the 5c coin in 2006). Many European countries have also moved away from small-denomination coins, often using register rounding to the nearest €0.05, even when 1- and 2-cent coins remain in circulation.

The pattern is consistent: economies don’t break, shoppers don’t revolt, and retail adapts. The main changes are practical, lighter coin jars and simpler cash handling.

For U.S. merchants, these examples should be reassuring. The penny survived in the U.S. largely due to habit and symbolism, but rising production costs and everyday hassles finally prompted change. Now, tools like Square’s cash-rounding feature help businesses make the transition without awkward math or inconsistent treatment.

Pennies also remain legal tender, so people can still spend them. But as they stop circulating, lost, saved, or not returned through banks, their use will fade. The debate has shifted from “Should we get rid of the penny?” to “How do we operate without it?” and standardized rounding is the practical answer.

Conclusion

The end of the penny is a small but symbolic shift in how America handles money. For small businesses, it could have been stressful. With Square’s cash rounding, the transition is smoother. “No penny, no problem” is quickly becoming true at the register.

Square’s rounding feature shows how fintech can adapt to real-world currency changes. It bridges old pricing habits with new cash-handling rules. Sellers save time (less coin counting and fewer bank runs) and can reassure customers they aren’t being shorted. The adjustment is automatic, bi-directional, and clearly shown on receipts. Over time, many shoppers and merchants may no longer notice pennies.

Change can be annoying, but it can also be useful. Other countries have shown that removing low-value coins can streamline commerce without hurting consumers. The U.S. is now following that path, and tools like Square’s feature reduce the friction. For small businesses, the ones most likely to feel the impact, this removes a major hassle.

Retiring the penny should save money, simplify transactions, and speed up checkout. Square’s approach helps merchants keep operating normally while the system adjusts. So if you buy a coffee with cash and get a nickel back instead of four pennies, it’s not a mistake, it’s the new normal, working the way it’s meant to.

Frequently Asked Questions

What is Square’s cash rounding feature?

It automatically rounds cash totals to the nearest 5¢, so you don’t need pennies. Card and digital payments still charge to the exact cent

How does the rounding work?

Square uses “nearest nickel” rounding: .01–.02 down, .03–.04 up, .06–.07 down, .08–.09 up. So $10.02 becomes $10.00, and $10.03 becomes $10.05 (cash only)

Will customers pay more overall?

Not consistently. Some transactions round up, others round down, and it tends to balance out over time. Receipts can show the rounding adjustment to ensure clarity and transparency.

Does this change sales tax reporting?

No, tax is still calculated on the exact amount before rounding. Square records the true totals in the backend, so reports stay accurate.

Do merchants have to change sticker prices, such as $9.99?

No. You can keep the $0.99 price on the shelf. Only the final cash total is rounded, so the pricing strategy doesn’t have to change overnight.

For subscription-based businesses, one of the most frustrating ways to lose a customer is through involuntary churn – when a subscriber who intended to stay is dropped because their payment didn’t go through. These are customers who want your service but get canceled due to a failed recurring charge. Unfortunately, this scenario is all too common. Studies have found that payment failures account for 20%-40% of customer churn in subscription businesses. In other words, up to nearly half of your lost subscribers may be leaving due to a billing issue, not by choice.

The good news is that this kind of churn is largely preventable. By optimizing your recurring billing processes, you can keep more customers on board and retain the revenue you’ve already earned. In this post, we’ll explore best practices to reduce churn in 2026 by minimizing failed subscription payments.

Why Failed Payments Cause Involuntary Churn

Before implementing solutions, it’s important to understand the problem. Involuntary churn (also known as accidental churn) refers to losing customers due to payment issues rather than the customer’s intent to cancel. Unlike voluntary churn – when a customer actively decides to leave – involuntary churn happens when a legitimate recurring payment fails for some reason, causing the subscription to end against the customer’s wishes.

These failures can occur for a variety of mundane reasons: an expired credit card, insufficient funds in the account, the card being reported lost/stolen and replaced, a bank’s fraud detection system falsely declining a legitimate charge, or technical processing glitches in the payment network. None of these means the customer wanted to stop their service – it’s often a surprise to them when they find their account canceled or access cut off due to a payment issue.

The impact of these failed payments is significant. Industry research shows subscription companies lose an average of 10% of their annual recurring revenue to involuntary churn. In fact, payment failures are now cited as a top concern for many subscription businesses, even outranking customer acquisition in some surveys. This is not just lost immediate revenue, but lost future revenue as well – when a customer churns prematurely due to a failed payment, you forfeit all the remaining months or years of subscription they would have had. It directly cuts into customer lifetime value and can cost businesses millions.

Additionally, failed payments can hurt customer relationships and brand reputation. A once-loyal customer might feel frustrated or embarrassed when their subscription lapses unexpectedly, and some may not bother to sign up again even if the issue was an accident. Simply put, failed payments are a huge but often hidden driver of churn and lost revenue.

The silver lining is that involuntary churn is largely preventable. Unlike voluntary churn (which might require improving your product or service), reducing involuntary churn is about payment optimization and smart billing practices. By targeting the root causes of failed transactions and having processes in place to recover from payment declines, you can dramatically improve your subscription retention. Below, we outline several best practices to do exactly that.

Keep Cards Updated Automatically (Use Account Updater Tools)

One of the most common causes of recurring payment failures is outdated card information: the customer’s credit card has expired or been replaced with a new number. In fact, nearly 30% of payment cards in the U.S. are reissued each year (due to expiration, loss, upgrades, etc.). If you’re billing a card that has changed, the charge will be declined unless the information is updated.

Chasing down each customer for new card details is tedious and often unsuccessful – many customers don’t notice or act on expiration reminders in time. This is where Account Updater services come in; they are a must-have for modern subscription billing.

Account updater services (offered by major card networks like Visa, Mastercard, Discover, and AMEX) automatically provide updated card information to merchants when a customer’s card number or expiration date changes. In simple terms, if a subscriber gets a new card, the updater service can supply the new card number/expiry to your billing system behind the scenes.

This ensures the next recurring charge processes seamlessly without requiring the customer to manually update their details. Implementing an account updater means expired or replaced cards no longer slip through the cracks.

The impact on churn can be substantial. Account updater tools significantly reduce payment declines caused by outdated card information, thereby reducing involuntary cancellations. According to industry data, these services automatically capture roughly 60-70% of card changes, significantly reducing failed transactions.

By preempting card-related failures, businesses can recover an estimated 2-10% of monthly revenue that would have been lost. In terms of churn, enabling account updater alone can reduce card-related failure churn by about 25-35%. Considering the minimal cost (usually a few cents per update), the ROI is extremely high – each updated card that prevents a failed payment is potentially saving you an entire customer’s subscription.

For these reasons, using an account updater service through your payment processor (many platforms, such as Stripe, Braintree, and Recurly, support it) is a best practice for recurring billing. It keeps your customers’ payment credentials up to date and takes the burden off you and the customer to resolve declines caused by outdated card information.

Implement Smart Retry Schedules for Failed Payments

Even with preventive measures, some payments will inevitably fail (e.g., a customer maxed out their card or had insufficient funds on the billing date). What happens next is critical. Many subscription businesses have a dunning process – essentially, an automated retry and notification schedule for failed payments. However, not all retry strategies are equal. To reduce churn, it’s important to use smart retry logic rather than a brute-force or ad-hoc approach.

First, recognize that not all payment declines are the same. Some are soft declines – temporary issues that might succeed if tried again later (for example, network timeouts or insufficient funds that could be resolved next payday). Others are hard declines – permanent failures that won’t succeed without the customer changing something (like a stolen card or closed account). A smart retry strategy accounts for these differences.

You don’t want to keep hammering a card if the error is unrecoverable, but you do want to persistently retry when there’s a good chance the payment will go through on a later attempt.

Timing is everything. If you retry a failed payment too soon (e.g., within minutes), you’ll likely get the same result. On the other hand, if you wait too long to retry, the customer might meanwhile notice the cancellation or even sign up with a competitor. The key is to find a balanced, data-driven retry schedule that maximizes success.

Rather than retrying at arbitrary intervals, use insights about why the payment failed and typical customer behavior. For example, if a transaction fails for “insufficient funds,” trying again in a day or two (or on the customer’s next payday) is often effective, since their balance may recover. An insufficient funds decline might justify 5-7 retry attempts spread over up to 30 days, especially timed around common pay cycles (e.g,. attempting charges on the 1st and 15th of the month).

On the other hand, a hard decline, such as “card reported stolen,” should not be retried repeatedly; instead, you should stop automatic attempts and ask the customer for a new payment method.

A common best practice is to stagger retries over several days or weeks, increasing the interval each time. For instance, you might configure retries roughly 1 day, 3 days, 7 days, and 14 days after the first failure (adjusting the pattern based on your business and the decline reason). Research has shown diminishing returns after about the 4th or 5th retry – beyond that, each additional attempt recovers very little and could even backfire.

Many companies cap their retry attempts to a reasonable number (e.g., 3-5 retries per invoice) to avoid excessive attempts that annoy banks or customers. Immediate retries can sometimes work for soft declines – for example, a momentary network glitch might succeed on a second try just seconds later – and some systems will do an instant retry once before waiting longer.

After that, it’s wise to schedule subsequent attempts at optimal times: for example, early morning (when banks begin daily processing cycles), on weekdays (when banking systems and customer support are fully active), and aligned with the customer’s known patterns (avoiding end-of-month if that’s when budgets are tight, and aligning with when they typically receive income).

Advanced billing systems or payment processors (such as Stripe’s Smart Retries or Recurly’s adaptive retry engine) use machine learning to select the optimal day/time to retry for each case, analyzing factors such as past payment behavior, decline codes, and issuer response patterns. These intelligent systems have been shown to lift recovery rates significantly – in some cases, recovering 2–4× more failed payments than a static schedule.

When implementing your retry (dunning) strategy, keep the customer experience and cost factors in mind. Every failed charge attempt incurs transaction fees and, if repeated, could trigger fraud warnings or chargebacks. The goal is to recover the payment quietly, without customer involvement, if possible, so you don’t disrupt their service. For example, many businesses will retry at least once or twice before notifying the customer to see whether the issue resolves (e.g., a soft decline clearing on a second attempt).

But if multiple attempts fail, it’s time to loop in the customer (as discussed in the next section). In summary, a smart retry schedule improves your chances of collecting revenue without alienating customers. By carefully timing retries and limiting their number, companies can avoid both unnecessary churn and the pitfalls of over-aggressive dunning (like angry customers or issuer flags).

Communicate Proactively and Kindly with Subscribers

Recovering a failed payment isn’t just a technical process; it’s also a human one. In many cases, the customer is unaware that their payment didn’t go through – at least until they suddenly lose access to the service. In fact, most customers don’t realize a billing issue occurred until they’re confronted with a cancellation or an interruption notice. That’s why proactive customer communication is vital. A simple, well-timed message can save the customer relationship before it’s too late.

Preemptive reminders: One best practice is to reach out before a failure happens when you can anticipate an issue. For example, if you know a customer’s credit card is about to expire next month, send them a friendly reminder to update their card details in advance. This can be an automated email saying, “Heads up! The card we have on file for you ends in 07/2026.

Please update your payment info to ensure uninterrupted service.” Customers appreciate the notice, and this simple nudge often prompts them to resolve the issue in advance. Similarly, some companies send a reminder about an upcoming charge a few days before each billing cycle (especially for annual plans or large payments), serving as both a courtesy and an opportunity: if the customer knows a charge is coming, they can ensure funds are available or update the card if needed.

Pre-billing notifications sent ~7-14 days before the charge can preemptively resolve 5–10% of issues that would have led to a failed payment. That’s a significant chunk of churn prevented without any revenue loss, simply by being proactive.

Post-failure outreach: When a payment does fail, timing and tone of your communication are crucial. You should alert the customer immediately – the moment a payment is declined – but do so in a helpful, non-accusatory way. For instance, an email or SMS that says, “We couldn’t process your recent payment. Please update your billing information to keep your subscription active. [Click here to update your card]. We’re here to help if you have any questions,” strikes the right balance.

It informs the customer of the issue and provides a direct, one-click path to resolve it, without using threatening language. Always include a clear call to action, such as a button or link, to update the payment method. The easier you make it for them, the more likely they are to resolve the issue promptly.

It’s also wise to reassure them that their access isn’t immediately cut (if you offer a grace period, mention that, e.g., “We’ll keep your account active for the next 7 days to give you time to update your payment.”). Many subscription businesses offer a short grace period after a failed charge, during which the customer can continue using the service while the payment issue is resolved.

This prevents a negative user experience from sudden cancellations and improves the effectiveness of your dunning emails. During this window, you might send a series of follow-ups – for example, an initial failure notice, a reminder 2-3 days later if still unpaid, and a final notice before the account is suspended. Each message should maintain a polite tone and highlight the simple steps to resolve the issue.

In all communications, keep the tone friendly and supportive. The customer likely didn’t intend for the payment to fail, so frame the situation as something that can happen to anyone and that you’re there to help. Avoid language that sounds blaming or overly urgent (“PAY NOW OR ELSE”). Instead, phrases like “please update your card to avoid interruption” or “we noticed an issue with your payment method; please visit [link] to update it” work well.

Additionally, use multiple channels to increase the likelihood the customer sees the message: send an email, consider SMS if you have consent, and use in-app or push notifications if your product allows. People have different communication preferences, so a multi-channel approach can catch their attention sooner.

Lastly, if you have customer support or account reps, empower them to reach out personally for high-value customers or long-time users who experience payment failures. A quick personal call or tailored email saying “we value you and want to ensure you don’t lose access” can turn what could have been a cancellation into a saved account – and it shows the customer you care.

By communicating swiftly, helpfully, and often, you can resolve many payment issues before they lead to churn. In many cases, a customer’s response to a simple failed-payment email (“Oh, I got a new card and forgot to update it – thanks for letting me know!”) is all it takes to retain them.

Give Customers Flexibility and Control over Billing

Another effective way to reduce payment-related churn is to give your customers greater control over their billing. The more flexibility and self-service options you provide, the fewer failures and frustrations will occur. Here are a few aspects of control and how they help:

• Easy self-service for billing info:

Make it dead simple for customers to update their payment details at any time. If a subscriber receives a new card or wants to switch their payment method, they should be able to log in to their account (or follow a secure link in an email) and update the card on file in seconds. Remove friction from this process – no one should have to contact customer support or jump through hoops to update an expired card.

Best practices include providing one-click update links in your dunning emails that take users directly to a payment update form without requiring them to log in again. The form should be mobile-friendly, require minimal information (use existing data to pre-fill as much as possible), and be secure. Use zero-friction update links and enable features such as scanning the new card with a phone camera to auto-fill the details, making updates as effortless as possible. By streamlining the payment update workflow, you increase the likelihood that customers will proactively resolve issues.

Remember, if updating a card feels like a hassle, some customers won’t do it and will let the subscription lapse. So invest in a user-friendly billing management UI – it pays off in higher retention.

• Let customers choose their billing date:

Not everyone’s personal cash flow aligns with your default billing cycle. Some subscribers might prefer their charges on a specific day (such as right after their paycheck clears) or avoid charges at the end of the month when budgets are tight. If possible, offer customers the option to select a convenient billing date (or at least provide a few date options). This flexibility can reduce the chance of declines due to insufficient funds. Research shows that when customers can choose their charge date, they can align payments to their income schedule, resulting in fewer failed transactions.

It’s a recognition that they know their finances better than you do. For instance, a customer paid on the 15th might opt to have their subscription renewed on the 16th, ensuring their account has funds. Many subscription platforms now support anniversary billing (charging every X weeks or months from the signup date) or allow moving a billing date on request. Even if you bill everyone on the same day, consider spreading out cohorts (not all on the 1st) or avoiding universally problematic dates like the 30th/31st. The key is flexibility – a little accommodation here can prevent significant involuntary churn.

• Offer multiple payment methods (and backup methods):

Don’t put all your eggs in one payment-method basket. If you only accept one type of card, you’re more vulnerable to failures. It’s wise to support multiple payment options – all major credit/debit card brands, possibly direct debit (ACH) for those who prefer bank accounts, and digital wallets or services like PayPal, Apple Pay, etc., depending on what’s popular with your customer base.

This not only attracts more customers but also gives existing subscribers alternatives when one method isn’t working. More importantly, allow (and encourage) customers to add a backup payment method to their accounts. For example, a subscriber could have two cards on file, or a card plus a PayPal account. Set your billing system to automatically attempt the secondary payment method if the primary one fails.

This way, a decline doesn’t have to mean a lost customer – the charge can still go through via the backup method with zero intervention from the user. Each additional payment method on file increases your chances of successfully collecting payment, since if one fails, another might succeed.

This is especially useful for preventing involuntary churn: a customer might not update their primary card in time, but if you seamlessly charge their backup card, their subscription continues uninterrupted (and you can notify them that you did so). It’s a win-win: you get the revenue, and the customer doesn’t experience any service disruption.

In addition to the above, consider other customer-friendly billing policies that can reduce churn. For instance, grace periods (as mentioned earlier) and the option to pause a subscription for a short time can help customers who encounter a temporary snag. If someone’s finances are tight this month, allowing them to pause for a month rather than cancel outright can help prevent churn. While pausing is more of a voluntary churn tactic, it overlaps with billing flexibility – you’re giving the customer control to manage payments on their terms, which ultimately protects your recurring revenue.

Overall, by giving subscribers more control over how and when they pay, you remove many of the common friction points that lead to failed payments. An empowered customer who can easily update their card, select their billing date, or rely on a backup payment method is far less likely to churn involuntarily than one with no flexibility. These measures contribute to a smoother billing experience, leading to more successful charges and higher retention.

Conclusion

Involuntary churn from failed payments is a real challenge for subscription businesses, but it’s also highly preventable. To reduce churn in 2026, make recurring billing more resilient by using account updater services to refresh expired or replaced cards, and set up smart retry logic that recovers soft declines with well-timed, limited attempts. Pair that with proactive, friendly outreach, expiry reminders, and failed-payment notices that make it easy for customers to fix the issue, and give subscribers control through self-serve billing updates, flexible billing dates, and backup payment options.

Companies that adopt these best practices often see higher payment success rates, lower churn, and better customer satisfaction. Since retaining existing subscribers is far cheaper than acquiring new ones, every recovered payment protects both immediate revenue and long-term customer value. In 2026 and beyond, teams that master recurring billing and dunning will gain a clear advantage by building stronger lifetime value, more predictable revenue, and healthier growth, without losing customers who want to stay.

Frequently Asked Questions

What is involuntary churn in subscriptions?

Involuntary (or accidental) churn happens when a customer wants to stay but gets canceled because a recurring payment fails. It’s typically caused by card expiry, insufficient funds, or bank declines.

What are the most common reasons recurring payments fail?

The big ones are expired or replaced cards, insufficient funds, fraud filters triggering false declines, and temporary processing/network issues. Most of these are fixable with better billing workflows.

How does an account updater help reduce failed payments?

Account updater services automatically refresh stored card details when a customer’s card is reissued or expires. This prevents avoidable declines and keeps renewals running without customer action.

What’s a “smart” retry (dunning) strategy?

It means retrying failed payments based on decline type and timing, spacing attempts out and stopping early for hard declines. This improves recovery rates without annoying customers or triggering issuer flags.

How should businesses communicate when a payment fails?

Notify customers quickly, in a friendly tone, with a clear, one-click way to update their payment details. A short grace period, along with reminders via email/SMS/in-app, can prevent cancellations and frustration.