For years, e-commerce professionals have been trained to think in funnels.
From the moment a visitor lands on a website until the payment is confirmed, every step is measured as a drop-off or a conversion. The funnel metaphor is so deeply ingrained in digital marketing that it has also shaped how many professionals think about payments. But here is the problem: Payment is a cycle, not a funnel
This distinction matters. Seeing payment as just the final step of a funnel blinds us to its ongoing impact. It is not only a question of success rates on transactions, but also about the customer trust, issuer behaviour, and the long-term health of the business.
The obsessive love for Funnels…
The funnel is one of the most powerful ideas in e-commerce. It provides managers with a clear framework for monitoring performance and improving efficiency.
The logic is simple:
- Exploration phase : Visitors land on the website to compare offers, browse products, or get a sense of what’s available.
- Consideration phase : A subset of visitors turns into prospects because what they see matches their criteria. The goal is to keep them engaged, reduce bounce rates, and encourage them to move closer to purchase.
- Intent phase : Prospects add items to the cart. They may continue shopping, but eventually they need to log in or create an account. This is where they signal clear buying intent.
- Checkout phase : The final stage: items are in the cart, the customer is logged in, delivery and invoicing addresses are provided, and payment details must be entered.
E-commerce managers live by conversion rates: the percentages of users who successfully progress from one stage to the next. Funnel health is monitored with dashboards, KPIs, and A/B testing. When conversions drop, teams react quickly: improve the UX, add promotions, optimise forms.
Fraud and refunds also appear in this picture, but mainly as “contaminants.” They don’t directly alter the funnel structure, but they increase costs and distort the quality of conversions. Too many fraudulent transactions or excessive refunds mean that money was wasted on acquiring the wrong customers.
In other words, the funnel works best when what goes in (traffic) is filtered step by step until it produces clean, paying customers at the end. It is like refining to obtain the best of the best.
…And why we can’t stop thinking of payments like a funnel
When you work in e-commerce, you want to expand this funnel framework to everything related to payments. After all, isn’t the acceptance rate just another conversion metric?
On the surface, it looks the same:
- Either the transaction is accepted (checked out) or it is rejected (drop-off).
- Acceptance rate becomes the final percentage in the funnel.
This is where many professionals make a crucial mistake. They treat payment as the last step of the funnel —a binary gate to measure efficiency. But that framing hides more than it reveals.
Because unlike the funnel, payment is a cycle not a funnel
Every transaction triggers a cycle that extends far beyond the completion of a checkout:
- Authentication: Was the customer properly authenticated? Did the issuer apply 3DS? Did friction at this step cause abandonment?
- Clearing and settlement: Did the acquirer and issuer reconcile correctly? Were there delays or mismatches that affect merchant cash flow?
- Chargebacks: Did the customer dispute the transaction weeks later? How did issuers handle it? What thresholds are being monitored?
- Refunds: Was the merchant able to process refunds efficiently? How do refund ratios affect acquirer or issuer risk models?
- Future acceptance: How do all these events feed back into the risk algorithms that determine whether the next transaction will be accepted?
This is why the acceptance rate cannot be treated as a static funnel metric. It is a dynamic variable that depends on what has already happened in the cycle.
Ok, time to reconsider your strategy
Treating acceptance rate as a funnel metric is misleading. It’s not a static percentage — it’s a signal of how well the cycle is functioning.
Seen in this light, the right questions change:
- Not just “Did this transaction go through?”
👉 But “How does this transaction affect the next one?” - Not just “What’s the drop-off rate at checkout?”
👉 But “What’s our long-term cost per transaction once refunds and chargebacks are included?” - Not just “How do we optimize today’s acceptance?”
👉 But “How do we keep issuers and acquirers confident in us tomorrow?”
This shift is essential. It’s what separates a one-off conversion from a resilient payment cycle. The subscription business is an eye-opening example to shift your expectations when it comes to payments, and how it should align with an e-commerce funnel.
A Concrete Example: Subscription Businesses
Subscription services, which are based on paying fees regularly to enjoy a service or a product, are famous for having well-optimised funnels.
- Attraction is easy to measure: free trials, discounts, and smooth onboarding push visitors down the funnel.
- Conversion looks strong: the first payment is accepted, and dashboards record a “win.”
- Marketing is satisfied: acquisition costs can be justified because the funnel produced paying customers.
But what happens after?
The Renewal Trap
One or two months later, things start breaking:
- Cards expire or are replaced.
- Customers reach credit limits or don’t have funds at the moment of renewal.
- Issuers apply stricter risk rules after too many chargebacks in the sector.
Suddenly, customers who wanted to stay subscribed are rejected.
From the funnel’s perspective, they already converted.
From the payment cycle’s perspective, the relationship collapsed.
Involuntary Churn: The Hidden Enemy
This silent attrition is called involuntary churn. The customers lost because of payment failures, not because they wanted to leave.
And the numbers are staggering:
- Zuora in their Eliminate Revenue Leakage and Passive Churn (PDF) states that passive (involuntary) churn “typically accounts for at least 20 %-40 % of all customer churn.”
- Recurly in their Subscriber Retention Benchmarks (link), reports that “subscription businesses risk losing 7.2 % of subscribers each month due to involuntary churn (payment failures).
So when marketing teams report a “healthy funnel,” they’re often celebrating wins that payment reality erases a few weeks later.
Beyond Vanity success Metrics
This is more than just a reporting nuance :
- Revenue impact – Losing up to half of churn to failed payments means millions in lost ARR for mid-size SaaS companies.
- Customer frustration – Many customers don’t even realize why their subscription stopped. They didn’t choose to leave; they were rejected.
- Issuer perception – High levels of failed renewals and chargebacks can poison relationships with issuers, who may downgrade acceptance rates across the board.
In short: a funnel says, “We won a customer.”, The payment cycle says the contrary.
Payments as a Continuity and Excellence in Service
Funnels are about acquisition. They measure how efficiently a business can turn visitors into customers.
But because payment is a cycle not a funnel, the real challenge is not acquisition, it’s resilience and the quality of service. Each transaction doesn’t just close a sale; it sets the conditions for the next one.
E-commerce teams who continue to see payments as a funnel step will keep filling dashboards with temporary wins.
Those who see payments as a cycle will build systems that survive renewals, withstand chargebacks, and keep issuers confident.
And in a world where customer lifetime value matters more than one-off conversions, resilience is the metric that really counts. This shift would radically change how the payments industry builds and sells its products: not by chasing one success metric, but by proving the quality of the service as a whole.
If you liked this strategic take on Payments, Vassilina, in my podcast also explained how rethinking governance around payment is key. Click here to access episode
