Replacement is a function that automatically updates information for expired credit cards.

If an e-commerce site doesn't support replacement, customers will usually need to enter their new card details to make a purchase. However, if an e-commerce site supports replacement, the site will update the card information automatically, so customers will not have to re-register card information on every shopping site.

This article explains the basics about the credit card replacement function.

What’s in this article?

• What is the replacement function?
  
• The benefits of replacement
  
• Preventing unpaid or uncollected amounts from being invoiced
  

What is the replacement function?

Businesses use the term “replacement” for numerous purposes, including bookkeeping, accounting, and real estate. The meaning of “replacement” differs depending on how an entity uses it, but most businesses would typically consider replacement as a method of updating information, similar to the “replacement method” or “replacement system” used in accounting.

Credit card replacement is a processing function that helps businesses manage expired credit cards. Typically, for credit cards whose systems are connected between the payment processing company used by the business and the credit card issuer, the replacement function automatically updates the card information to the latest version after confirming the validity of the card with the issuer.

By using the replacement function provided by an agency, a business can automatically update credit card information to the latest version without having to ask the customer to re-register their new card. This allows the business to continue charging without any problems with sales, such as payments cancelled without notice.

Replacement is usually performed for customers who will be charged or who are receiving a service and not for customers who have cancelled their e-commerce site or subscription service.

The benefits of replacement

Using the replacement function will lead to an improved payment experience for customers and increased convenience for businesses.

Advantages for business owners

For operators of e-commerce sites, if payment errors occur because of expired customer credit card information, there is a risk those operators will be unable to collect the payment and their profits will decrease.

However, using the replacement function allows customers to immediately make payments based on updated card information, thus preventing missed or lost payments and allowing businesses to continue providing services and avoiding a negative impact on revenue.

This also avoids businesses needing to contact customers to update their card information and managing that information.

The role of replacement in subscription services

Replacement plays a major role, especially when customers make ongoing payments, such as subscription services for online shops and other regular deliveries.

For example, when a customer uses auto-payment—such as for a subscription service in which they sign up to get products delivered monthly or for streaming content—if the customer’s credit card expires or if they had to update their card information because of theft or loss, a payment error can occur. In these cases, if a business has the replacement function, it will update the card information, including the card number, so there will be no payment interruption and services can continue.

Customer benefits

As with the benefits for the business, if customers are able to pay without any problems, they can continue to use the subscription service uninterrupted.

Another major benefit is that customers don't have to re-register their credit card details.

Preventing unpaid or uncollected amounts from being invoiced

Without the replacement function, e-commerce site operators and other business owners usually have to continue charging customers whose credit cards have expired. However, if businesses use the replacement function provided by payment service providers, they can reduce the admin involved relating to payments for customers whose credit cards have expired.

Businesses can also incorporate various sales collection functions and countermeasures as well as automatic notification functions for expired cards and retry functions for payments.

The replacement function, which maintains the continuity of payments, improves the convenience of payment for customers and collection of credit card payments and the operation of e-commerce sites for businesses. The replacement function will continue to evolve, with a focus on improving security and simplifying operations and will be available for a wider range of business applications.

Stripe Payments handles a wide range of payment-related functions and services, including payment acceptance, information processing, and revenue management, and it meets all payment needs on one platform. In addition to the replacement function, Stripe also uses a tokenisation system for payment information using network tokens, so payments can go through successfully regardless of whether the customer has updated their payment information.