How to choose the best subscription payment service

Things to look for when choosing the best subscription payment service

In today's market, the recurring revenue or subscription business model is unlike any other — and businesses of all sizes across various industries are taking notice. Considering that nearly 70% of Americans have multiple subscriptions, with 28% stating they have at least four, there is an immense opportunity for companies that adopt a subscription-based model.

It's easy to get overwhelmed if you're on the hunt for the best subscription payment and management platforms. With so many options, how do you know which is best? When making your decision, you must carefully examine each platform's core benefits and features.

This article dives deep into some of the most commonly asked questions, ranging from what's most important when choosing a payment platform to how you go about choosing one.

What are subscription payment platforms?

Whether you sell a monthly box of high-end fitness products, send out a weekly meal kit box, or operate a streaming media company, you know that scheduled payments or "recurring billing" will be the lifeline of your business. You also see that subscription model businesses continue to grow across varying industries, with many of them following a unique payment structure.

To benefit from greater automation and collect recurring revenue to maximize profits, you will need to invest in subscription management software. These platforms handle all aspects of electronic payments, including security, processing, and deposits. The top platforms will also help you better manage customer accounts by offering features such as recurring billing.

Understanding the different types of subscription payment services

To choose the best system, you first need to understand the different systems available.

The billing and payment process begins with trusted payment gateways. These companies make it easy for you to accept payments online, allowing your customers to use any card.

Next is merchant accounts. These are the bank accounts that allow you to accept payments. Once systems process the payments and subtract any fees, they send the rest to your merchant account.

Subscription management or recurring billing services enable you to create plans, pricing, do all your recurring billing, dunning, create greater efficiency and a better overall customer experience.

How to choose a subscription payment service

One of the most critical considerations is how a potential subscription payment service integrates with your current tech stack.

Start by considering:

  • The productivity of your sales team — If your sales team has to create new accounts manually, this is precious time wasted. They could be utilizing this time to build meaningful relationships with customers — the type of customers who convert into recurring revenue. The payment service you choose should automate this process to create an account and record it in your CRM.

  • Syncing with your accounting system — When choosing between payment systems, opt for one that makes accounting and record-keeping seamless and straightforward. Your data is incredibly valuable; remember that.

  • Your customers' preferred payment methods — Customers often have preferred ways to pay, so accommodate them. The top subscription payment services will offer several options, ranging from PayPal to Venmo. Always consider your current needs and what you may need in the future, especially if you plan on expanding into different geographical areas.

Another critical area to consider is gateway routing. The best gateway will depend on the transaction type, which is why you want to select a flexible platform when routing payments. The decision you make can affect processing costs, acceptance rates, the reconciliation process, and overall risk.

During this stage of the decision-making process, consider geolocation and product type. For example, do you conduct business in both Europe and the United States? If so, it is beneficial to route U.S.-based business through a U.S.-based gateway and to route business in Europe through an EU-based gateway. This could translate to lower transaction fees and higher acceptance rates, both of which affect your bottom line.

Other things to consider:

  • Does the platform have experience in your industry? Whether you are operating a healthcare, tech, or education business, partner with a subscription billing platform that has worked with companies in your vertical. Does the company understand your greatest challenges and obstacles? Ask for case studies or detailed reports that help you better understand how you stack up with subscription performance.

  • How much revenue does the platform recover, and how will the platform help you reduce involuntary churn? Some features you need to remain mindful of include:

  • The ability to update accounts based on changing card details

  • The ability to push expiration dates forward because the platform vaults cards

  • A data-driven approach to determine when and how is best to retry transactions

  • Dunning support

  • Can the platform support global expansion? While you may operate in the United States or a few other countries at present, that may change in the future. The goal is to choose the best subscription payment service that can expand with you. The last thing you want is to have to switch platforms and run into time-consuming and costly situations. Recurly supports 140 currencies and 18 languages.

  • Once you expand, consider taxes on a global scale. You want the calculation process to be as accurate and easy as possible.

  • Consider privacy, security, and compliance when operating internationally. Find a vendor that is up to date with the latest regulations.

Choose a payment service that works for your subscription business

The best online subscription payment service will be the one that is tailor-made for the needs of your company.

In that sense, the payment service you choose will depend on your unique product and strategy. The key is to focus on the subscription billing models offered.

For example:

  • Do you offer a product or service for a single price and then charge on a recurring basis? If so, a fixed recurring model may be your best bet.

  • If you alter prices based on the quantity purchased, a quantity-based model will be more fitting for you.

  • Do you only want to charge customers for what they use? If so, a usage-based model could be the solution you seek.

Recommended reading: Quantity-Based Pricing vs. Usage-Based Billing: What’s the Difference?

If you operate a large company with complex needs, you can implement several pricing models. Plus, many of the top vendors offer custom pricing solutions, so be sure to ask how they can accommodate your needs.

You may also want to choose a service that lets you offer your customers incentives, such as coupon codes and free trials. Most platforms will help you facilitate this process. However, the best billing platforms will offer enhanced options, focusing on greater flexibility. Again, this gives you the freedom to run promotions that best suit your business objectives — for example, the ability to create bulk unique coupons and then limit total redemptions.

In addition, make sure your customers can pause and postpone their subscription. This will help reduce voluntary churn. Whether a customer is low on funds one month or simply wants to take a break, pausing their subscription instead of canceling increases the odds that they'll be back. Data shows that one-third of paused subscriptions are later reactivated.

Decision time

To choose the best payment service for subscription billing, you need to take your time. Your decision could make or break your success.

Carefully consider all the variables discussed above, focusing on what your company needs now and what you'll need moving into the future.

  • How will the billing platform you choose impact your bottom line?

  • Have you discussed options with your stakeholders? What are their opinions?

  • What experience does the platform of your choice have in terms of your industry/niche?

Getting answers to these questions about a subscription service payment system can help you pick the best fit.

Recommended reading: Your Business-Critical Checklist. What to Consider Before Building Your Own Subscription Management and Billing Platform

FAQs about subscription payment services

How does subscription billing differ from regular billing?

Businesses that sell products and services online will have billing and invoicing needs. The software you use also depends on the size of your business. For example, you may use Quickbooks if you're a medium-sized business, while an enterprise will typically use something like Sage or Quickbooks Enterprise, as these options can handle their complex needs.

However, if you offer subscriptions, you will need to invest in billing software equipped to handle this business model. Note that this type of billing requires a lot of back-end work. In that sense, subscription billing is often more complicated and requires greater attention to detail when dealing with churn mitigation and plan configuration.

What industries benefit from subscription billing software?

Subscriptions now span across many industries, including:

  • Healthcare

  • Education

  • Consumer goods

  • Software and SaaS

  • Travel and entertainment

  • Energy and utilities

  • Business and professional services

  • Digital media

  • Government and non-profit

What are some of the core benefits associated with subscription billing?

Companies that offer subscriptions benefit in several ways — and so do their customers.

Some of these benefits include:

  • Minimized risk — Customers only have to input their personal data and billing information once before it is stored securely. This helps lessen the risk for fraud and/or error.

  • Increased value — When you offer a variety of plans and pricing tiers, you can diversify your options. This flexibility provides your customers with an opportunity to select exactly what they need, when they need it. They're able to pay for their subscription on a recurring basis, upgrading or downgrading it when they see fit.

  • Greater predictability — A subscription service payment processor helps you better predict revenue. By making budgeting much simpler, the system makes life easier for both you and your subscribers. There are no surprises in terms of the price paid (and received) each month.

Greater scalability — Recurring billing will allow you to develop better offerings and scale more easily.

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