Within a very recent past there has been a time where consumers possessed a sort of unsavory perception of being involved in a recurring billing situation. They viewed it as somehow getting ”sucked in”. Like that protein powder that keeps showing up even though you haven’t even used the last one you got!
But times are changing and quickly! Consumers are leaning more and more towards what is being dubbed a “subscription society”. What with subscriptions for everything from razors and toothbrushes to groceries and pre-planned meals, there is almost nothing you can’t subscribe to these days. And this so called “subscription economy” is growing more and more each year, to the tune of about 200% a year.
There are many types of products where monthly recurring billing is necessary, not only necessary but appropriate. Today, opportunities for ongoing or recurring billing subscription products go way beyond one’s monthly product subscriptions — retainer fees, SaaS, gym memberships, Amazon Prime membership, streaming video, even the landscapers who come tend to your lawn each month, the list goes on…
Memberships and recurring billing benefit the merchant and consumer alike.
Nowadays, the subscription model fits with the needs of the consumer. The attitudes of consumers is changing as Millennials and Gen Z begin to influence the marketplace. It is not so much that they want to own and collect items anymore, they want continuous access. Subscription services allow them the ability to simplify their life a bit. They are able to enjoy the convenience of having exactly what they need when they need without having to remember to shop or make a trip to the store, as well as indulge themselves without much effort, and it offers piece of mind where busy consumers are already overwhelmed with business decisions and obligations. Now, instead of that razor being just another item on the grocery list, it feels like a present that just showed up on the doorstep! All shiny and new. And your legs always look sexy!
For businesses, the benefits of recurring billing customers are many. Not only does it help to increase repeat customer base, but having a clear idea of how many customers you will have each month allows a business to better calculate future cash flow. Recurring billing also all but eliminates late payments further helping business owners to better manage that cash flow.
There is a certain sense of financial security and piece of mind that comes with the knowledge and certainty of an almost guaranteed income. That ability to forecast future income can help business owners solidify plans for growth and expansion too. When one can show guaranteed future income it makes the business much more valuable to a lender, potential investor or a potential acquirer.
Now that you know you want to offer a subscription, how should you set up the recurring billing?
There are many choices when deciding to set up recurring billing for your customers. Making sure that the subscription plan and recurring billing are set up properly is almost more important than offering a subscription model in the first place. Will you go with the services offered by your current merchant service provider or use a third party recurring billing service or app provider that will need to integrate with your current processor?
Fusebill and Chargify are examples of third party apps that allow a business to accept recurring payments by integrating with your current processor. When using a third party to gain access to recurring billing remember that some may require additional charges on top of the processing fees you pay with your merchant service provider such as a per transaction fee or even a percentage of the volume you are processing. For this reason, it may be more cost effective to partner with a processor or merchant service provider who offers recurring billing as part of their payment processing services
If you are just setting up your business or are looking to add a subscription service to an existing business model one major thing to consider is your data portability. It is extremely important to consider working with a processor that offers data portability. As your business grows and changes, the current situation you are using for your billing may no longer work best for your business tempting a new solution. But how do you get all of that customer information and card payment data over to the new solution without having to trouble each and every one of your customers for their information again? Data portability. And you will be pulling your hair out if you started with a solution that didn’t allow data portability or you didn’t consider a time when you would need to be able to do it.
Businesses who are involved with monthly subscription are not all “one size fits all”. Each have their own situation and level of needs depending on the size of the company and the diversity of product. Some simply need to be able to bill customers each month for the same amount, others need multiple payment gateways or require customized integration. Some business models will benefit from the ability to update plan changes and prorate payments or update customer credit cards automatically that have expired or have been reissued.
The right type of recurring payments provider will vary and can be determined based on business needs.
While most business needs will indeed be individual, Automatic Card Updating is a feature that can benefit any merchant. With Automatic Updating the provider works directly with card issuing banks to make sure the new information for the card is updated automatically, when needed. This not only allows for continuous service for the customer but also decreases the incidence of card declines due to expired card information. Once a card has expired it can often take a customer months to go in and re-enter new card information in order to keep a subscription going, if they even do it at all. This can often give a customer an excuse to discontinue service or look for another product. Payment Updating functionality can cost additional money for the merchant though. It is important to work with a processor who has options for different types of businesses and specializes in recurring billing. Many processors will include the ability to process subscriptions right into their merchant account pricing while others will treat it as a special service and charge substantial fees to get the feature set up as well as additional fees for each transaction.
Free trial offerings prior to an ongoing subscription are a whole other ball game. Many acquiring banks (the merchant account provider) view free trial programs as “high risk”, which means these businesses have a few more things to think about, and a few more hoops to jump through, when opening a merchant account and getting set up for their recurring billing. There are new rules that card brands such as MasterCard adopted earlier this year for communicating with the consumer, notifying the consumer and verbiage merchants must use on the website. For a deeper dive into the new free trial regulations read “MC’s Free Trial Policy A Hassle For eCommerce Merchants”. These merchants will also find themselves paying higher processing rates than subscription companies who do not offer a free trial.
How will declines be handled?
If a recurring payment is declined what protocols are set in place to follow up? Will it notify you as well as the customer and offer an alternative way to complete the payment, or possibly retry at a later time?
Does the recurring billing service integrate or communicate with your current accounting software or apps? Accounting and reconciliation are just part of a successful business model and you want to make sure that you are not adding extra work in order to transfer data needed to complete the task.
As you can see, there are a few important things to consider when choosing a recurring billing service or processor. At Bankcard Brokers we are experienced in the intricacies of all forms of eCommerce, card not present, payment processing. In addition to recurring billing, features such as suspicious transaction screening, electronic invoicing, tokenized customer vaults and Level 111 processing with extended transaction data allow merchants to process ongoing payments with confidence.
For the most competitive rates built on transparency, credibility and our dedication to exceed client’s expectations in order to create a successful, long term business relationship call Bankcard Brokers today and experience the “Bankcard Brokers Difference!”