Subscription billing is at the heart of any business that collects payments regularly. Payment providers such as Stripe, Braintree, and GoCardless have existed for years, but services that integrate them all into a unified experience are becoming increasingly popular. In this article, I will outline the reasons why subscription billing services are gaining popularity and how they could help your business thrive.
When accepting payments on your website or application, you need to abide by The Payment Card Industry Data Security Standard (PCI DSS) rules to protect cardholder data. Subscription billing services will have secure APIs which will allow you to handle card payments securely. Alternatively, services such as Chargebee offer an option where users can be taken to a branded PCI compliant page to enter their payment information and then be redirected back to your application or website.
If your company is wanting to grow its customer base to more countries, supporting a variety of payment gateways is a good way to provide flexibility to your customers, allowing them to pay with whichever gateway works best for them. Certain types of payment methods are better from a business perspective. For example, your European customers could use direct debit via GoCardless so rather than entering their card details, they would enter their bank details instead. This is advantageous over collecting card details since cards can be canceled and expire over a few years, meaning the customer will have to go through a card renewal flow the next time a payment is taken. Since direct debits are taken directly from the customer’s bank account, it does not matter if a customer cancels their card.
One of the problems with card payments is the rate of failure. In an article by Spreedly, they claim that 25% of cards in the European Union are declined during processing. This could mean a quarter of your European user base may be delayed when transacting with your website or application. What can be done to prevent this? Luckily, a lot of payment gateways have automated dunning features built-in. If one of your users’ cards has expired, the system will automatically notify them telling them their card has failed and asking them to update their details. This means you can spend less time chasing customers for their updated card information and also decreases the number of late payments from customers.
Having an overview of how and where money is coming into your business is vital, especially when running a company that relies on a monthly subscription. A lot of subscription billing services give you analytics dashboards, a place where you can identify trends in your company. For example, an MMR (monthly recurring revenue) report should give you a good idea as to how your product is performing and whether the revenue your company is bringing is increasing month by month. Churn is also a key metric to see how many customers are canceling their subscriptions and the value of those customers leaving, which will impact your MMR.
Tax regulations in the digital economy are constantly evolving, with different countries and governments regularly creating new regulations around taxes for online businesses. One of the most notable changes in tax law for the digital economy was VAT MOSS (VAT Mini One Stop Shop), which came into effect for EU member states on 1 January 2015. VAT MOSS made it so that when a company buys a product or service online, they are invoiced using the local rate of tax. For example:
Ben sells .pdf books online. He has customers across the world. Ella buys one of Ben’s books in France. Ben must charge Ella French VAT on that sale, at the French rate of 20%.
If you were collecting payments in-house you may have to re-implement tax logic in your website or app each time tax regulations change, which would be a costly task for your business.
Solosoft has a vast amount of experience integrating subscription billing software into applications on behalf of our clients. Please contact us to have a chat about your requirements.