The Advantages of Recurring Billing for Businesses

The Advantages of Recurring Billing for Businesses

Recurring billing technology is playing a key role in supporting subscription-based businesses and redefining how businesses handle recurring customer payment collection. In a world where customers expect convenience and value, subscription-based businesses are increasingly turning to online payment technology to accompany rising demands. As companies and service providers gain the ability to offer greater convenience and options like recurring billing, subscriptions, and auto-pay features, these businesses are primed for greater client retention and value.

With its proven record of reducing missed payments, improving business efficiency, and boosting customer convenience and loyalty, it’s no surprise why subscription models are becoming so desirable among businesses and consumers. In this blog post, we’ll explore the benefits of the subscription model and the important role that recurring billing software and integrated payments play when it comes to automating subscription services.

The Growth of Subscription Services

Whether it’s for groceries, gym memberships, or entertainment streaming services, recurring billing software is the blueprint for many subscription businesses. This technology lets you charge your customers each month for the same price, without requiring them to re-enter their payment information. During each billing cycle, the customer receives a notification electronically and is automatically charged via credit card, ACH, wire, or other various payment options based on the settings you specify. Customers enjoy the convenience of never having to worry about forgetting or sending a payment.

The subscription model has existed for decades, but the widespread adoption of cloud-based software combined with online retail has brought it to the forefront in recent years. Increasingly, companies and businesses are migrating to an on-demand economy in which customers can purchase their products and services on an as-needed basis or opt-in for automatic debits to their credit cards. 

One of the biggest drivers behind the growth of the subscription services model is the popularity of software-as-a-service, or SaaS, as commonly known in the software industry. SaaS refers to a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted in the cloud. Essentially, the software can be accessed from a web browser and has the ability to run on a desktop computer, tablet, or smartphone device. Present in a myriad of industries, you may be familiar with popular SaaS companies such as Microsoft, Amazon, Adobe, Shopify, Uber, and Grubhub.

According to recent data, it’s expected this year that 53% of all software revenue will be generated from a subscription model. SaaS companies often use subscription services to charge their customers a monthly subscription fee for access to their software. 

However, it isn’t just software moving to subscriptions – the subscription economy is growing at a rapid pace throughout multiple industries. According to recent data, in 2021, 78% of adults globally currently had a subscription service. Most people are aware of common industries utilizing subscriptions for various products and services like groceries, gym memberships, beauty products, and more — but, subscriptions are not limited to these goods and services only. Over the past few years, subscription services have become a premier model for driving sales and retaining customer loyalty in a wide range of industries. Today, subscription services have made their way across sectors you might not expect – such as medical services, car services, travel programs, video games, and home improvement.

As more consumers join the subscription economy, businesses must strive to keep pace with their client’s changing needs. As of November 2021, the average subscriber has five retail subscriptions — twice as many as in the first quarter of 2021. As a result of the pandemic, subscription services have gained popularity in many markets as consumers shift away from traditional in-store shopping and gravitate towards purchasing products online, where services and products can be delivered digitally or right at your doorstep. The UBS financial services firm predicts that the subscription economy will grow to $1.5 trillion by 2025, more than double the $650 billion it’s estimated to be worth now. With subscription services becoming a mainstay across a wide range of verticals, it’s time to consider how your business can harness the power of the subscription services model.

How Subscription Services Increase Customer Retention and Decrease Churn

As a subscription services provider, it is essential to maintain customer retention by reducing customer churn. Churn, commonly referred to as customer or subscriber churn, pertains to the rate at which a business loses its subscribers during a given period of time. Some common causes of churn are due to dissatisfaction with the product or service, or it could be caused by preventable factors such as expired credit cards, changes in bank information, or insufficient funds. To prevent losing out on current customers, it is important to use automated tools that identify when a cancellation may occur due to payment issues so that you can take appropriate measures proactively. By identifying the reasons why customers have churned, and by isolating common contributing factors, you can address those issues early on and keep customers satisfied and engaged over the long term. A reliable recurring billing software platform consistently reduces churn by automating payments and using card updating tools to keep track of customer payment information.

The Benefits of Integrated Payments for Recurring Billing

There are a number of recurring billing software programs on the market for managing subscription services. However, their payment feature set is often basic and lacks feature customization. In order to leverage the most out of subscription services, it is essential for merchants to integrate their subscription software with a robust payment gateway that offers merchants greater flexibility while simplifying ongoing payments. From monthly subscriptions to repeat orders, a payment integration allows merchants to integrate custom billing within their subscription-based platform. The end result is a seamless automated billing experience for customers and a simplified management system for merchants. The advantages of payment gateway integrations are numerous:

  • Support for Multiple Payment Methods

Giving customers more options of payment methods helps reduce churn and increase revenue over time. If you’re running a subscription business, you’ll need to find a payment solution that supports various payment methods. Credit cards and auto-debit ACH payments are the most common options, but if you want to serve more customers, it might be in your best interest to support a larger scope of payment methods. Merchants can maintain a competitive advantage in the market by offering their customers the most payment options available. While credit and debit cards are standard, let your customers pay with mobile wallets like Apple Pay and Google Pay, FSA/HSA cards, ACH, EBT cards, and more.

  • Reduced Card Declines

Every year, millions of customers receive a new credit card. A payment solution equipped with automated card updating tools can eliminate the hassle of declined transactions and reduce passive churn. These tools detect stored cards that are about to expire and automatically retrieve the updated card information from the issuing bank. Thus, your customers can always have their most current payment information updated in the system when it comes time for them to make a purchase from your business. This not only improves declining transaction rates but saves you time by not having to track down customers and request they re-enter their updated payment information. An interruption of a product or service due to an expired credit card can lead users to cancel their subscription or membership.

  • Advanced Invoicing Tools

Online payment forms are a great tool for collecting recurring payments. These payment forms can be designed and branded by the merchant, and then embedded within an existing webpage or shared via URL. There are a number of payment form solutions on the market, such as Cardknox PaymentSITE, that can be customized by merchants and shared with customers so they can pay one-time invoices as well as enroll in auto-pay from the convenience of their desktop or mobile devices. These forms are the ideal billing solution for service providers, non-profits, and businesses looking to automate their billing processes, streamline invoicing, and efficiently manage their bookkeeping.

  • Support for Convenience and Service Fees

Convenience and service fees are charged by organizations to customers in order to offset processing fees. For merchants that charge these fees, it is important to look for a payment solution provider that makes it easy to do so. Note that convenience and service fees are governed by rules and regulations, and service fees, in particular, can only be charged by those in the government and education sector.

  • Secure Storage of Payment Data

Businesses that process recurring payments online will be sure to benefit from a payment integration equipped with tokenization technology. Tokenization replaces sensitive customer data, such as credit card information, with a unique token that only the payment processing system can decipher. This allows for secure storage of payment information on file, and it also vastly simplifies PCI compliance.

Level Up Your Subscription Services With Integrated Payments

With more and more companies embracing a subscription-based business model, payment integrations are proving to be a key differentiator when it comes to optimizing subscription payments. There are a lot of untapped niche markets out there that stand to benefit from the subscription concept. Subscription commerce has extended across many business models and sectors, as modern consumers seek convenience and an improved shopping experience. As subscription-based businesses are on the rise, your choice of an integrated payment system can directly impact the success of your company. If you’re looking to upgrade your subscription business or implement recurring billing for your products and services, it is essential to work with a payment processor that supports recurring payments and can be tailored to your business’s needs. To learn more about Cardknox’s recurring payment solutions, contact us today to help you get started.