Examples abound of businesses large and small moving to a subscription model. From airlines and law firms to business models like Over the Top (OTT) and the Internet of Things (IoT), the subscription business industry is decidedly booming. In addition to a subscription billing and management platform, subscription businesses also need a payment gateway to process their recurring payments—that critical link in the chain that delivers revenue to the business.
Knowing the factors that are most important to your business and knowing how a gateway can meet those requirements will help you choose well and set you up for success, both in the present and as your subscription business grows and evolves.
Depending on your business, you may benefit now or in the future from using multiple gateways. Having a second gateway can be used as a failover gateway if your primary gateway experiences an outage. A second gateway may also offer other benefits such as reduced rates for processing certain types of transactions, for example.
Here are some of the major criteria subscription businesses need to consider when choosing a gateway:
Some gateways only support transactions in certain countries or transactions in certain currencies, limiting e-commerce opportunities. Be sure to choose a gateway that supports the countries and currencies where you expect to do business.
Global businesses in particular may want to consider using multiple gateways which allows them to route transactions based on their geo-location. Having a second gateway also lets you conduct A/B split tests to determine which has higher acceptance rates based on key criteria relevant to your business.
Not all gateways are created equally. Some of the things you should inquire about when considering a gateway are:
If your payment gateway has an outage, it can’t process transactions and you may lose customers. You should have a clear understanding of the gateway’s system reliability, SLAs, and how well they’re equipped and prepared to address service interruptions so that they can resume processing payments as quickly as possible.
Price is obviously a consideration in any business relationship, balanced by quality of service. Fees are another important consideration in picking the right gateway. Different gateways will have different fee structures which can include monthly fees, fixed fees per transaction, variable fees based on the transaction amount, and extra fees for things like chargebacks, international payments and currency conversions.
Whether you’re considering operating with one or multiple gateways, you should get a quote from several gateways to determine estimated costs based on the gateway’s fees relative to your business.
In the event of a change in requirements, how easy is it to switch to a different gateway? Business requirements, gateway policies, the payment processing ecosystem, and even your customers’ preferences are all subject to change. In the event your gateway can’t keep up with your business needs, are you able to switch providers without impacting your ability to bill and collect revenues?
Any payment gateway that a subscription business chooses will need to be integrated with their checkout pages and billing system. There are a variety of different technologies that support this integration. You should make sure that the integration technology you prefer is one that the payment gateway you’re considering can support.
There are three popular options:
The world of payments is fast-moving, particularly recently, with new payment methods continually coming to the fore. When selecting a payment gateway, you should consider if the gateway supports all the payment methods you need.
Error fidelity refers to how detailed and how precise transaction decline messages are. There are over 100 different and very specific reasons for why a transaction might be declined. But some payment gateways don’t provide this level of detail and instead only specify a dozen or so error types.
Granular error fidelity is critical for a subscription business because the likelihood of successful payment collection can be drastically improved by customizing the collection attempts based on the exact decline reason. So, the more detailed a payment gateway is in terms of identifying why a transaction was declined, the more effective a billing system can be in terms of how best to address the decline and rectify it.
When dealing with credit cards and other types of payments, issues will invariably arise, both on the business’ side and on the gateway’s side. Major issues that prevent payments from going through can stop a business dead in its tracks and necessitate the immediate involvement of the gateway to provide a rapid remedy so that payments can be collected again.
Other kinds of issues can cause significant disruption such as unusually high transaction decline rates, problems with issuing refunds, duplicate transactions being created, etc. These issues can have a significant negative impact, requiring customer support and operations teams to scramble. Most importantly, gateway and payment problems affect customers who may be unsatisfied and frustrated.
When dealing with payment issues, a gateway’s customer support team usually plays a key role in identifying and resolving issues. It’s important to understand how the team will work with you to solve problems, how accessible and responsive they are, and what policies they have in place. When considering a gateway, some things to determine are:
In addition to how a gateway responds to specific issues, it’s helpful to know what other kinds of guidance they may offer in regards to things like expanding into new countries, accepting new types of payment methods, and other payment issues or opportunities of importance. These ventures can be important for a subscription business’ growth, and a gateway that can provide expertise and experience in these areas can be invaluable.
Also, with growth will likely come increases to processing volume. If you expects huge increases to your volume, it’s good to know how this might impact your fees and if the gateway offers different fee structures (discounts) for higher volumes.
Determining your business’ future needs and growth potential provides an opportunity to consider if adding a second gateway would be beneficial. As mentioned, having multiple gateway gives you the ability to route transactions based on geolocation, product lines, and more. It also speeds financial reconciliation, lets you optimize for retries, and mitigate certain kinds of risk, ultimately providing potentially critical flexibility that will support your business’ expansion.
Fraudsters are relentless and highly-motivated, stealing from businesses at every opportunity and ever-evolving in their methods of attack. Fighting fraud is a constant challenge and requires a sophisticated, multi-pronged approach. A gateway can and should be your ally. Some questions to ask the gateway:
Subscription businesses depend upon information from multiple sources including external parties like payment gateways, banks, and credit card companies for revenue recognition and other financial reporting purposes. Understanding how this information is provided is critical. Some businesses will rely on reports from payment gateways, while others rely upon specialized internal staff who prepare reports using raw data from the gateway.
Some key questions around reporting practices include:
Occasionally, a business may want or need to switch to a different gateway. In this case, a gateway’s credit card data portability processes and policies will become extremely important.
Find out what tools or support they provide to import and export customer and credit card information. You should also determine if there are fees involved in this process and how long the process will take.
Whenever a business decides to change gateways, they’ll need to export their credit card data from their old gateway. Because this information is so sensitive, payment gateways can be resistant to exporting the data. Even when this process is agreed to, it can take months to schedule and cost several thousand dollars in professional services fees. As well, the business will lose access to their legacy data and all their subscriber data will need to be reconfigured.
Recurly customers don’t need to worry about the portability of their credit card data. With Recurly, you can change payment gateways with ease as you needs grow or change. It’s as simple as providing the new gateway credentials and checking a box to switch the flow of transactions from one gateway to another.
Tax compliance is another broad area of compliance. As we all know, federal and state tax rules and regulations can be very complicated and can differ by jurisdiction. International sales and use taxes along with VAT and GST taxes may also apply. Be sure to choose a payment gateway that’s familiar with the tax codes in all the areas in which you plan to do business.
Choosing a payment gateway is just one of the many key business decisions a subscription business must make. Knowing the factors that are most important to your business and knowing how a gateway can meet those requirements will help you choose well and set you up for success.