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Subscription Payments6 min read

What's different about subscription payments vs. other businesses?

Understanding subscription payments

Turning transactions into opportunities

People often think that the payment element of a subscription business is just about facilitating repetition at agreed intervals. 

In reality, the mechanisms that enable subscription payment business models need to be more detailed than that, nurturing the relationship with the customer. These mechanisms make it possible to offer a range of plans including different tiers, options and features, the ability to upgrade, downgrade, pause, or, from the business side, test new pricing models and products as time goes on. 

In this article we look at what defines desirable payment experiences, the role of payment service providers, and what to look for in your subscription payment processes to maximise their benefits to your business.

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Recurring payments require a level of internal flexibility and technology complexity to help subscription businesses thrive through positive and retained customer relationships.

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What are desirable subscription payment services?

Positive payment experiences
along the customer journey

Ensuring payments are made and received successfully is a fundamental function in any business, but the methodology and psychology are inextricably intertwined for customers. It isn't simply a matter of functionality and making sure a system works (which is essential), but also ensuring that it offers the reassurance, security and journey that will make it easy for customers to pay and for the business users to match invoices, track funds, and analyze customer behaviors.

For both the customer and the company, the repeat element of a subscription payment means that there are added layers to consider. That in turn means you need to have two things: a payment service provider for the financial transaction itself, and a subscription payment billing or business system to tell the provider what to do and when, in line with your business and your customer service requirements.


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Payment methods and options for different customers are both functionally relevant and important for attracting and keeping customers. Different regions around the world typically gravitate towards different payment methods, whether its credit cards, Apple Pay, bank transfer, etc. Equally, different demographics including age groups will likely have preferred payment options they feel most comfortable with. This isn't just about practicality—it's also about making customers feel safe. Payment might seem like something that's void of emotion, but not being able to use the payment method of choice can and does frequently mean that customers elect not to complete a transaction, despite having got all the way to 'cart'.

 

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Recurring payment reminders

When you have recurring payments, especially when they're long distances apart, payment reminders (such as subscription payment reminder emails) are an important part of the customer experience. They are also important for ensuring that payments go through, perhaps because a payment method needs updating or re-approving for example.

 

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Customer self-service

Allowing customers to manage their payment methods through a customer portal is fundamental to customer service in subscription businesses. Not only does this make management easier for the business, but it also instils a sense of control and autonomy for customers, giving them transparency and the option to manage their payment type easily, as well as supporting other features such as upgrading or downgrading their service.

 

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Transaction fees

From an internal perspective, understanding and automating transaction fees within your system is essential for staying on top of accounting and recording payments accurately. Some payment solutions have higher transaction fees than others, making for another element that needs to be taken into consideration when choosing payment gateways. These can have an impact on your profitability as well as your customer experience, and when a business is handling hundreds of transactions on a regular basis, it's impossible to manually manage accurately. You need a system that you can trust to record fees and apply them to your accounts.

 

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Payment status

Some payments can take a while to process, but it doesn't mean that they haven't been paid. Staying on top of this is essential both for keeping customers and business users in the loop. For that you need a system that 'talks' to your payment solution to understand its status and automatically issue payment retries and dunning procedures if they haven't been successful. That way you not only improve the customer experience, but you also avoid missed payments or losing customers through accidental churn—perhaps because a payment method has not been updated.

The role of payment service providers

Payment solutions vs.
subscription billing platforms

Payment service providers are typically responsible for processing payments but do not manage the logic for billing customers, especially during subscription activities such as contract upgrades, downgrades, co-terming, or prorations. Whereas a traditional business might apply that logic manually because they're only handling a single transaction, in a subscription business, this requires the business platform to manage that 'thought' process. Subscription billing platforms trigger the payment processing in payment service providers, which includes sending invoices and receiving payment processing statuses from them as well. 

Even if a payment service provider offers subscription billing capabilities, these are typically limited to simple shop and checkout functions, which finish when the customer converts with that initial purchase. In subscription platforms, which operate on top of payment solution providers, they hold the knowledge that provides the customer journey after purchase, such as upgrade journeys, purchase add-ons or win-back journeys. 

Read more about what a subscription billing system does

What to look for in your subscription payment processes

Keys to optimal customer experience
and business efficiency

With all of this in mind, what should you look to include in your subscription payment processes?

  • The capacity to offer a diverse range of payment methods and global coverage

  • A subscription system that can connect with multiple payment service providers

  • Check that your subscription payment service providers are able to offer sophisticated subscription billing and not just simple recurring billing —to find out more, read our article on subscription billing vs. recurring billing.

  • Make sure that your subscription platform offers customer journey functionalities without needing to custom build them (which will incur significant additional cost)

Read more about why custom-build isn't always the best option

How keylight can help

Streamline recurring payments
and subscription billing

keylight has been designed as an end-to-end subscription business platform, and a pivotal part of that is how we manage payment and billing processes as part of the entire customer journey. When it comes to managing payments, keylight provides the proverbial brain behind the transaction, 'talking' to the payment service provider to make sure payments are initiated, paid, recorded and adjusted in line with the customer's current or amended agreement.

With keylight, businesses can easily connect with one or multiple payment service partners, selling globally, safe in the knowledge that subscription payments are being managed and recorded accurately, providing comprehensive capabilities for customer journeys and advanced automation across sales, billing, and revenue operations, all with a solid data foundation for analytics and forecasting.

The result is a more streamlined set of business processes that you can trust, and that your customers feel safe and supported within, helping to generate sustainable, well-managed business practices without surprises, errors and lost revenue resulting from system inadequacies. In short, the system does the manual labour so you can get on with growing your business.