Subscription-Based Business Models

The subscription-based business model has outgrown its traditional realm.

What was previously limited to the media and entertainment industry is now a multi-faceted business model having walked into the healthcare, eCommerce, automotive, and many other industries owing to how it facilitates a consistent revenue stream. 

In this post, we share the role of digital payments in subscriptions.

‍

The role of digital payments in recurring billing

With the rise in demand for seamless recurring billing, digital payments have come to our rescue. Here’s how digital payments support the subscription model:

Seamless transactions for subscriptions

The recurring billing process is in demand among customers and merchants for ease of expense management and as a consistent source of revenue generation.

However, the manual process is a chore and prone to errors. Digital payments can automate these transactions ensuring speed, accuracy, and ease of payments.

Subscription businesses and platforms can now easily integrate with payment gateways offering advanced functionalities like handling billing cycles. This integration is a win for businesses because it improves efficiency and provides a frictionless customer experience.

Reduced payment failures and churn

Advanced payment systems are needed to handle the nature of recurring payments which are otherwise subject to failed transactions in general.

Frequently failed transactions are a big blow to customer retention and revenue because they impact customer experience and confidence resulting in increased churn.

Advanced payment systems, with features like automatic card updaters and intelligent retry logic, reduce the risk of payment failures ensuring customers continue to enjoy uninterrupted services while businesses maintain consistent revenue streams.

‍

Advantages of automated billing

Subscription payment systems are not only a win for businesses but also a great option for customers. Here are some of the most common benefits to both parties:

For businesses:

• Improved cash flow: Because automated billing is not made on will and interest, it ensures payments are done on time. The auto debit feature helps reduce any possible delays and improves cash flow for an organization.
• Operational efficiency: When businesses do not have to intervene in the recurring payments process, they are left with a lot of time to focus on actual growth initiatives rather than administrative tasks.
• Forecasting: Digital payments for subscriptions streamlines income for the near future deciphering what revenue a business can expect over a period of time. These insights help make accurate financial forecasts and strategic decisions.

For Customers:

• Convenience: Recurring billing solutions spare customers the hassle of remembering due dates or manually processing payments. The payments are scheduled to be deducted automatically at fixed intervals. 
• Flexibility: Automated systems come with extreme levels of flexibility where customers are free to choose the payment schedules, payment obligations, and intervals that best fit their financial status.
• Uninterrupted service: Because the payments are made on time, there is no disruption to services offered. Customers can enjoy the benefits of reliable billing that ensures they don’t miss payments and lose services.

‍

Emerging trends in subscription payments

We have witnessed a fair share of disruption in subscription payments already, but there’s a lot more in store for the future. Let’s check them out:

1. AI-Driven insights and optimization

Artificial intelligence only makes the subscription payments model better. It provides advanced fraud detection and payment optimization capabilities that ensure no hiccups, breaches, or errors in the process.

AI-powered systems can analyze vast datasets in real time and identify fraudulent activities to enhance transaction security. Furthermore, businesses can use this intel to come up with personalized billing plans and tailor service offerings according to customer preferences and behaviors.

A report by McKinsey states companies that use AI-driven customer insights improve customer satisfaction by 10 to 20 percent and reduce early-life churn by as much as 30 percent.

2. Blockchain integration

Blockchain technology is popular for added security and transparency. Its integration with subscription payment systems ensures protected transactions that cannot be tampered with or overwritten and builds trust among customers.

This technology is an aid even for global subscription-based businesses because it facilitates seamless payments and secure cross-border transactions without the need for intermediaries, thereby reducing transaction costs.

According to a recent report, 90 percent of finance leaders believe that the currencies underpinned by blockchain will greatly impact business in the next few years.

3. Flexible payment options

Alternative payment options like digital wallets, Buy Now Pay Later (BNPL) services, and cryptocurrencies are now finding their way into subscriptions.

Digital wallets like PayPal and Apple Pay offer quick, convenient transactions, while BNPL solutions come with flexibility in managing payments. Cryptocurrencies are also gaining traction, particularly among tech-savvy consumers and in global markets where traditional banking systems may be less accessible.

Recent data shows that Alternative payment methods have proven to drive more revenue (5.0% renewal invoice decline rate) and help prevent fraud (0.9% of failed fraud transactions).

‍

Best practices for leveraging digital payments in subscriptions

Businesses looking to make the most of the subscription model and build subscription revenue growth must incorporate these best practices:

Choose the right payment gateway

The payment gateway you will select determines your capability of offering advanced digital and subscription payment options.

So, you must look for gateways that integrate seamlessly with your platform, support multiple currencies, offer multiple payment methods, have the latest features or functionality, and provide robust security features.

Choosing a reliable payment infrastructure like Payby can simplify this process, offering comprehensive solutions tailored to subscription needs, and resulting in a smooth customer experience.

Ensure compliance

To offer subscription-related payment options, businesses need to stay compliant with regulations like GDPR and PCI DSS that are set in place to safeguard customer data and maintain trust.

Non-compliance on the other hand will attract hefty fines and cause reputational damage.

Your choice of a payment service provider like Payby can help you stay compliant by meeting all regulatory requirements, reducing risks, and protecting customer information.

Offer diverse payment options

Make sure you offer a diverse range of payment options that include credit cards, digital wallets, and BNPL besides the traditional debit cards option.

This diversity makes it possible for you to cater to the varying preferences of a global customer base, without losing revenue in the process.

Plus, the level of flexibility enhances customer experience, reducing friction and improving retention. Payby can help businesses effortlessly integrate multiple payment methods that are built for convenience and satisfaction.

‍

Conclusion

The subscription-based business model with its unique capability coupled with automated billing benefits is here to stay.

Customers demand a seamless payment experience that places subscription payment systems at the top. Businesses must address and oblige to the shift in customer preferences to stay on top of the game and be competitive.

That’s where you need to choose a reliable payment partner like Payby. With tailored solutions designed to meet the unique challenges of subscription-based businesses, Payby can help you streamline processes, ensure compliance, and provide the best possible experience for your customers.

Get started with Payby today.