The popularity of subscription businesses is on the rise thanks partly to the success of businesses like Netflix and Spotify. During the past decade, the subscription economy has grown multi-fold. Gartner highlights that about 80% of all new software entrants are working on subscription-based models.
But only those running a subscription business can understand the difficulty that comes with running such a business and managing those thousands of recurring payments.
Payment gateways are one of the most preferred options for managing recurring billing. However, payment gateways often fall short when it comes to managing the complexity and multitude of challenges of subscription businesses.
Let’s discuss the key reasons why billing solutions should be preferred over payment gateways.
Payment challenges faced by subscription businesses
Payment gateways may work fine for smaller subscription businesses since there are fewer complexities and fewer payments that need to be processed. The customer pool is also very limited.
But issues start to crop us when you try to scale your business. Scaling can be a stressful and complex process. As you scale, your customer pool also starts to expand. The growing customer base means that there are varied customer needs that your existing payment gateway might find hard to fulfill.
Moreover, the nature of the subscription business is such that it calls for rapid changes in response to growing customer needs and a competitive environment. This may force you to change billing frequency, add multiple subscriptions, support add-ons, add coupons or discounts, offer alternate payment methods, and necessitate billing changes. All this might be beyond the capabilities of your payment gateway.
Where do payment gateways fall short?
Let’s now talk about the specific areas where payment gateways fall short.
- Over-reliance on a single payment gateway. If you only work with a single gateway, you run the risk of being over-reliant on it. In case of any downtime with the servers or any other merchant issues, you may lose valuable customers who might build a bad impression of you. If the gateway doesn’t give you a heads-up on any server issues, your business might suffer. Moreover, you might also need to pay a chargeback fee for any disputed transactions.
- Expanding to new markets. An issue with using payment gateways is that you might need to regularly switch your payment providers to cater to customers who request a particular payment method. Switching gateways and migrating all your subscriber information can be a daunting task.
- Lack of flexibility with subscriptions. Payment gateways do not offer much flexibility. The lack of advanced subscription management options (like upgrade, downgrade, or pause plans) is a major issue with payment gateways.
Reasons for choosing a billing solution over a payment gateway
A comprehensive subscription billing solution can do a lot more than a payment gateway. Here are some of the key reasons why it makes much more sense for your subscription business to adopt a billing solution over a payment gateway.
- Account management
- Better pricing flexibility
- Improved customer retention
- Enhanced security
- Support for multiple payment gateways
- Automated communications
- Subscription management
In addition to all the benefits mentioned above, a robust billing planform also has the following specific capabilities:
1. Ability to rate usage
A modern billing solution allows computing charges based on the actual usage of any service. The usage unit (in any form such as KB, MB, GB, calls, minutes, features, licenses, etc.) is then tracked to calculate charges for customer invoices. It also offers an easy UI-driven usage charge definition for mapping your CDR files to usage charges.
It can also handle bulk usage transaction records using UI, API integration between the source system and building platform, or through a file-based approach that can be connected to the FTP location for processing CDR rating.
All such abilities are not offered by payment gateways.
2. Customizable invoice templates
Having customizable invoice templates gives businesses the freedom to quickly choose a professional quality invoice format for specific industries. Businesses also need the flexibility to customize the design of their invoices and also include add-ons like discounts, run-time, charges, taxes, etc.
A billing platform can allow businesses to choose from a wide array of billing methods and choose the one that’s tailored to their customers’ specific needs like standard, flex, on-demand, order-based, etc. It is also possible to consolidate changes from different vendors and systems into one bill – quickly and easily.
3. Accurate tax calculations and regulatory compliance
For subscription businesses catering to customers all over the world, it is essential that they maintain the tax rate accuracy for each customer transaction by capturing the required tax information and calculating it in real-time for every invoice. A billing solution does all this heavy lifting.
Moreover, by offering integrations with taxation platforms, billing solutions can help enterprises ensure correct taxation codes that apply to the products and services they offer. This increases regulatory compliance and minimizes any potential tax audit risk.
4. Ability to integrate with wider enterprise systems
A cutting-edge billing solution seamlessly integrates with business’ enterprise system such as –
- Carriers and providers like Bandwidth, 2600Hz, 888VoIP, Bicom systems, Netsapients, Telnyx, Cisco, Broadsoft, Sansay, Netx, etc.
- Payment gateways like Stripe, IPpay, Moneris, Authorize.Net, Bambora, Digitzs, Merchant e-solutions, etc.
- Accounting & admin solutions like DocuSign, FedEx, AWS, Quickbooks, Datto Developer, etc.
- Taxation solutions like Avalara, SureTax, Compliance Solutions, etc.
- CRM & ERP systems like Salesforce, Microsoft Dynamics CRM, Oracle, etc.
These integrations ensure that the information flows seamlessly across all systems and the right information is available to the right stakeholders at the right time. In the new post-COVID-world, where most of the business processes have moved online and teams are working remotely, such integrated systems ensure that critical information does not fall through the cracks of manual processes.
Robust Billing Solutions for Subscription Businesses
As your subscription business grows, your requirements also evolve. While payment gateways might work just fine for you initially, it’s always recommended to plan by keeping future growth in mind.
A billing solution like OneBill can offer features that perfectly suit the needs of your ever-growing subscription business. OneBill is a comprehensive enterprise-level subscription revenue management platform that has been designed to handle with ease every aspect of your subscription business. It can simplify billing, invoicing, revenue tracking, and payment management for your business while letting you focus on scaling your business. OneBill has been instrumental in helping many businesses maximize their revenue, reduce costs, and avoid unnecessary revenue leakage. We’ve been helping companies transform their lead-to-revenue generation experience.