Introduction

Processing payments takes more than just running a credit card number–and that’s why many companies rely on a subscription billing platform that can handle all things related to recurring payment processing. There are integrations, revenue recovery, subscription billing models, gateway routing, pricing experiments, and much more to consider. 

A subscription payment gateway makes recurring billing possible by accepting various payment methods, saving customer payment information, and integrating with popular billing platforms. This guide explores the features and capabilities of subscription payment services. 

What is subscription payment processing? 

Subscription payment processing is a payment service designed to manage recurring payments for subscription-based businesses. When paired with online billing software, it automates most tasks related to recurring payment collection, such as secure card data storage, payment pre-authorization, and embedding payment links on recurring invoices. 

Payment processors that support subscriptions come with a payment gateway that not only captures, authenticates, and sends the customer’s information for payment processing — it also performs the additional function of retrieving payment details from the card vault to automatically charge the customer’s account every billing cycle.

How to process subscription payments

The best payment processor for subscriptions uses a secure payment gateway to start the process of collecting subscription payments. It captures, stores, authenticates, and eventually communicates the customer’s payment information to financial institutions. And while there are a variety of payment methods that differ in details, the role of the payment gateway is essentially the same.

Step 1: 

Customer chooses and signs up for one of the subscription plans on your website, filling out a subscription form.

Step 2: 

Customer chooses a payment method and (card, ACH, bank transfers, digital wallet) provides their payment details, and agrees to your payment policy, typically by clicking on a box on the form stating that the information will be kept on file for automatic payments.

Transfi provides multiple payment options for payments via recurring payment setup making it flexible for customers to choose what’s best for them. 

Step 3: 

The payment processor validates the payment information with fraud prevention tools, such as IP and address verification. Once validated, the payment details are encrypted and stored in the secure card vault.

Step 4: 

Every billing cycle, the payment processor automatically charges the stored payment details. The payment processor sends the transaction details to the relevant financial institutions for authentication and approval.

Step 5: 

Once approved, a digital receipt or post-transaction invoice, which contains the subscription details and payment information, is sent to the customer’s elected email address. The receipt will also contain a link where customers can cancel, renew, or change their subscription. 

If the payment is rejected, a notification email will be sent to the customer along with a request to provide a replacement payment method via a link to their account. The system will then repeat step 5 and attempt to charge the new payment method.

Step 6: 

Once the payment is successful, the proceeds, net of the transaction fees, are sent to the user’s merchant account where they stay until the funds are transferred to the linked business bank account.

Benefits of recurring payments for your business

Your company can enjoy several benefits when you use a recurring payment processing solution, such as:

1. Predictable revenue streams: One of the most significant draws of subscription payment processing is the predictability of recurring revenue. Instead of the peaks and troughs of traditional sales, recurring revenue paints a picture of consistent income, enabling businesses to plan with greater certainty.

2. Enhanced customer experience: Subscription models are inherently customer-centric. They offer a level of personalization and control that traditional models often struggle to match. Customers can tailor their subscriptions, add on services, select their preferred payment options, and manage their accounts with unprecedented ease, fostering a sense of ownership and engagement.

3. Flexible payment terms and packages: It’s easier to give your customers a variety of payment, plan, and billing frequency options, which they can change at any time. Some customers may want to make credit or debit card payments, while others want to pay using a virtual terminal like PayPal for automatic payments. Perhaps your value-packed but most expensive plan appeals to a small subset of your customers, but others see it as excessive and wish you had a pared-down offering. Without recurring payment options, this type of flexibility is difficult, if not impossible, to achieve.

4. Minimized effort: The setup is a one-shot deal, and no more work needs to be done every billing cycle. It sounds like a bonus for your business, but it also helps you build customer relationships. With online recurring payment processing, the invoice and payment information automatically flows into the right systems, preventing missed and late payments–making it easier for your finance team to track a client's payment history.

5. Error and fraud defense: There is less risk of card detail mistakes or fraud because your customers aren’t required to enter their payment details over and over again. With automated subscription billing cycles, you can protect your business integrity by securing your client's payment methods and streamlining the process.

6. Data-driven decisions: The data goldmine that subscription models provide is invaluable for making informed business decisions. Insights into customer behavior, churn rates, and revenue forecasting can steer your strategy with precision, leading to smarter, more calculated moves.

The benefits of recurring payment processing are undeniable. Let's find out how you can wisely choose one for your business’ maximum advantage. 

How does one choose a recurring payment processing solution?

To grow, businesses need real recurring payment processing solutions. A first-rate recurring payment processing solution does a lot of behind-the-scenes work to ensure that your customers’ payments go through without a hitch at every point in the billing schedule. Your customers likely have diverse preferences, so you should look for a billing solution that can handle every imaginable scenario.

If you need a complete subscription management platform, check out Transfi’s subscription and billing solutions to understand what capabilities to look for, what questions to ask your internal stakeholders and vendors, and what terms you need to know.

Transfi allows you to set up various recurring and one-time payments, regardless of business size. Our robust platform accepts major payment methods and currencies and is designed for enterprises to maximize profits through simplified recurring payments.

Conclusion 

Gone are the days of manual invoicing and the laborious task of chasing down late payments. With an automated recurring billing and payment solution, you set the schedule for future transactions, and the system does the rest. 

Transfi, does a lot of work behind the scenes with gateways, online payment processors, and other parties like associations, issuer banks, and customer banks. It's like having a diligent assistant who never sleeps, never forgets, and never misses a beat–except it fits neatly within your digital infrastructure.

Transfi can be integrated into your company’s payments ecosystem, combining subscription management, advanced features, and billing elements in a solution that supercharges revenue growth. 

Frequently asked questions (FAQs)

1. What is subscription payment processing? 

Subscription payment processing is a payment service designed to manage recurring payments for subscription-based businesses. When paired with online billing software, it automates most tasks related to recurring payment collection, such as secure card data storage, payment pre-authorization, and embedding payment links on recurring invoices. 

2. How to process subscription payments?

The best payment processor for subscriptions uses a secure payment gateway (like Transfi) to start the process of collecting subscription payments. It captures, stores, authenticates, and eventually communicates the customer’s payment information to financial institutions.

3. What are the benefits of recurring payments for your business?

• Predictable revenue system
• Enhanced customer experience
• Flexible payment terms and packages
• Minimized effort
• Error and fraud defence
• Data driven decisions 

4. How does one choose a recurring payment processing solution?

To grow, businesses need real recurring payment processing solutions. A first-rate recurring payment processing solution does a lot of behind-the-scenes work to ensure that your customers’ payments go through without a hitch at every point in the billing schedule. Your customers likely have diverse preferences, so you should look for a billing solution that can handle every imaginable scenario.

5. Who should use recurring payment solutions?

Any businesses that offer products or services at a recurring frequency such as daily, weekly, monthly or annually, can make a good use of recurring payments. This covers software, content, services industries, etc.