Subscription payment processing 101: a comprehensive guide

Are you considering a subscription payment model? If not, you should be – the global subscription market is expected to grow at a compound annual growth rate of 62% over the next few years, growing to over $320 billion in value by 2027. If your products or services lend themselves well to this model, you’ll need to work out how to deal with how to best handle recurring billing. Read on for our guide to subscription payment processing, including the ins and outs of recurring billing.

What is subscription payment processing?

Subscription payment processing goes by many names, including recurring payments and automatic payments. All these terms refer to the process of collecting regular payments from customers for an ongoing service or product. Examples include a monthly gym membership or annual magazine subscription. Businesses big and small take subscription payments, across a multitude of industries.

A subscription payment platform manages the billing process, retaining customer payment details on file and automatically charging accounts during each billing cycle. With recurring payments fully pre-authorized by the customer, there’s no need to send out invoices or chase up on payments.

How do subscription payment services work?

Here’s a closer breakdown of how it works.

1. The customer signs up for your subscription plan, agreeing to make a payment at regular intervals for access to the service or product.

2. At the time of sign-up, they provide their payment details and agree that these be kept on file for automated processing. Payment methods vary but can include credit cards, ACH bank transfers, or digital wallets.

3. During each billing cycle, the stored payment details are used to complete payment. There’s no need to notify the customer or ask for payment – the process is automatic with most subscription payment services.

4. The customer can cancel, renew, or change their subscription according to payment terms and conditions.

What are the benefits of recurring payment processing?

So, why should you consider online subscription payment processing? Here are a few reasons to consider this billing strategy.

• It improves your cash flow with predictable recurring revenue streams. You know how many customers you have, how much money will be taken, and when it will be received.

• At the same time, customers know exactly what to expect. There are no surprise bills or lengthy checkout processes involved with recurring billing; the process is frictionless and fully automated.

• Your business can boost value by upselling to higher-value plans with new or advanced features. You can also sell one-time add-ons to the subscription services, opening fresh marketing opportunities.

• Compared to one-time purchases, subscription plans create deeper customer relationships. You have more time to build trust and loyalty with your customers throughout the duration of their subscription plan.

How do you set up a subscription payment system?

To get started with selecting and setting up the best billing system, first think about whether subscription payments are right for your industry. Do you sell services that customers can use over the long-term? How will you innovate?

With that in mind, the next step is to choose the best subscription payment processing solution. Look at features including:

• Payment methods

• Customer management tools

• Subscription management tools

• Analytics and reporting

• API integrations

• Payment processing fees

The best software manages your subscribers as well as their preferences, working together with accounting software to record payments and generate reports.

GoCardless is an excellent choice for subscription payment processing. It fully automates payment collection, allowing you to take recurring subscription payments using the ACH bank network. Pull subscription payments directly from customer bank accounts on the day they’re due, saving time, stress, and money. Set up payments using our user-friendly dashboard for full visibility over billing. We partner with your existing software including Xero and Salesforce Billing for an all-in-one subscription billing and accounting solution.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.