A payment gateway is not a subscription management software!

Payment Finance
Ilian

ILIAN SETHI

Approx. reading : about 8 min

Payment gateways versus recurring billing management: let's see the facts!

Whether you are a business with an early stage or mid-stage subscription offering, subscription management can be frustrating.

But why is that? Probably because so far you’ve used your payment gateway as a recurring billing management tool. After all, she’s supposed to be made for this, right?

Not sure ! Let’s take a moment to think about it!

What you may realize is that your payment gateway is limited in terms of management capabilities. Often the complexity of managing subscriptions is underestimated.

Subscriptions change over time and can be incredibly complex. Taking this complexity into account means that you need a system that can handle these changes effortlessly; which often payment gateways are unable to do.

Payment gateways are great at processing payments, because that’s what they are designed for.

The main function of a payment gateway is to help you collect payments from your customers. They sit between the buyer and the seller, facilitating transactions.

Essentially, the role of a payment gateway is to authorize, approve or deny and report online transactions.

Payment gateways like Stripe, Braintree, and Adyen offer recurring billing solutions, which cover some of the basic payment requirements of subscription-based businesses. However, these capacities are insufficient in a context of more elaborate configuration of your subscription offers.

In this article, we’ll try to show you why it’s important to go beyond payment gateways to manage your subscriptions and how this affects subscription commerce and SaaS businesses in general.

The ability to generate rapid growth becomes much more complicated, if not limited.

The growth of a business is complex and difficult to manage. Recurring billing is just one of the things you need to worry about as you grow.

As your business grows, customers have different needs. The very nature of a subscription-based business demands the ability to change quickly while meeting customer needs, the competitive environment and exploring product-to-market fit.

Various scenarios may arise in your business journey: you may explore a new business model, discover new customer demands, or even be forced by regulation to change the way you bill your customers.

Whether it’s changing billing frequency, adding multiple subscriptions to an account, supporting add-ons, coupons and discounts, offering alternative payment methods (online or offline ), etc. your payment gateway quickly becomes an obstacle to your development.

Your requirements for changes and flexibility for your recurring billing are now beyond the capabilities of your payment gateway.

dotsha is the platform that power subscription and usage-based business :

Quotes and Plans

Billing automation

Revenue collection

Kpis and reporting

To better understand this, let's dive into a few examples of potential risks.

1- Risk in the case of a single payment gateway

When you use a single payment gateway for your subscriptions, your gateway may block you if they perceive you as a “high risk” merchant.

If you haven’t been notified and haven’t enough time to migrate to another gateway, your business is penalized. Add to that the disputed transactions that come with chargebacks for which you will have to shell out money and you understand the importance of diversifying your payment gateways.

2- Risk when expanding into new markets

What do you do when your customers request a payment method that is not supported by your gateway? Once the initial wave of frustration has passed, the obvious solution is to switch payment providers. Right ?

And then 6 months later you want to start selling in a new country and the payment gateway you just chose does not support that currency. What is happening now? Are you going to switch gateways again and start the whole process of migrating all of your subscriber information again?

Switching to another payment gateway is a daunting task. You should take into account the time required to test and migrate the gateway.

3- Risk when pricing and billing must be as flexible as possible

You convinced your customer to re-register and reactivate them. Or you want to experiment with pricing and be able to easily change prices. And during those price changes, you’ll want to be able to keep your older customers as well.

Or, you want to allow customers to dynamically and autonomously upgrade, downgrade, or suspend their plans. In all of these cases, payment gateways are unable to offer such advanced subscription management options. 

Managing the recurring billing with our payment gateway has wasted my management team's time for too long. The diversity of our pricing model was difficult to configure. We constantly had to change our configurations and add billing manually!

A. GABAY – CEO Izzymobility

4- There are no "simple subscriptions plans"

When you enter new markets or launch new subscription offers, there are many factors that make your launch more complex.

Regulatory, compliance, security, and operational requirements can quickly limit you if you choose to develop and design solutions that focus on the limited capabilities of a payment gateway.

Take the case of taxes. With complex tax rules, manually calculating and applying taxes by country or region can quickly become a hassle.

For example, the ability to manage the tangled rules around taxation was a critical issue for companies like Zeenea who chose dotsha as their recurring billing platform rather than relying on the capacity of payment gateways.

Recurring invoicing platforms are able to effectively sift through various tax profiles and in particular manage the diversity of European VAT.

5- Payment gateway limits your ability to get relevant statistics ...

Payment gateways provide basic reporting at best. Your business needs real-time metrics and accurate, relevant, timely, and accurate reporting that only subscription management solutions can provide.

Being constantly informed about the performance of your business is essential – key business decisions are made based on metrics such as ARPU, CAC, net churn, MRR, etc.

From the point of view of revenue recognition, which depends on invoicing and services rendered, the chain of events leading to revenue recognition is worked out – and for a subscription activity, it is much more complex.

Proration rules can become incredibly complex for subscription businesses, and payment gateways cannot handle these scenarios natively. Accounting and revenue recognition for subscription activities are unique.

Your subscription billing solution supports all of this and more: additional options for payment gateways and methods, invoicing, coupon and discount management, accounting, email notifications, helpdesk integrations, referral marketing And the list is long.

However, the light is at the end of the tunnel ...

Recurring billing consists of 3 basic elements:

Here’s the good news: A subscription management solution like dotsha works on top of a payment gateway and, at its heart, makes it easy to manage subscriptions throughout a customer’s lifecycle.

With the depth and specialization that a billing solution brings to you, recurring billing will soon no more be a problem to solve.

Adopting subscription flexibility doesn’t have to come at the expense of growing your marketing and product offering. Instead of consolidating your billing needs into one payment gateway, why not let a subscription management solution do the work and make it easier for you to manage?

To learn more about dotsha’s subscription management platform and understand how we can help you, please feel free to contact  our customer support team and request a product demo.

Solution
To learn more about dotsha and understand how we can help you, feel free to contact our customer support team and request a product demo.

About DOTSHA

dotsha delivers the top class order-to-revenue platform designed to put every subscription-based or usage-based business on autopilot … from quote to cash !  

Your business can scale fast without turning its back-office into a mess! 

Keep growing faster… we’ve got your back !

All-In-One platform that streamline back-end while the MRR just keeps growing, dotsha’s plaform is an easy to use and quickly implemented cloud-based platform that augment your existing information system with robust API integrations in order to deliver optimal automation with minimal code. You will forget we are there!

Ilian

ILIAN SETHI

Approx. reading : about 8 min

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