Best Subscription-Based Payment Gateways for Recurring Billing

Subscriptions are becoming a new norm in the SaaS and e-commerce industry. Businesses like it because subscription-based pricing promises recurring revenue and stable growth. Payments at regular intervals enable companies to calculate key metrics, such as MRR and ARR.

The continuity in services means businesses can establish long-term customer relations, ultimately improving retention. Subscription businesses are outperforming S&P 500 companies, which proves the point.

The Subscription Economy Index™ (SEI) report by Zuroa states that subscription businesses grow 4.6x higher.

Even more compelling is the average number of subscriptions held by the subscribers.

According to the Recharge, a typical customer holds 4.1 subscriptions over the year. A recent survey revealed that about 24% of consumers held at least one retail subscription

This only shows one thing: subscription-based pricing is becoming a norm. As of 2024, the market value is 9.28 billion, and it’s growing at a 16.11% CAGR. The market is expected to flourish and touch the USD 22.76 billion mark by 2030.

Considering the recurring billing market size, investing in a subscription-based payment gateway is a great business decision. 

However, familiarizing yourself with the basic key concepts is crucial before taking the leap of faith. Here’s what you need to know while considering a subscription-based payment gateway.

What Are Subscription Payments?

Subscription payments are repeated amounts or recurring installments that customers pay for uninterrupted access to services. The consumers made payments at regular intervals instead of a one-time deposit.

The subscription model ensures predictable revenue streams for businesses without customer loss. On the other hand, subscriptions provide convenience to the clients, making it easy for them to pay as they deem fit.

For example, rather than paying a $120 annual fee, a user might pay $12 monthly to access a premium service. Similarly, small businesses can subscribe to an appointment scheduling software without paying a hefty upfront amount.

The subscription payment model is more common among services businesses, memberships, streaming platforms, and SaaS products.  

Subscription transactions are easy to process and automate through payment gateways without interruptions. 

How Subscription Payment Processing Works

The key to the success of the subscription payment process is accuracy. Your payment gateway should collect the amount accurately on time. 

For this to happen, the business should have payment details of their subscribers (a bank account, debit/credit card, or digital wallet).

The process of subscription payment deduction involves the below key steps.

Recurring Billing Setup

Based on the subscription plan, the business has to schedule a recurring bill. This usually entails the start date of the subscription, frequency, and service charges.

Businesses can also add extra charges, such as mid-cycle upgrades using modern Omni-channel payments.

Secure Payment Authorization

On the billing date, the subscription payment gateway sends payment details to the customer’s payment processor or acquiring bank. All this happens in a secure way through encryption to ensure data security during the transaction.

Payment Confirmation or Retry

After making the subscription billing request, the payment gateway system verifies the transaction. If the payment is successful, the recurring payment gateway confirms the transaction and renews the subscription.

Customer Notifications

The system instantly sends an email or notification to the customers once the payment request is made. The payment gateway confirms successful billing or alerts the customer of any issues.
A business can reduce the risk of churn by informing the customers of unsuccessful billing.

Reporting and Analytics

The role of payment gateway is to provide valuable insights to businesses regarding billing. Subscription payment gateways not only monitor transactions and identify failed payments but also analyze customer trends.

Insights by a recurring payment processor can help your business optimize retention strategies to maximize revenue.

Key Components of Recurring Payment Platform

Subscription or recurring payment gateways are quickly replacing the existing systems. They help businesses collect payments and manage recurring billing while strengthening customer relationships. 

Let’s break down the key components of subscription-based payment gateways that make them efficient and reliable.

Billing System Explained

The core of any recurring payment processor is its billing system. It ensures on-time payments by charging customers on a monthly, quarterly, or annual plan.

As highlighted earlier, the billing system charges customers automatically based on the pricing model. The business can charge a flat rate, usage-based cost, or tiered pricing.

The billing system also adjusts charges for upgrades or downgrades to ensure accurate payments. Moreover, it handles tax calculations based on customer location and applicable laws, such as VAT or GST compliance.

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However, the subscription payment may fail due to card expiry or insufficient funds. In such cases, the payment system triggers retry attempts and sends automated reminders to customers.

Role of Subscription Payment Gateways

Recurring payment providers are an intermediary between customers and businesses. They only ensure smooth and secure transactions by eliminating manual billings. 

The core functions of subscription-based payment gateways are:

Payment Processing: Recurring payment gateways authenticate and process payments via bank transfers, digital wallets, debit cards, or credit cards. 

Multi-Currency Support: Subscription payment platforms enable businesses to serve a global audience by accepting different currencies.

Fraud Prevention: Modern recurring payment processors use advanced security measures, such as tokenization and encryption. This protects customer data and reduces fraud risks.

Integration with Billing Systems: The best payment gateway for recurring billing works in tandem with billing software to automate the end-to-end payment cycle.

Importance of Dunning Management

According to Recurly, 12-15% of subscription payments fail on their first attempts. But with effective dunning management, a business can recover up to 70% of these failed payments.

Dunning management is a mechanism to handle payment failures. The mechanism involves implementing a few steps to minimize revenue loss, recover failed payments, and reduce customer churn.

Dunning management involves trying different strategies to recover failed payments.

Customer Notifications: Sends reminders to customers about upcoming renewals or issues with their payment methods.

Automated Retry Logic: Schedules retries for failed payments, increasing the chances of successful transactions.

Card Updater Services: Automatically update expired or replaced card details for continuous billing.

User Interface and User Experience

Businesses often take user interface (UI) and user experience (UX) lightly when they are investing in a system. The truth is the subscription payment system’s user interface and user experience plays a crucial role in customer satisfaction and retention.

According to Adobe, companies investing in superior UX see a 400% increase in conversions.

Considering customers are often directly in touch with the subscription-based payment gateways, businesses cannot afford to overlook this aspect.

Key UI/UX Elements for a Subscription Payment Gateway

While choosing a recurring payment gateway, pay attention to the onboarding process. A simple and intuitive signup process helps convert prospects into subscribers quickly. Moreover, display your subscription plans clearly and mention associated benefits. This will reduce confusion and build trust among potential customers.

Also, make sure the payment gateway you chose is allowing users to manage their subscriptions. It should be easy for your users to update payment methods and view invoices without contacting support.

Common Challenges in Subscription Payment Processing

The subscription payment processing model offers predictable income and long-term customer relationships. However, it also comes with some unique challenges. If not addressed effectively, these challenges can quickly impact revenue and customer retention.

Managing Recurring Payments Effectively

Recurring payments ensure businesses receive revenue on time, but managing these payments efficiently is often complex.

According to Deloitte, around 24% of subscription businesses face recurring billing errors. This is an issue that often leads to customer dissatisfaction and churn.

Some common challenges of recurring payments are:

Multiple Payment Methods

There are so many payment methods and customers use options that suit them. People usually prefer using credit/debit cards, digital wallets, and bank transfers while opting for a subscription. So businesses need robust integration capabilities to handle multiple payment methods.

Billing Frequency

As a business, you are bound to offer multiple billing options. Customers may prefer monthly, quarterly, or annual billing depending on their financial situation. However, handling varying billing cycles accurately can strain the payment system.

Dynamic Pricing Models

Businesses, especially retail companies and SaaS offer hybrid or usage-based pricing. With such options, they need flexible billing systems, which traditional solutions often lack.

Solution with XStak XPay:

XStak XPay offers a comprehensive billing solution with:

• Flexible billing options for fixed, tiered, and usage-based models.
• Seamless support for multiple payment methods to cater to a global audience.
• Automated invoicing and error-free processing.

Handling Failed Payment Retry

Payment failures are a leading cause of involuntary churn in subscription models. The most common reasons are:

• Expired credit cards
• Insufficient funds
• Technical issues

Many subscription-based payment gateways don’t have built-in retry logic. As a result, businesses lose revenue without submitting another payment request. In addition to that, customers are also unaware of failed transactions when they opt for subscriptions. Businesses can recover failed payments by simply notifying their customers of their users on time.

Managing International Payments & Currency Differences

A study by PayPal revealed that by offering multi-currency support, businesses can get a 22% increase in sales. However, expanding into global markets also introduces complexities in managing international payments.

For instance, accepting payments in various currencies and converting them accurately can be cumbersome. Furthermore, compliance issues can also disturb your payment acceptance system. Adhering to regional payment regulations like PSD2 in Europe can be challenging.

During international transactions, there are more than one banking institution involved in the process. The business and the customer are usually registered with different banks. So when the transaction occurs, there are always chances of technical delays and errors. 

Dealing with Subscription Cancellations

Subscription cancellations or churn directly impact revenue and growth. Your customers may cancel due to budget constraints or lack of value. So keep an eye on the competitors to offer better value at competitive pricing.

However, there can be involuntary cancellations caused by payment failures or unintentional errors. This is something that can easily be avoided by implementing the Dunning management.

Too many cancellations can also negatively impact the payment gateway’s system. So, limit how many times the system should attempt resubscription requests.

Automating the Dunning Process

Implementing the Dunning process can significantly reduce the churn rate. However, manual tracking and recovering failed payments hurt in terms of time and labor resources. 

Businesses should try automating this process to ensure sustainable revenue and maintain the cash flow.

The key to success here is personalization and keeping the process as simple as possible. Flexibility in payments, implementation of security protocols, and feedback loop can optimize and smoothen the process. 

Top Subscription Payment Gateways for Recurring Billing

A well-chosen subscription payment gateway ensures seamless recurring billing and secure transactions. Above all, it offers a user-friendly experience that establishes long-term client relationships. 

XPay - Best for Customization

XPay by XStak is a highly customizable payment gateway designed to meet the unique requirements of subscription businesses. The recurring payment platform offers tailored billing solutions and comes with robust automation tools.

Its ability to integrate with existing systems and customize every aspect of the billing process sets it apart.

Key Features of XPay

• XPay supports fixed, tiered, and usage-based billing, making it adaptable for various subscription models.
• Businesses can customize the platform to align with their branding, creating a seamless user experience.
• Advanced analytics provides detailed insights into customer behavior, churn rates, and payment trends.
• XPay ensures failed payment recovery with retries and personalized reminders.
• The recurring payment processor helps businesses optimize operations by automating billing and multi-currency exchange options.

Stripe - Best for B2C

Stripe is a household name in payment processing and is suitable for businesses with a large base of individual consumers (B2C). 

Stripe is known for its developer-friendly APIs and seamless integration with e-commerce platforms. It supports over 135 currencies and connects you with audiences across the globe.  

Key Features of Stripe

• Stripe’s APIs are highly flexible. Businesses can integrate subscription billing directly into their platforms.
• Advanced machine-learning tools help you identify and prevent fraudulent transactions.
• Customers can manage their subscriptions, update payment methods, and view invoices through an intuitive portal.
• A wide range of payment options, including credit cards, digital wallets, and local payment methods.

However, Stripe is still not fully global. This subscription-based payment gateway isn’t available in emerging countries like Pakistan. So, you may have to look for Stripe alternatives, such as XPay.

Checkout.com – Ideal for Global Payments

Checkout.com specializes in handling international payments. Its comprehensive payment solutions and robust security features cater to the complexities of cross-border transactions.

So, if your business has a global subscriber base, this is the recurring payment process for you. But there is a catch. Like Stripe, Checkout(dot)com is not supporting businesses based in Pakistan.

Key Features of Checkout.com

• Allows businesses to accept payments in various currencies with transparent conversion rates.
• Supports region-specific methods such as SEPA (Europe) and WeChat Pay (China).
• Ensures transactions adhere to local and international regulations, including PSD2 and PCI DSS.
• Provides real-time analytics to optimize payment acceptance rates and reduce transaction failures.

Why XPay Stands Out for Subscription Payments

XPay is designed to revolutionize the way businesses handle subscription payments. Here's why XPay is the ultimate choice for subscription-based payments.

Flexible Payment Schedules for Recurring Revenue

XPay empowers businesses to set up payment schedules that align perfectly with their revenue goals. Whether it’s daily, weekly, monthly, or yearly billing, XPay provides the adaptability to cater to every business model.

By offering customizable recurring payment schedules, XPay enables businesses to generate predictable income. Thus, it reduces the customer churn.

Powerful Customizations for Enhanced Control

XPay offers a host of powerful customization features that give businesses unparalleled control over their subscription processes:

Customizable Recurring Payment Schedules: Tailor payment intervals to meet customer preferences and business needs.

Rule-Based Actions on Events: Automate actions such as notifications or retries based on predefined rules.

Timezone Compatibility: Align payments with customer time zones, improving customer satisfaction and retention.

Perfect for All Business Types

Xpay is an all-in-one solution whether you’re selling digital products, physical goods, or offering B2B services. The subscription platform caters to a wide range of industries, including:

Digital Products: SaaS tools, e-learning platforms, and software services.

Food Delivery: Seamlessly manage recurring orders and payments for meal plans.

Physical Goods: Streamline subscription boxes or repeat product deliveries.

B2B Services: Manage client subscriptions for consultancy, IT services, and more.

Simplified Payment API for Developers

With XPay, handling subscription payments is easier than ever. Its single API call integrates payment processing, tokenization, and subscription setup—eliminating the need for multiple calls. Webhook support ensures seamless updates for uninterrupted workflows.

Advanced Features to Maximize Revenue

XPay's robust features make it stand out in the competitive market of subscription payment gateways:

Product Creation with SKU Support: Add plans with varied pricing and currencies tailored to different customers and regions.

Proration Support: Dynamically adjust billing based on customer usage.

Retry Management: Customize retry timings at the subscription and invoice levels to recover failed payments effectively.

Customer-Centric Subscription Management

XPay enhances customer experience with subscription controls, allowing users to:

• Skip or un-skip payments
• Pause or resume subscriptions
• Cancel subscriptions with ease

Subscription Recovery Made Easy

XPay provides payment links to facilitate quick recoveries when payment failures occur. Merchants can also offer in-app experiences that encourage customers to resolve issues without hassle.

Compliance and Security You Can Trust

XPay adheres to industry standards, ensuring data security and regulatory compliance. So you can focus on business growth while XPay takes care of secure payment processing.

Conclusion

XPay simplifies subscription management with flexible billing, advanced customizations, and seamless integration. It’s an all-in-one subscription-based payment gateway for all types of businesses. Whether you are offering digital products or services, or delivering physical goods, XPay ensures secure, efficient, and customer-friendly recurring payments.