How Is Subscription Payment Service Technology Helping Companies Thrive?
By Cory Mann, Managing Director, Payments Innovation and Product Strategy
It’s an exciting time for business as emerging technologies make it easier to attract – and keep – new customers. A subscription payment service is an innovation available to companies of all sizes that can offer considerable advantages when put to use. Let’s take a quick look at how it works.
Advantages of Automated Subscription Payment Services
Consumers are eager to adopt new payment innovations, and 51% want to pay bills through electronic channels. Subscription payment services satisfy these preferences, allowing customers to set it and forget it through automated billing.
Unlike traditional payment methods, where customers receive a statement for reoccurring charges and send payment by check or through electronic channels, subscription services automatically deduct the reoccurring amount from the customer’s bank account or charge it to a credit card.
Businesses realize several benefits from automated or subscription payment services, including:
- More on-time payments: As a business, you know how disruptive it can be when customers pay late. With automated payments, 39% of consumers say they make bill payments on the due date, meaning more consistent cash flow for your business. Organizations also spend less time tracking down late or missed payments.
- Lower costs: With automatic payments, businesses send fewer bills by mail, reducing the costs associated with printing and postage. Automated billing also reduces the burden on internal AR resources, leading to lower costs overall.
- Enhanced security: When customers are set up with automated billing, payment information is not stored by the payment service provider. Instead, an account number is converted into a token, ensuring that customer information remains secure, even if technology resources become compromised.
- Flexibility for One-Off Payments: While many businesses, such as cell phone or internet service providers, process only one consistently priced payment a month, leading automatic payment systems offer flexibility to send additional invoices when needed. So, if you run a lawn care company, for example, and one of your subscription clients wants to add a one-time service, such as tree trimming, it’s easy to send an invoice without disrupting the regular automated payment.
Because 85% of all reoccurring bills are paid digitally by customers, setting up subscription plans also make it easier to meet consumer needs, leading to higher levels of satisfaction and more long-term loyalty.
How to Start Subscription Payments
The first step in setting up automated billing is to determine how often payments will be made. While most companies set up a monthly schedule, a business can arrange a schedule that works best for the organization and its customers.
Once a payment schedule is determined, the company collects bank or card details from their customers and adds them to the subscription plan. From this point forward, the customer’s established form of payment will be charged according to the determined schedule, with funds transferred automatically to the business.
A business without a strong tech team to select, implement and manage automated billing systems may hesitate to consider subscription payment services. But there are easy-to-implement tools available. Third-party services can bring the security and efficiency of subscription payments to businesses of all sizes and can easily connect to an existing payments system.
When seeking a solution provider, be sure to consider how your business operates. Certain factors, such as the number of customers you have, how often payments are processed and the payment software integrations you need to accommodate, will influence your choice. For example, integrating the service with existing accounts receivable technology can further streamline business accounting, but only if your current software is compatible with the subscription payment vendor you choose.
This is an area where your bank can help. The first step is to speak with your commercial banker. Because they are familiar with your business, they can easily connect you with the right people and solutions needed to implement subscription payments for your organization.
About the Author
Cory brings a well-rounded list of professional experiences to his role at FNBO, including a history in product and innovation, strategy, marketing and client communications. He held various leadership positions across the financial services industry, and is frequently called upon to leverage his expertise as a marketing and technology consultant for businesses and nonprofits.
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.