It is not a secret when the online payment topic is exposed, it can still cause some fear and doubts. What is the best way for processing recurring payments? What is it about? How does it work? What will it mean for our customers?
The main objective of this article is to guide you about the tricky and important aspects of online payments for businesses with presence on the net.
Before we begin, it is critical to realize the choice that you are going to make about what subscription commerce platform will be used in your business. It will definitely cause an impact to the daily operations of your company and in case of any inconvenience and a big pain in the back to change later. So, it is worth to take the necessary time to choose wisely.
What components does your company need to take recurring payments?
In most cases, your platform will need three or four key elements, which are:
- A shopping cart software
- A recurring billing management system (may be integrated with the shopping cart)
- A payment Gateway
- A merchant account (optional)
What is a Shopping cart software?
A Shopping cart software is an e-commerce program which is located on a web server that permits visitors of a specific website to select items for purchasing or to accumulate a list of articles to buy (by the use of labels like: “add to cart”, “placing items in the shopping cart”).
When the purchasing process is completed , the software will calculate the total amount of the order, including fees (such as shipping and handling costs) and the corresponding taxes.
These applications commonly provide a method to capture a client’s payment information, but in the case of credit cards, they depend on the software module of the secure gateway provider and secure payment gateway, with the purpose of protecting online transactions when credit cards are used.
Most of the shopping cart softwares are implemented using HTTP cookies or query strings, however, data related to the shopping cart is accessed and used on the fly while a user chooses different items from the cart. At the end of the transaction, the information is accessed again with the purpose of generating an order including the selected article and then, clearing the shopping cart.
How to choose a shopping cart platform for a Subscription Commerce Business
Before stepping forward in the complicated process of choosing an e-commerce platform, first you have to take into consideration which of the available platforms have support to recurring payments and which don’t.
Some of the available platforms are:
- Cratejoy: Perhaps considered as the best option because of its all-in-one architecture that is capable of operating a subscription box business with a wide range of support-focused features, which includes telling a friend about campaigns, analytics and management of errands.
- Magento. It has an open source shopping cart system with good functionality. But surprisingly, this platform has limited support for subscription billing, however, some external developers offer extensions (for a price of course) with extra subscription functionality.
- WooCommerce. A open source shopping cart system based on the WordPress platform. It has a subscription commerce plugin.
- Customize your website. The ideal platform if you want to build a subscription commerce website using technology such as Ruby on Rails or PHP. For this option would be ideal to integrate it with a dedicated recurring billing management system, however, it may require extensive custom development work.
What is a Payment Gateway?
Payment Gateways are considered the core of online payments and e-commerce in general. It is the platform that the shopping cart or recurring billing system reports back to. Its main function is to take your client’s payment details (e.g. credit card data) and connect to the payment networks (e.g. Visa, Mastercard or American Express) to process the transaction in an easy way.
However, when choosing a payment gateway, there are four major factors to be considered:
- Transaction fees. When you are processing a payment, some gateways need to detain a small portion of the charge in order to keep using their app. You can pay a tiny fee for each operation or a settled percentage from each purchase.
- Types of payment cards. It is quite important to know what kind of payment cards (credit or debit) are accepted by the chosen payment gateway. Moreover, some of those platforms require customers to link with their bank accounts rather than using a card.
- Accept payments through forms. Pay attention to this factor if you are going to implement a pre-built form integrated to collect your incomes. Some gateways will get
the payment in the form itself, but others will reroute users to another page to complete the purchasing process.
- Recurring billing. It gives the possibility of scheduling payments which are going to repeat in determined period of time. If you need to charge your clients based on a monthly plan and do not want to have stress about doing this action manually, then you need a payment gateway that supports recurring billing.
How to Choose a Payment Gateway for a Subscription Commerce Business
As usual in business, we have another complicated decision to make: to choose a payment gateway. However, to put it simple and straight to the point, the key factors that you must consider are the following ones:
- Does the payment gateway work for businesses in your country?
- Does it integrate with your chosen shopping cart platform or recurring payments system?
- Does it have convenient support for subscription payments?
What is a Merchant account?
A merchant account is a kind of bank account that allows stores, shops or companies to receive money from credit or debit cards. If your company requires the option of accepting online payment by credit cards, it will definitely need a merchant account. Perhaps, people did not realize this due to some payment gateways sometimes providing a merchant account under the table.
In plain words, after a credit card is charged, the money needs to go to a determined destination, and for this purpose, a merchant account is necessary.
Here are some the best merchant accounts services available in the market:
- Cayan. Considered by some marketing experts as the best merchant account service, Cayan (formerly known as Merchant Warehouse) adapts to the needs of almost any type of business. For instance, It offers a wide selection of brands and lines of credit processing hardware such as wireless equipment and credit card terminals, with the necessary software, printers and PIN pads. Additionally it has the following features:
- a) No contract or cancellation fees.
- b) No hidden fees or charges.
- c) Quick response from highly trained merchant advisors.
- d) Fast and easy account setup.
- e) No application, programming or setup fees.
- f) Lowest guaranteed prices on all processing hardware and software.
- Charge.com. It is one of the most affordable merchant account providers available. It is quite common that some online retail owners feel uncertainty about including merchant services into their business due to the fact that it can be quite expensive. Nevertheless, Charge.com is an attractive option considering that this provider charges zero fees and also contributes to any kind of business with an instant approval, so you can start doing business immediately. Some of its feature are:
- a) Free setup and application
- b) Technical support with no additional cost
- c) Free shopping cart software
- d) Internet check software without charge
- e) Free search engine submission
- f) Discount Rate: 2.25%
- TransFirst. It has quickly become one of the best merchant account services providers on internet due to its lower rates in the industry. Suitable for businesses of any kind, TransFirst has a big number of services and equipment to accept payment cards on your webpage or your store front business. But the main reason of its quick success is that it offers the best customer-friendly support, conformed by a team of well-trained specialists, who are always willing to help and guide new or regular users through the merchant account process. Some of its noteworthy features are:
- a) Fast approvals (no more than 24 hours)
- b) Quick and easy setups
- c) No setup or programming fees
- d) Low prices for equipment
- e) Real-time processing data for your website
- f) Shopping cart integration
- g) Funds available within 48 hours
Difference between Merchant Account and Payment Gateway
Yes, we know it is a bit confusing to determine the difference between them. After all, merchant accounts and payment gateways share the same goal: to collect money from your customers. However, they do it in very different ways. It is quite important to understand the difference between them as you determine the ways to manage your company’s income.
|Payment Gateway||Merchant Account|
|Each time that any payment card is used for an in-store or online transaction, a service has to communicate with the client’s credit/debit card to check if sufficient funds are available. In the case of in-store transactions, these are often made through a POS (point of sale) machine.||A merchant account is pretty similar to a bank account, but its function is collecting money from payment cards until it is transferred to a regular bank account.|
What is a Recurring Billing service?
We know that the main purpose of payment gateways and merchant accounts is to charge a client’s credit/debit card and ensure that the money will arrive, without any problems, to your account.
But what about dealing with a subscription that needs to be charged monthly? In this kind of situations is where recurring billing systems enter. These services contain a credit card safe box, and a list of periodic charges, and their main function is to ensure that every month the correct people is charged the right amount.
Recurring billing systems (like Recurly, Chargify or Zuora) deal with this issue and have an edge over other payment gateways and merchant accounts. Actually, some payment gateways have changed and adopted recurring billing functions to their modules.
Even though payment gateways have existed since e-commerce appeared, nowadays most companies have focused on recurring billing services with some new features to help software developers making their lives easier, like sending e-mails to the clients with their invoices, rating upgrades and downgrades and managing dunning (i.e. dealing when a payment card has expired or been declined).
How to Choose a Recurring Billing service for a Subscription Commerce Business
It is likely that you will encounter this dilemma: you may need a dedicated recurring system as basic subscription management or you may not.
Remember that its main feature is the built-in integration with some shopping carts and payment processors (for example, PayPal’s recurring billing system). It adds an extra fee but provides advanced subscription features such as the capacity to automatically send emails to clients regarding the expiration of their payment cards.
However, it is important to keep in mind these factors:
- Does the system support an appropriate payment gateway for your country?
- How easily can be integrated into your shopping cart platform?
- Are costs convenient for your business?
Then, we are going to suggest some sites which may be useful for your business:
- Recurly. This software was developed for subscription commerce. Offers customer communications management and an analytics dashboard. It grants the option of building Payment Card Industry (PCI) compliant transaction forms to be easily integrated into a website, to give customers a wider range of payment options.
- Chargify. This versatile platform provides a SaaS (Software as a Service) billing solution that can deal from coupons and refunds, to email receipts and free-trial periods. Its support billing systems allow users to pay by credit card or by invoicing for larger accounts. Recently, this service has added analytics and several metrics for subscription commerce business. Additionally, it offers a remarkable mobile app with an attractive design and user-friendly interface.
- Zuora. It is the ideal invoicing platform for enterprises/large companies. It offers some useful features such as comprehensive metrics, tax automation, and support for multiple currencies. Provides an immediate integration with Salesforce and Netsuite, which saves companies time and money by replacing outdated enterprise resource planning (ERP) systems.
It is noteworthy to mention each software comes with its own pros and cons. Your choice will definitely depend on the size and range of your subscription commerce business.
So, after reading and learning from all this information, here comes the one million dollar question:
How should I pick the best option for my company?
Well, as this article was created to help you avoid headaches and make your life easier, we strongly recommend you take your time to analyze and ask yourself these three questions:
Question #1 How are you going to receive payments?
Do you want to do a simple plan based on billing service, or do you prefer to charge for variable usage? If your plan is to build a complex business, probably the best option for you is searching for a company that aims on SaaS as their main business instead of a “hybrid” payment gateway. But if you want to apply for a simple plan-based billing, you will be surprised about the quickness and simplicity to customize “hybrid” gateways to do that.
Question #2 What is your location?
Some providers offer their services exclusively for certain countries. For example, Stripe is only available in the USA and Canada, while others, such as Paymill, focus on Europe. Unfortunately, payment processing law is troublesome and depends on the region to allow or not a transaction. For this reason, you need a versatile plan and knowing which payment gateways and management layers are available in your location.
Question #3 How much can you spend?
The fact that hybrid gateways generally do not charge anything extra for their subscription, is indeed, great news if you are planning to do something simple. But you have to pay extra if you require services focused on subscriptions. It is important to follow the example of some companies which have a mix of monthly and transaction fees without paying anything to get started.
To sum up
If you still have many doubts after answering these questions, remember, you will always have at your disposal a useful option to obtain clues or information: social networks. So post a support request or a tweet, and see which providers will give the quickest feedback. If that still doesn’t help, take a look the programmer’s documentation; read it thoroughly and choose the option that adapts better to your needs. And finally, you need to be sure you trust your provider to have the capacity of offering easy to use services, good and quick support, and growing and adapting with your business.