Solving Subscription Billing Problems

By Author: Bryan Johnson 1
Total Articles: 19
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Online merchants are increasingly turning to monthly, subscription based business models to acquire customers and generate additional revenue.

Many Internet Service Providers and Software as a Service Providers require customers to agree to a six month or yearly contract. Content providers charge users monthly subscription fees for access to website content, such as articles, or they can charge advertisers for monthly advertising subscriptions. Even retailers use a subscription model for Book of the Month Clubs, Wine of the Month Clubs, or they may even offer high priced items payable in 5 easy installment payments.

All of these subscription models rely on a neat little feature available through most online merchant accounts. It's called recurring billing. With recurring billing the customer agrees to have their credit card charged every month for the amount and time agreed upon. The transactions occur automatically each month, making it a no hassle payment plan.

So what's the problem with recurring billing?

Visa estimates that 50% of cardholders experience a change in their account information every ...
... year. Let's say that halfway through your customer's yearly contract, their credit card expires. Their automatic monthly subscription payment comes back denied. What are you going to do? If you think about it, you don't have many good options.

You can contact the customer and kindly ask them to update their credit card information. However, at this point you may discover that the customer's contact information is also out of date, leaving you with no way to reach them.

If you're lucky, the customer will reply and maybe after a week or so update their payment information. This is the best possible outcome. You still have your customer, but you've waited a week or more for payment, and you're out the time and effort it took to track them down.

Another option is to simply deny the customer access to your service, but then you run the risk of losing them for good. You surely don't want to lose a customer with whom you've already cultivated a 6 month relationship. Many customers will use this opportunity to renege on the contract they agreed upon. Unless you plan on taking them to small claims court, what are you going to do if they refuse to update their payment information?

The answer is called Account Updater.

Some online merchant account providers have come up with a feature that automatically updates customer's credit card information. One vendor, Braintree Payment Solutions, allows merchants to enroll in Account Updater, a program run by Visa and MasterCard, that automatically updates a customers credit card number or expiration date when changed. The program will also provide notification if the account has been closed. The process is entirely transparent to the cardholder, and best of all it's totally PCI Compliant.

So, if you're an online merchant who relies on monthly subscription billing, you can increase recurring billing revenue with fewer failed transactions, effortlessly update account expiration date and account status, and reduce customer attrition with Account Updater.

Problem solved!

Bryan Johnson is the author of this article on online merchant account. Find more information relating to Account Updater, and recurring billing here.