Each year, subscription providers lose an average of 9% of their revenue on failed payments.
This revelation comes from a recent 2023 PYMNTS report that further uncovers that 50% of these providers say failed payments directly contribute to the challenge of customer churn. Despite this, only 36% are actively tracking customer churn, with just 17% tracking failed payments at all.
What these numbers ultimately prove is that subscription platforms and providers need an enhanced approach to payments — especially when it comes to preventing payment failures.
Yet, managing an entire payment stack on your own can be a tremendous burden.
Not only do you need to build and maintain the right connections to payment processors, banks, financial service providers, and fraud tools, but you also need a strong strategy for compliance as well.
Solving these challenges requires an innovative approach to payments that can help streamline your payment processes, reduce the complexity of compliance, and ensure you have the right tools and connections at your disposal at all times.
So, you may be asking yourself, could payment orchestration be the key to escaping these payment woes as a subscription platform?
What Key Payment Challenges Do Subscription Platforms Face Today?
To best examine how subscription platforms can improve their payment systems, we must first take a look at the specific hurdles subscription platforms face.
Undoubtedly the biggest challenge is ensuring recurring payments are easy to make, on-time, and well-managed.
Payment timeliness is reliant on the customers easily subscribing and the merchant seamlessly processing recurring payments. Primarily, this is through merchant-initiated transactions where subscribers register a payment method with the merchant and give permission to merchants to process payments on their stored payment methods regularly. Many factors go into effectively managing this subscription model and payments orchestration adds such benefits as:
- Tracking Payment Activity: While subscription service providers may be tracking failed payments, are they building business intelligence from them? Are they operating on when subscriptions are coming in and paid for? Are they examining the preferred payment methods their users are using? This can be a crucial step towards improving a subscription-based payment process and understanding customer behavior. Detailed payment tracking is essential for identifying errors and pain points in both the back-end processing and the front-end customer experience.
- Alternative Payment Methods: Subscription platforms often have a product that can and should have global coverage. To enable and expand global coverage, accepting alternative payment methods from around the world must be a part of this motion. Subscription platforms need the ability to understand how their current and prospective customers prefer to pay and offer a wide range of payment methods to suit those preferences. This includes alternative or local payment methods specific to the regions they plan to expand into.
- Keeping Payment Methods Fresh: Any business relying on recurring payments, whether on-demand or subscription, should ensure they are using the latest tools to keep those payment methods securely stored and updated. Payment Orchestration goes beyond just accepting new payment methods and transacting payments across multiple gateways - it also enhances how payment methods are stored, updated and managed. Spreedly’s Advanced Vault combines card-lifecycle updates, network tokenization, and data enrichment within a single vault product, enabling clients to optimize their stored payment methods. Updating your customers’ payment credentials automatically to ensure smooth recurring payments is a must-have for any subscription business.
- Rules-Based Framework for Best Practices: When working with a payments provider, subscription businesses should look for partners with expertise on how to manage their payments. Spreedly, having stored over 1 billion payment methods in our platform, builds rules-based logic directly into our vault, taking the lift off of our clients’ teams and making payments best practices easy to implement as they manage their stored payment methods.
- Improving the User Experience: Customer experience is a major component that can make or break a subscription platform. Recurring payments need to cause little to no additional work on the customer’s end. The payment experience needs to be as frictionless as possible, whether that is offering stored credentials to enable automated payment options so that customers never miss a payment, automatically updating stored payment details ensuring customer churn is kept to a minimum, or building simple failover routing to instantly re-route declined transactions to improve success rates.
How Can Payment Orchestration Improve Subscription-Based Platforms?
Payment orchestration enhances payments across all types of models —and businesses with recurring payments in particular can realize a host of benefits.
The payment orchestration layer within a payment tech stack:
- Simplifies payment method integrations
- Routes recurring payments to the ideal services or gateways that offer the highest potential success rates or most attractive costs
- Automatically updates and optimizes stored payment-methods with card-lifecycle programs, network tokenization, data enrichment, and an embedded rules-based framework for best practices
Here’s a closer look at the benefits payment orchestration provides to subscription platforms:
- Simplified Integrations for Recurring & One-Time Payments: Many subscription platforms offer both subscription services and standalone products or services that only require a one-time payment. Recurring and one-time payments generally require different types of payment integrations, such as a wider range of payment processors and gateways.. Moreover, even subscription platforms that offer only recurring payment options need the ability to integrate subscription management services and other key tools, such as fraud checks, with ease — all of which payment orchestration can help facilitate.
- Increased Payment Flexibility: When your subscription platform does not have access to a variety of payment services, your payment system can grow inflexible and rigid, especially with the pace of payments innovation.. This becomes an especially difficult challenge if your entire payment service is augmented by a single provider - and is therefore limited to just the functionality it can offer. Payment orchestration makes your payments dynamic and flexible by giving you access to not only more services and tools but also the freedom to work with multiple providers as your business evolves.
- Optimized Stored Payment Methods: Subscription businesses rely on stored cards for recurring payments. Payment Orchestration brings a modern toolset for keeping those cards updated in your hands. It also enables businesses to collect and operate on an enhanced data set from the stored cards and their transaction activity. Orchestration also offers a rule-based framework for managing those stored cards to reduce needless costs and keep them organized.
- Greater Global Reach: Payment Orchestration offers out-of-the-box global reach. With a vast range of global payment service providers and payment methods available for you to connect to as needed. As your subscription platform grows globally, orchestration offers the best opportunity for your payments ecosystem to keep up. . This is particularly helpful not just in terms of activating a global network of alternative payment methods but also for improving authorization rates, lowering fraud, and keeping the overall cost of payments low
If you are new to payment orchestration or simply want to learn more, read our guide on Payment Orchestration and Payment Optimization: The Definitive Definition.
How Spreedly’s Payment Orchestration Supports Subscription Platforms
If you are a merchant or merchant aggregator looking for the ideal way to optimize your subscription platform and services, look no further — at Spreedly, our payment orchestration solution is designed for many broad and tailored use cases, including subscription platforms.
Spreedly offers many vital capabilities that can support your subscription platform, such as:
- Global payment connections and payment methods for expanding into new markets with ease
- Speedy transactions optimized through smart routing to help reduce payment failures that cause customer churn
- A modern toolset for securely storing and updating cards on file for recurring payments. Spreedly’s PCI-compliant Advanced Vault includes card-lifecycle support and network tokenization with best-practices built into the product.
- Improved insights enabled through our transaction measurement, data enrichment, monitoring, and reporting tools
Taking your subscription platform to the next level is easy with Spreedly. Our payment orchestration solution is customizable to your needs so that you can ensure a highly tailored payment experience that keeps your customers coming back for more.
Discover the power of payment orchestration today by contacting the Spreedly team.