In the last seven years, the subscription industry has miraculously grown by 300%. While the subscription industry is expanding at a rapid pace it is still considered a high risk industry. This is due to the various factors involved in subscription payment services.
If you find yourself in the recurring revenue industry, you’re probably aware of some of the challenges you face when starting a subscription service. Unfortunately, payment processing can be one of the biggest hurdles you’ll encounter. To make it easier for you to understand, we’ve compiled a list of the top ten biggest factors that affect subscription payment services.
1. The Subscription Industry is High Risk
Due to a variety of factors, the subscription industry is considered high risk. High risk businesses have different relationships with payment processors, as most typical payment processors will not take on risky businesses. As the industry is high risk, subscription businesses need to use high risk payment processors instead of just any payment service, such as PayPal or Stripe.
2. Very Vulnerable to Chargebacks
The subscription business is highly vulnerable to chargebacks, which affects choices in subscription payment services. Typical payment processors do not want to take on businesses that are chargeback vulnerable, as it can affect their relationship with banks. Reputable high risk payment processors/subscription payment processors are equipped to help manage chargebacks.
3. Fraudulent Charges Mar the Industry
Fraudulent charges are similar to chargebacks in nature. The subscription industry is highly vulnerable to them, which deters payment processors from taking on subscription businesses. You can find high risk subscription payment services that will take on your business, even with the risk of fraudulent charges.
4. Business Owner Credit Score is Low
A credit score can affect whether a payment processor will take on your business or not. Some companies will not accept businesses with little or no credit score. There are reputable high risk payment processors, that will take on your subscription business – even if you have little or no credit score. As long as other aspects of your business are in place, PaymentCloud will partner with banks that they know will accept businesses with a poor/no credit score.
5. Blacklisted by a Previous Payment Processor
Being blacklisted by a previous payment processor you worked with can be harmful in finding a subscription payment service. As the subscription industry is already high risk, being blacklisted can make it challenging to find a payment processor that will take on your business. While this can affect your ability to find credit card processing, there are high risk payment processors that will take on your business–you just need to find the right one.
6. New Businesses Have Hiccups
Another factor that affects subscription payment services is being a new business. With no online presence, business credit score, or customers, it can be hard to find the right payment processor for you.
7. Refunds Undermine the Business
Refunds affect subscription payment services just like chargebacks and fraudulent charges do. Businesses with high vulnerability for refunds are considered high risk, and can deter typical payment services from taking on the business.
8. Negative Perception of Industry
This factor is one that is quite unique to the subscription industry. There is a somewhat negative perception of the industry, as many consumers may have accidentally signed up for a subscription. Due to this, consumers may feel like subscription businesses, in general, are scams. Part of this problem can be related to billing practices such as negative option billing that recur without the need for customer confirmation.
The negative perception of the industry can affect subscription payment services. To mitigate this risk in your business, ensure that your policies and straightforward and clear. If your customers know exactly what they are signing up for, you shouldn’t have a problem.
9. Compliance, Rules, and Regulations
To run a successful subscription business, you’ll want to make sure you are fully compliant with all regulations. As subscription businesses are built on an automatic periodic renewal, any pause or delay in receiving a product can cause customers to opt out of the business. A reputable subscription payment service will ensure that you are compliant with all regulations. There are plenty of online tools to help you understand the regulations for your business.
10. Online Credit Card Processing
Running a successful subscription industry is dependent on successful credit card processing. If credit card payments cannot go through, it will be challenging to be successful, as monthly renewal is typically tied to an automatic credit card payment. Subscription payment services need to ensure that they are fully equipped to support both credit and debit cards, nationally and internationally, and you need to ensure that you are choosing a payment service with foolproof credit card processing.
While it may seem that there are a variety of factors affecting subscription payment services, it’s good to know all of them upfront. Now that you know what you’re dealing with, you’re fully prepared to pick a subscription payment processor that will allow you to grow and scale your business rather than focusing on payment processing.