How to choose the best payment provider for your subscription or recurring payments business

Subscription and recurring payment models have become the cornerstone for enterprise businesses seeking to establish predictable revenue streams, nurture customer loyalty and reduce churn. The global recurring payments market is projected to be worth $268.7 Billion by 2033, up from $130.2 Billion in 2022. Meanwhile, the global subscription market is poised for even bigger growth -- predicted to reach $1.5 trillion by 2025. South Africa mirrors this trajectory, with over 7.2 million active subscriptions and a market set to grow to over $820 million by 2025.

However, enterprise businesses face a range of challenges when it comes to recurring collections. Sectors such as prepaid, insurance and lending grapple with tough regulatory requirements, diverse payment frequencies and complex transaction dynamics. For example, insurers need to streamline claims and payment processing, provide multiple ways for customers to pay their premiums and address threats of fraud. For lending companies, efficiently managing loan payments and minimising missed or failed payments and default risks are key concerns.

Failed payments, for example, account for nearly half (48%) of customer churn. On the operational front, enterprise businesses face complexities in managing integrations across various payment methods,  providers and financial institutions, as well as reconciling transactions and chasing missed payments.

To help businesses choose the right payment methods for subscription or recurring payment processes, here are five key factors to consider:

1. Access to multiple payment method options enhances customer satisfaction

For enterprise businesses that rely on collecting subscriptions or recurring payments, offering multiple payment options is crucial. Diversifying payment methods not only caters to various customer preferences but also ensures fallback options, financial stability and flexibility. When a business relies on a single payment channel, it becomes vulnerable to fluctuations, disruptions or downtime and potential loss of revenue. It also means less choice for the customer, which may increase instances of missed payments or churn.

By offering multiple payment options, enterprise businesses can reduce the risk of payment failures and boost customer retention. They are also better able to adapt to changing market dynamics, regulatory requirements and evolving payment technologies.

How Stitch can help

Stitch offers enterprise businesses a number of different payment flows that are suitable for collections:

• Recurring card payments, which are ideal for marketplace apps and services like e-hailing, streaming platforms, insurance, utilities, telecoms, gyms and more. With Stitch, merchants can tokenise card details for first-time users and then later request payments using the token, allowing for charges without the user's presence.
• DebiCheck enables businesses to collect, manage and reconcile recurring and subscription payments via an authorised Debit Order mandate. This can be combined with other methods using smart routing to reduce missed or failed payments – and lower costs. 
• To accommodate customers who need to make payments outside their regular billing cycle, Variable Recurring Payments (VRP) allows a consumer or business to authorise a third party to initiate payments from their bank account on their behalf. This is done according to a set of previously agreed-upon rules and limits, providing significant benefits including enhanced budget management, increased customer satisfaction and reduced churn for businesses.  
   

2. Smart routing minimises failed payments

To collect recurring payments, businesses can offer a number of options, including card, Pay by bank, Debit Order / DebiCheck or even once-off options in the event of a missed payment, such as manual electronic fund transfers (EFT). Implementing smart routing allows enterprise businesses to establish rules that tailor payment method options to individual customers based on specific circumstances.

For instance, if a customer has set up recurring payments via Pay by bank, but their account lacks the necessary funds for the transaction, the system should automatically present the user with alternative payment options such as manual EFT, card payment or cash to ensure a smooth payment experience.

How Stitch can help

The Stitch orchestration platform includes smart routing capabilities, enabling clients to seamlessly integrate and manage all their payment methods and service providers in one place, while setting custom rules. For example, clients can opt to display specific providers with lower fees when the payment amount falls below a certain threshold. This functionality is made simple with a straightforward toggle switch, offering clients the flexibility they need to customise their payment processing options.

3. Payment orchestration platforms improve reconciliation

Using a payment orchestration platform also significantly improves the reconciliation process for subscription or recurring payments businesses, and reduces admin burden. This technology streamlines the complex task of matching payments to customer accounts, reducing errors and manual intervention. By centralising and automating reconciliation procedures, enterprise businesses can ensure accurate financial records and easily identify discrepancies.

Payment orchestration platforms can also simplify the reporting process through standardised report formats and a centralised view of all transactions.

How Stitch can help

Stitch Reconciliation enables enterprise businesses to reconcile payments across different methods and providers in one place. You can plug in any payment method or provider across geographies and easily track, audit and reconcile all online payments via one dashboard. Accounting teams can access frequent reports in standardised formats to significantly reduce time spent producing audits and reconciling payments. This streamlines financial operations across divisions and departments.

4. Automating payment systems boost scalability and growth

Automating payment operations is vital to enable scalability and growth within the subscription and recurring payments industries. Automated operations simplify reporting and auditing by consolidating data from various sources, enabling smooth invoicing and attribution and significantly improving the payouts process. By incorporating automation into your financial processes, you empower your business to efficiently manage the complexities of recurring payments or subscriptions while focusing on scalability and growth.

In fact, an ever-growing number of enterprise businesses are turning to payment orchestration platforms to automate financial processes and enhance their operational efficiency. Projections indicate that the global market is set to grow to $3,041.9 million by 2028, up from $793.6 million in 2021.

How Stitch can help

With Stitch, you can plug into our orchestration platform to increase revenue by automating processes. Clients can view live data to understand or test which method or provider is performing best for which customers and optimise rules and workflows to reach peak payments performance. They can also harness the insights derived from these systems to pinpoint the most effective methods and providers for specific contexts. Additionally, automating bulk payouts reduces the time spent by finance teams managing manual transactions.

5. Ensure your provider meets industry-standard security and compliance requirements

Ensuring customer data security is paramount for any enterprise business. Complying with industry standards such as PCI DSS (Payment Card Industry Data Security Standard) is a critical step. This framework mandates robust security protocols, encryption and stringent access controls to protect sensitive payment information.

Investing in secure, PCI DSS-certified payment gateways and licensed TPPPs, and partnering with trusted service providers, bolsters an enterprise business’s commitment to data security, creating trust among customers and reducing the risk of data breaches.

How Stitch can help

Stitch is level 1 PCI DSS certified and registered as a Third Party Payments Provider (TPPP) in South Africa. Most local or international businesses operating in South Africa can partner with us without needing any additional licensing and be fully compliant with local regulations.

Choosing the right payment rails

Choosing the right payment infrastructure is paramount for enterprise businesses seeking to minimise payment failures, reduce customer churn and boost scalability and growth. ​​The best approach is to opt for a combination of different payment methods that align with your customers' preferences while ensuring the availability of backup options in case of payment failures.

Here is a checklist of things to consider when deciding:

• Smart routing strategies. Ensure your payment provider can offer smart routing to minimise payment failures, provide tailored options and ensure a backup in the event of service disruption
• Access to multiple payment flows. Make sure your provider has the capability to provide multiple methods to accommodate different payment needs and scenarios
• Recurring billing. Select a payment gateway capable of managing the complexities of recurring billing. This involves safeguarding customer information, automatic billing by agreed schedules, streamlined reconciliation, contingency plans for failed transactions and more
• Choose a payment orchestration provider to automate payment processes. Leverage a payment orchestration platform to allow your finance team to manage and reconcile transactions and automate payment processes across multiple payment methods and providers. This will boost efficiency and pave the way for enhanced scalability and growth
• Prioritise security and compliance. Ensure your payment processor or gateway meets industry-standard security and compliance requirements.
• Balance cost, flexibility and security. Balance the cost of a payment solution with its flexibility and security features. While cost-effectiveness is crucial, it should not come at the expense of data security or flexibility in accommodating various payment methods

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