Choosing the Best Payment Gateway for Your Subscription-Based Business

Selecting the best payment gateway for your subscription-based business is crucial to ensuring smooth transactions, reliable recurring revenue, and a seamless customer experience. Unlike one-time purchases, subscription models require a payment solution that can handle recurring payments, reduce churn, and provide robust security.

A payment gateway designed for subscription businesses understands the unique challenges of recurring revenue—such as managing failed payments, updating credit card information automatically, while ensuring compliance with industry regulations. In this article, we’ll explore the key features to look for so you can find the best payment gateway for your subscription-based business.

What is a Subscription Business Model?

Subscription business models revolve around selling a product or service in exchange for recurring monthly or yearly payments, prioritizing customer retention over acquisition. Instead of a single upfront payment, these models generate revenue by allowing customers to make multiple payments for ongoing access to a good or service. As the economy shifts toward a preference for subscriptions over ownership—spanning industries like automotive, software, entertainment, and retail—businesses benefit from increased customer lifetime value (LTV) and more predictable revenue streams.

A growing number of industries thrive on subscription-based services. You probably use a few of them already:

• Entertainment: Among the most obvious subscription-based services are streaming entertainment services that charge a monthly or annual fee for access to their libraries. This includes services like Netflix, Hulu, and Amazon Prime Video.
• News Media: Today, 82% of American adults access their news online. Many subscribe to their favorite outlets like The New York Times, The Washington Post, and The Wall Street Journal.
• Meals: Instead of going to the grocery store, some customers have meal preparation kits sent to their homes weekly through services like HelloFresh, BlueApron, and EveryPlate.
• Fashion: Companies offer clothing and styling services with a regular fee, often taken at customizable intervals. This includes services like StitchFix, Rent the Runway, and Fabletics.
• Software: Software as a service (Saas) is a subscription-based model where users generally pay a monthly, annual, or lifetime fee to access software. This includes services like QuickBooks, Zoom, and Adobe Creative Cloud.

The Best Payment Gateway Features for Subscription-Based Businesses

A payment gateway processes payment transactions by authorizing and transferring payment data between a business, the customer, and the financial institutions involved. It acts as the critical link between your website or application and the payment networks. A robust payment gateway not only encrypts sensitive data to prevent fraud but also integrates with your existing systems to automate billing, reconcile transactions, and support various payment methods. Choosing the best gateway is essential for optimizing cash flow, maintaining compliance, and providing a frictionless payment experience for your customers.

Because customer retention is a priority, the best payment gateways for subscription-based businesses will provide features that help reduce payment decline rates and customer churn, ensuring a steady revenue stream. Such features are account updater, Amex Cardrefresher, and customer payment recovery.

Reduce Subscription Payment Decline Rates

One of the most significant issues subscription-based businesses face is outdated payment information. As a customer, it happens to everyone; your credit or debit card expires and suddenly, you’re under an avalanche of “payment failed” emails. As a business owner, this means you’re constantly facilitating updated payment methods and encouraging your subscribers to update their cards or account numbers.

With automatic account updater, or Amex Cardrefresher, you can reduce declined payments and lost profit due to outdated card information. Account updater and Amex Cardrefresher automatically query participating card networks, including Visa, Mastercard and American Express, identifying and updating card and account numbers.

Customer Payment Recovery

Give your customers the ability to complete a purchase when their payment is declined. Instead of a payment failure message, customers  are presented with the option to complete the purchase and be charged at a later stage. With customer payment recovery, a large percentage of your failed payment transactions can be rescued. Businesses can expect up to a 15% revenue increase.

Secure Online Payment Processing

Make sure the payment gateway your considering is PCI-DSS certified.  PCI-DSS certification means that the payment gateway complies with the Payment Card Industry Data Security Standard (PCI-DSS)—a set of security requirements established to protect cardholder data and reduce fraud risks. This certification ensures that the payment gateway follows strict guidelines for encrypting, storing, and transmitting payment information securely.

Transparent, Cost-Plus Pricing

Most Payment Service Providers (PSPs) like Stripe and Authorize.Net charge the same bundled rate per transaction. If you’re paying a bundled rate for payment processing, you’re likely paying more than you should. Instead of paying one bundled fee no matter the transaction, you pay the actual interchange fee plus the merchant services for that transaction. This coupled with level 3 processing, can save you even more in processing fees.

24/7 Support

If your business works around the clock, so must your payment gateway. At Payway, we provide personalized support facilitated by our dedicated staff. You won’t have to waste time navigating a call center to get the answers you need. Instead, you’ll get concierge-level service from the start of your payment journey through ongoing maintenance. You can always reach a human instead of a bot.

Payway May be the Best Payment Gateway for Your Business

Payway has a long record of serving subscription-based businesses – 41 years to be exact! We began serving publishing companies in 1984, processing subscription payments long before the start of the internet. Our payment gateway has evolved since then to provide the most secure online payment processing, purpose-built for subscription-based businesses.

Contact us to learn more about how Payway may be the best payment gateway for your subscription-based business!