Back in 2013, a tweet sent out by the Associated Press (AP) Twitter account reported two explosions had taken place at the White House that had injured then-U.S. President Barack Obama. Within a matter of minutes, that single tweet sent Wall Street into a frenzy, wiping out more than $130 billion from the U.S. stock market.
Shortly after, AP claimed their Twitter account had been hacked and that no explosion had taken place. President Obama was safe and sound.
While the losses were quickly recovered, the incident highlighted the serious financial consequences of misinformation.
For any SaaS (Software as a Service) or other business, making important decisions based on misconceptions can be detrimental for growth.
Here are 4 of the most common recurring billing myths that we needed to debunk, in order to help empower your business for success:
Myth #1: It’s difficult to keep customer credit card data safe on the cloud
Protecting customer data is a huge concern for many businesses. In fact, 46% of businesses avoid adopting newer technologies due to cybersecurity fears. These companies often feel as if their data won’t be safe if contained within an external platform.
In 2018, cyberattacks became more common than ever, with companies like Facebook, T-Mobile, PumpUp, and Uber all reporting that they had been hacked.
Considering more than a billion people were affected by corporate data breaches last year, it’s easy to feel like your business is never safe from a potential security violation.
When large scale data breaches occur, it can be for a variety of reasons:
- a company might have been hacked.
- their security system had holes that left customer information without proper protection, or
- data was mishandled.
As a start-up, the last thing you want is to have your customers’ payment information compromised.
An advanced recurring billing platform that is PCI 1 compliant is backed by world-class security. In order to be certified PCI 1 compliant, a business that processes credit card payments must abide by a strict set of security standards. The stringent compliance audit process can run for months and must be performed frequently for a platform to remain in good standing.
This means you can rest easy knowing that all customer payment information is safe and secure in your billing platform.
Myth #2: It’s better to build your own in-house billing system than use an existing platform
Many start-ups assume that building your own in-house recurring billing system is a more ideal, convenient option than going with a SaaS platform. Often, these companies believe that they can easily create their own customizable billing solution and make changes and upgrades to it at any time. They may also perceive that it’s safer to maintain all their customer and company data in-house, rather than storing it elsewhere.
In reality, building a recurring billing system is incredibly time-consuming and costly, and results in many unforeseen consequences.
With a large customer base, implementing marketing, product, or pricing changes on a home-built system is nearly impossible without significant development effort. Several developer cycles need to be devoted to even a simple upgrade.
Features offered by complete subscription management and recurring billing platforms include dunning management, integrations, revenue recognition capabilities, advanced reporting, PCI compliance, and automated communication. These tools are often non-existent with home-built systems.
Therefore, using a specialized platform to handle your recurring billing and subscription management will save you from exhausting much time and resources on building and maintaining a system that doesn’t meet your long-term needs.
Myth #3: A recurring billing platform works the same way as a payment gateway
When starting out with recurring billing, many businesses don’t understand that a subscription billing platform is vastly different than the payment gateway they are already using.
A payment gateway is simply an e-commerce service that processes credit card payments and facilitates transactions.
An automated subscription billing platform that integrates with a variety of payment gateways handles recurring billing, invoicing, payment processing, and subscription management within a single system.
Think of an automated platform like the Starbucks app. Customers that have downloaded the app can place their orders in advance and pay for them using their mobile devices. When picking up your Frappuccino and panini, you simply grab your order and go without having to pay in store or wait in line. Without the app, you have to stand in line and wait to order and pay the old-fashioned way.
Like the app, a recurring billing platform serves as a portal that stores all your business’s customer data, such as past orders and payment information.
Modern recurring billing platforms also include a laundry list of other features which a gateway alone does not offer.
A prime example is dunning management features that help you recover revenue. This means the platform will send out automated communication to notify customers of a failed or late payment, or when a credit card is about to expire. The platform will even retry credit cards when payments fail.
Dunning management is often a huge asset to companies as it’s estimated that 75% of these failed payments will go through when they are retried. A simple payment gateway is unable to recover this revenue for you.
Myth #4: Churn is only product related
For SaaS and other subscription-based businesses, client retention is critical. Because the subscription model is driven by regular recurring sales instead of one-time transactions, holding on to customers is what ensures your business earns consistent revenue.
However, businesses that previously focused on one-time sales but have made the shift towards a recurring billing model sometimes underestimate the negative impact of churn.
These businesses might view losing customers as unavoidable. They won’t take active steps to identify what went wrong and prevent it from happening in the future.
Indifference towards client retention can end up being costly, as 80% of a business’s future revenues will come from 20% of existing customers.
'Churn rate’ is the rate at which a subscription-based business loses its subscribers. It can either be voluntary, such as when a customer takes their business elsewhere, or involuntary, when credit cards expire or fail.
Here are a few ways churn can be avoided with a recurring billing system:
- A self-serve portal empowers customers to change their preferences, view invoices and make payments.
- Automated email notifications ensure that there is a consistent and effective stream of communication between your business and customers. This also ensures that customers are notified when payments fail so they can fix the problem and avoid accidentally churning out.
- Financial reports and analytics give you access to customer behavior in order to identify potential signs of churn, such as declining usage or subscription downgrades. This will allow you to take proactive steps to prevent customers from voluntarily churning out.
With these tools in place, a recurring billing platform helps mitigate churn by improving the overall customer experience.
From fake news to old wives’ tales, there’s no shortage of misleading information floating around the data-enriched world today.
Whether it’s a tale about a company that successfully built their own recurring billing system to one that flourished in spite of a high churn rate, it’s important to discern that these are the exceptions, not the rule.
Arming yourself with credible, reliable information will empower you to make the right decisions when it comes to the growth of your business.