Choosing the Right Payment Processing Solution for Your Subscription-Based Business
Online business requires online payment processing, and with a growing number of options available, it can be hard to know which one is right for you. In this article, we will review what payment processors are, how they work, and how you can select the right payment gateway for your subscription-based business.
What Is a Payment Processor?
Payment processors are vital for any kind of commerce. They provide merchants with a direct connection to card networks like Visa, Mastercard, and American Express for credit and debit card payments.
On the surface, this may seem like a simple process, but each card transaction triggers a series of additional actions. Payment processors handle these actions and work as an intermediary between you and the card networks you accept payments from to handle the payment processes securely.
What Do Payment Processors Do?
So how do payment processors handle a transaction from start to finish? Since payment processing usually happens in seconds, it’s easy to overlook the number of players and actions they must complete. Let’s look at the essential steps of a transaction:
- Transaction Initiated – A transaction begins when a customer makes a purchase and selects their payment method. Then, the customer provides their card information, whether it’s in person or online.
- Connect via Payment Gateway – After the customer provides their card information, it passes through a payment gateway, which uses a payment processor to connect to card networks and complete the transaction.
- Confirm Payment with Card Issuer – The payment processor communicates with the network that issued the card, and the transaction is either approved or declined.
- Receive Information from Payment Processor – The payment processor tells the gateway if the bank or network that issued the card has approved the transaction. If the transaction is successful, the payment processor completes step 5.
- Transfer Funds to the Merchant – When a payment is approved, the payment processor transfers the funds from the customer’s account to the merchant.
What is the Difference Between a Payment Gateway and a Payment Processor?
While you may see these terms used interchangeably, payment gateways and payment processors are two distinct parts of the complex online payment puzzle.
Payment processors directly connect with card networks like Visa and Mastercard, while payment gateways connect you with those processors. In essence, your payment gateway gives you access to the credit card networks you need to accept payments.
But payment gateways do more than provide processor access. They also let you accept other forms of online payments, including Apple Pay, PayPal, Google Pay, and more, depending on the gateway.
Where Do Merchant Accounts Come into Play?
Merchant accounts provide a holding place for transactions. Since settling some transactions takes a little time, merchant accounts serve as a staging area. Unlike business accounts, you can’t use the money in a merchant account to make purchases.
After your payment processor approves a transaction, the processor moves the funds from the customer’s account into a merchant account. Then, after all the processes are complete (usually within 24–72 hours), the money is transferred again into the merchant’s business account.
What Do You Need for Payment Processing?
To begin accepting payments, you’ll need a payment gateway to facilitate transactions between your customer, your business, the card networks and your bank. Some gateways offer merchant accounts as a separate service, while others will bundle their gateway and merchant services together. Payment gateways also allow you to take payment types beyond cards to give your customers more options, like Apple Pay, PayPal or non-card transactions like ACH.
A good payment gateway will make accepting payments simple and easy, reducing the burden on your business. Many even offer widgets or embeddable payment forms to use on your website, making the process seamless for your customers.
What Should You Look for in a Payment Gateway?
Each business has unique needs, and since payment gateways aren’t one-size-fits-all, it may take some time to find the one that works best for you. There are a few things to consider when choosing your gateway for an online payment processing platform:
- Merchant Banks – Some payment gateways only work with select merchant banks. Make sure your gateway will work with your banks.
- Payment Methods – Ensure your payment gateway offers a range of payment options. For example, many now accept credit and debit cards along with Apple Pay, PayPal, Google Pay, and other popular payment options.
- Low Fees – Businesses pay a flat rate per transaction or a monthly fee to use a payment gateway service. Review the payment processing fees to ensure they fit your business’ budget.
- Security – Your customers’ security should always be your top priority. Ensure their sensitive card and payment information are kept safe with secure payment processing.
- Customer Support – Since payment gateways are an integral part of online business, make sure yours has a strong customer support record so you can be confident help is there when you need it.
Why Do Subscription-based Businesses Have Unique Payment Processing Needs?
Most purchases are one-off transactions for products or services. However, a growing number of industries thrive on subscription-based services. You probably use a few of them already:
The long list, includes categories and examples
- 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.
Businesses that offer subscription-based products and services need a payment gateway that lets them accept payments and facilitates reliable recurring payments. Customers expect their subscription payment processing to be automatic on the same day each month, while merchants expect reliable transactions without their intervention.
What Does Payway Offer?
Payway has the longest record of success serving subscription-based businesses among payment gateways. We began serving publishing companies in 1984, processing subscription payments long before the advent of the internet. Our smart, savvy model has evolved since then to provide the most secure online payment processing, purpose-built for subscription-based businesses.
Our payment solution gives you the most secure payment processing in a comprehensive payment gateway. With Payway, you get more than a one-size-fits-all approach. Here’s a quick glimpse of what we offer:
Reduced 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 Payway’s automatic account updater, you can reduce lost profit due to outdated card information. Our account updater automatically queries participating card networks, including Visa and Mastercard, identifying and updating card and account numbers in Payway’s vault so you can reduce declined payments each month.
Secure Online Payment Processing
At Payway, security comes first. Our gateway is PCI-DSS certified, so it meets all the steps required for the highest level of payment processing security and customer data protection throughout each step of the transaction process. We protect each transaction with tokenization, point-to-point encryption, and EMV 3D Secure, the global standard for eCommerce authentication.
Transparent, Cost-Effective Pricing
Instead of bundling credit card transaction fees, we offer an Interchange-Plus Pricing model that reduces credit card processing fees. We monitor spending and identify purchases that qualify for lower payment processing fees, saving you money.
If you’re just starting out and don’t have a merchant account set up for online processing, or want to transition away from your existing provider, Payway also acts as a merchant services credit card processor. Our cost-plus pricing model gives you complete visibility into your transaction pricing, so you always know where your money is going.
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Simple to Use
While payment processing may be complex, implementing it for your business shouldn’t be.
For our customers, we provide a simple gateway that is easy to navigate and implement on your website so you can start collecting recurring payments.
For your customers, we provide a range of secure payment options from traditional credit cards through emerging digital wallets so they can use their preferred payment method, extending your customer reach and reducing cart abandonment.
In the digital age, your business must work around the clock. That means your payment gateway needs to work 24/7 too. At Payway, we provide personalized services facilitated by our dedicated staff. Don’t waste hours navigating a call center to get the answers you need. Instead, get concierge-level service from the start of your payment journey through ongoing maintenance, and move forward with confidence knowing you can always reach a human instead of a bot.
Flexibility from Start to Finish
Your business is as unique as each of your customers. Since there’s no one-size-fits-all approach to collecting payments online, we’ve created the most flexible, customizable platform for you to streamline your processes and grow with the confidence that your payment gateway will evolve with your business.
Explore Payway’s Online Payment Processing
Start accepting recurring payments today with Payway’s comprehensive solution. With Payway, you get more than a payment processor; you get dedicated support backed by 35+ years of experience serving subscription-based businesses.
Explore our cost-plus pricing model, use our savings calculator to see how much you can save when you switch to Payway, or schedule a call with one of our representatives to get all your questions answered.
Selecting the right payment gateway for your subscription-based business can be challenging. But, by understanding the essential elements of payment processing, along with what your business needs, you’re ready to tailor your payment platform to meet your needs today and flexibly scale for the future. Especially if you know:
- What types of payments you want to accept. Credit card networks, or also other forms of payments, including Apple Pay, PayPal, Google Pay, and more?
- How seamless the process is for your customers with the payment gateway. Do they offer widgets or embeddable payment forms to use on your website?
- Whether the payment gateway works with your bank.
- How recurring payments are facilitated and how outdated payment information is updated.
- What transactional or monthly fees are involved.
- How security is structured to protect your customers’ sensitive card and payment information.
- What customer support is included so you can get answers and help when you need it.