|By D.J. Murphy, Editor-in-Chief
Subscription billing enables vendors to mitigate uncertainty and risk by assuring a predictable and constant revenue stream over a certain period. The business model was pioneered by magazines and newspapers, but, with the advent of e-commerce, it was applied to an ever-expanding range of products. CyberSource, a Visa-owned anti-fraud technology provider, noticed the trend and, in October 2011, launched a comprehensive managed billing system to accommodate the surge in merchants using the model.
“It used to be that it was specific industries focused around subscription billing. Companies like utilities and media outlets,” according to Rini Ghose, solutions marketing manager at CyberSource. “But now we see an increasing number of other types of businesses interested in a subscription model. The array of products now available by subscription is eye-opening. Things like shoes, razors, software, pharmaceuticals, gym memberships, anything you can think of.”
Companies that take subscription payments using credit cards, however, open themselves to card-not-present complexities they may not be used to dealing with. CyberSource says its managed billing solution offers merchants flexibility, PCI-compliant security, the ability to take payments via multiple channels and global reach that other providers cannot match.
Ghose says the wave of non-traditional products being offered via subscription—generally by newer tech-savvy companies operating online—is even leading to more established merchants taking recurring payments for their products. In these types of companies, that is leading to tension between marketers who want to leverage the promotional opportunities present in subscription models and accountants who are not equipped to reconcile the books with a new way of thinking.
“We wanted to figure out a solution that allows people to manage the process in as automated a fashion as possible so they can benefit from the incremental revenue streams without their costs going out of whack,” Ghose says.
With Managed Billing, CyberSource is able to meet the requirements of subscription billers who have very specific needs that are often not met by traditional solutions. In addition to providing billing via all major global and regional credit cards, the solution also enables payment acceptance via PCI-compliant IVR or call centers. The solution accommodates micro-payments, trial periods, discounts, metered billing, etc. Merchants can avoid payment failures by automatically receiving updated cardholder information via the Account Updater Service.
CyberSource points to one of the very first merchants that signed on with the service—a national retail chain with more than 4,000 locations—as an example of how its solution can enhance subscription revenue.
The company was looking for a solution that could handle all the complexities of the service offering including self-management of warranties, and that could scale rapidly to keep up with growing demand. The solution had to accept payment information in a secure environment without increasing the PCI DSS scope of the rest of its operations.
Within weeks of implementing CyberSource Managed Billing, the company was averaging nearly 250,000 new accounts per month and around 78,500 monthly payment transactions.