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DIY Recurring Payments? Read This Before You Go Any Further

Moving to or adding a recurring revenue model will definitely cause a spike in customer sales. It will also increase the number of interactions you have with each customer. This is important to consider if you are planning a DIY approach to automating the recurring transactions (i.e. coding it yourself).

Trying to build and implement your own payment processing platform is a complex undertaking and can cause real headaches, missed revenue opportunities and big client problems due to billing errors. Administrative costs will be higher too. In-house programming will also inhibit your ability to quickly change your offerings, because every change requires new coding. Here are some key things to consider:

1. Lack of Flexibility: Need to change pricing or options quickly because the market is changing? This won’t be an option. Each change will require development resources and time.

2. Misallocation of Resources: Think of it this way … you’re asking your best engineers to stop working on things, like lowering costs through better fulfillment systems, and start hardcoding a billing platform that is at bare minimum as complex as your actual product.

3. Death by Churn: You will need to gather and build the intelligence to increase the percentage of submitted transactions that are successful. Churn is your #1 killer when offering subscription billing.

4. Dunning Management: There are over 100 unique codes to describe why a credit card might decline. Each type of decline has an optimal dunning strategy. If you know when and how often to retry cards based on these unique codes, you can save your company from losing significant earned revenue. Lack of experience and insight here can increase declined charges up to 5%.

5. Regulatory Scope: Adding recurring transactions to your business significantly increases your regulatory scope. Are you prepared? How much time does your team have to research, prepare for, and ultimately adapt to ever-changing PCI compliance requirements.

6. Fraud and Chargebacks: If you’re not taking the right steps up front to limit chargebacks, like screening and transaction data matching, you will be fined heavily and often.

These are just some reasons to stay away from a DIY approach when taking recurring payments. To learn how we can help you optimize your recurring revenue — and avoid detrimental DIY billing errors and costs — give me a call at 267.287.1035 or send me an email at rellis@membersolutions.com.

Rick Ellis is a Business Development Executive with over 20 years of experience operating a membership-based company. Rick has experienced firsthand the types of unique challenges present when using a recurring billing business model. Rick enjoys working through complex business models to find and leverage every opportunity to optimize profit and reduce risk.

 

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