Optimizing Payment Orchestration for Subscription-Based Businesses

Introduction

From streaming services like Netflix to software platforms like Salesforce, subscription-based businesses are becoming increasingly popular across various industries. This is further corroborated by the 2023 Business of Apps survey, which shared that subscription-based businesses generated approximately $45.6 billion in revenue that year. Thus, for companies relying on this model, ensuring a smooth and efficient recurring billing process is essential for maintaining revenue streams and customer satisfaction.

However, as companies scale and expand globally, managing payments in a subscription model comes with challenges, such as payment failures due to expired cards or declined transactions, currency conversion issues for businesses with global customers, and regulatory compliance issues for different regions, such as the GDPR in Europe.

Furthermore, subscription-based businesses often need to enable multiple local payment methods (LPMs) and alternative payment methods (APMs), as relying on a single processor may not meet the needs of every region the company aims to serve. Additionally, ensuring secure card vaulting across regions can be complex, as businesses must comply with varying security standards while maintaining seamless recurring payments.

This is where payment orchestration comes into play.

This article will explore actionable strategies that subscription-based businesses can use to optimize payment orchestration processes, reduce churn, and improve long-term customer retention. Let’s get started.

What is payment orchestration?

Payment orchestration involves managing, from initiation to settlement, the entire payment workflow (payment authorization, analytics, fraud detection, and others) through a centralized platform to ensure transactions are processed smoothly and securely.

An example of a payment orchestration platform is Juspay, which acts as an intermediary between businesses and multiple payment service providers. It optimizes each transaction by selecting the best payment service provider (PSP) based on factors such as customer location and payment method. Juspay automatically retries failed transactions through alternative routes, significantly increasing success rates. Additionally, by continuously monitoring performance and ensuring compliance with local regulations, Juspay enhances overall transaction efficiency for global businesses.

Check out this blog post by Juspay to gain a comprehensive understanding of payment orchestration.

Next, let’s explore some common issues subscription-based businesses face without payment orchestration.

Challenges in subscription billing without payment orchestration

Managing subscription billing without payment orchestration presents significant challenges that can negatively impact revenue and customer experience. These include:

High payment failure rates

Without a system to automatically route transactions through alternative gateways or retry failed payments, businesses face issues like insufficient funds, declined transactions, or downtime of banks or payment gateways. This often leads to missed payments, disrupted services, and increased customer churn — accounting for up to 48% of churn rates.

Limited payment method flexibility

Without payment orchestration, businesses often depend on a single payment provider, limiting the range of payment methods they can offer customers. This lack of flexibility can alienate customers who prefer alternative payment options such as digital wallets or local payment methods, especially in global markets where preferences vary widely.

Lack of scalability

As businesses grow, billing needs often become more complex. Handling different pricing tiers, subscription frequencies, and promotional offers can be difficult without a payment orchestration system. This lack of scalability can slow growth, restrict product innovation, and create operational bottlenecks.

By understanding these challenges, we can explore the benefits of using payment orchestration for subscription-based businesses.

Key benefits of payment orchestration for subscription-based businesses

Payment orchestration offers numerous advantages for subscription-based businesses, addressing many of the challenges inherent in recurring billing models. Here are some of these key benefits of payment orchestration while also using Juspay as a case study to show how they help subscription-based businesses enhance their payment flow.

Support for recurring payments and automated billing

Payment orchestration platforms are designed to facilitate recurring payments seamlessly. For example, Juspay’s Hyperswitch provides an API to process automated payments for subscription-based services, ensuring transactions are executed at the correct intervals without manual intervention.

While Juspay doesn’t directly manage subscriptions, it integrates smoothly with subscription management services like Kill Bill or Chargebee. This integration reduces the risk of payment errors, saves time, and provides customers with a frictionless payment experience.

By handling the payment processing aspect efficiently, Hyperswitch makes subscription-based business models more manageable for companies, allowing them to focus on their core services while ensuring a smooth payment experience for their users.

Improved customer retention through smart routing and reduced payment failures

Smart routing is a feature of payment orchestration that directs transactions through the most suitable payment gateway based on factors like currency and payment method.

A platform like Juspay uses a non-deterministic mathematical model to rank all applicable gateways to optimize payment flows and reduce the likelihood of payment failure. This significantly improves transaction success rates, helping businesses retain customers and reduce churn. When payments consistently succeed, customers are less frustrated and more likely to continue their subscriptions.

Card vaulting for secure and seamless recurring payments

Another benefit of a payment orchestration platform like Hyperswitch is its card vaulting feature, which securely stores customer payment information for future transactions. This not only minimizes the PCI DSS compliance burden for subscription businesses but also supports seamless, frictionless recurring payments by eliminating the need for customers to re-enter payment details with each billing cycle.

Additionally, using PSP-agnostic tokens, stored payment data remains compatible across multiple payment service providers, allowing businesses to easily switch providers and optimize transaction routing. Together, these features empower subscription businesses to reduce churn, improve customer satisfaction, and maintain a secure, flexible payment infrastructure.

Automating retries for failed payments

Payment orchestration systems automatically handle failed payments through sophisticated retry mechanisms, significantly reducing the need for manual intervention. These systems not only retry payments at optimal times but also intelligently route transactions through alternative payment gateways when appropriate. This approach addresses various failure scenarios, including insufficient funds, expired cards, temporary network issues, or gateway-specific problems.

This automation helps businesses recover potentially lost revenue from failed payments, minimizes customer disruption, and ensures a higher overall payment success rate. The ability to dynamically switch between gateways during the retry process adds an extra layer of reliability, making the payment system more resilient to individual gateway failures or performance issues.

To achieve this, Juspay provides two distinct retry mechanisms: mandate retry for recurring payments, which attempts to process failed transactions on the same day for both technical and business failures, and silent auto-retry for one-time payments, which operates in the background over an extended period. Coupled with these, the failure reason is identified, and the appropriate retry mechanism is triggered for payment failures.

Support for global expansion by offering multiple payment methods

As businesses expand globally, they must cater to diverse customer preferences regarding payment methods. Payment orchestration platforms support various payment options, including credit cards, bank transfers, and local payment methods. This flexibility enables businesses to meet the demands of different markets and customer segments, ensuring smooth transactions across regions.

Simplified compliance and enhanced fraud detection

Navigating complex payment regulations like PCI-DSS can be challenging for businesses, but payment orchestration platforms simplify compliance by managing security protocols and regulatory requirements across all payment channels.

Additionally, these platforms often come equipped with advanced fraud detection systems that monitor transactions for suspicious activity, protecting both businesses and customers from fraudulent transactions.

Detailed payment analytics for subscription optimization

Payment orchestration provides businesses with comprehensive analytics on their payment flows, enabling them to monitor performance, identify trends, and optimize their subscription models.

These detailed reports on transaction success rates, customer payment behaviors, and potential bottlenecks allow businesses to make data-driven decisions to improve revenue streams and enhance the overall customer experience.

By leveraging these benefits, subscription-based businesses can create a more efficient, scalable, and customer-friendly payment model that drives growth and reduces churn.

Next, we’ll examine some measures to optimize a payment orchestration platform to enhance subscription-based businesses.

Optimizing payment orchestration for subscription-based businesses

To optimize payment orchestration platforms, subscription-based businesses should:

• Leverage analytics to track success rates and gateway performance, using these insights to identify bottlenecks and refine billing strategies
• Implement intelligent gateway routing and regular testing, especially during high-volume periods, to maintain optimal performance
• Configure region-specific payment options and dynamic currency conversion to improve international transaction success rates

Conclusion

This article has discussed payment orchestration, its applicability in subscription-based businesses, and how to optimize it to maximize its benefits. By using a payment orchestration platform, businesses can:

• Automate recurring payments
• Support diverse global payment methods
• Leverage smart routing to minimize transaction declined

In conclusion, by using a payment orchestration platform, businesses can significantly reduce churn, enhance customer satisfaction, and improve the overall business workflow.