Top Recurring Billing and Payments Tools Compared

The simplest way to describe recurring billing is to label it as a subscription. More precisely, it’s an ongoing payment for a product or service on a periodic basis. With a recurring billing and payment software, the subscribers can provide their credit card information to pay for the goods or services on a periodic basis. The vendors, in turn, withdraws the payment on a regular schedule until such time as the subscriber’s subscription expires and/or is canceled.

Recurring billing provides a benefit to subscribers who risk missing out on the delivery of a product or service, with a guarantee to have continuous service. Vendors love it, as it makes their revenue more predictable with the prior knowledge of the payments, plus it cuts down the administrative headaches associated with the collection of payment.

The subscription economy is not that new: Businesses have been selling monthly subscriptions for all sorts of goods and services for years. Think newspapers and magazines. More recently, a variety of industries has started dabbling in subscription-based business models, offering anything from online software to toothbrushes to television shows for a flat monthly fee.

Consumers now have an option to subscribe to the products and services they want, when they want them. Recurring billing makes this process simpler. The essential areas that change when companies transition their models to the subscription economy are pricing, customer onboarding, internal operations and growth, and financial metrics.

How to pick the right provider?

When it comes to subscription management and recurring billing, it can be a bit overwhelming to track down what it all means. To understand how the billing system works, we need to understand the basics. All recurring billing systems rely on payment systems, namely payment gateways, and merchant accounts.

Payment Gateways: If a business is making an online transaction with your credit card, they are most likely using a payment gateway. It is an application on websites that allows the linkage of the client payment account with the website’s account. Payment gateways connect to all the credit card companies like VISA, Mastercard, or AMEX to make it easy to collect any kind of credit card users want without having to submit to Payment Card Industry (PCI) compliance.

Merchant Account: A merchant account is a type of bank account that allows businesses to accept money from payment cards. If you’ve ever used your card and actually wondered where the funds have transacted to, they have gone into a merchant account. The money is transferred out to a business bank account, usually on a daily or weekly basis. When businesses want to accept credit cards online, they will need a merchant account. Some payment gateways will also provide a merchant account behind the scenes.

Payment Gateways and Merchant Accounts ensure that credit/debit cards are charged and the money ends up in the right accounts. But to handle a subscription that needs to get charged every month, we need to rely on subscriptions for the recurring billing systems to ensure that every month the right people get charged the right amount.

Now that we have established the basics we shall take a look at the top 3 billing and payment services — Stripe, Recurly, and Zuora.

Stripe: Stripe offers a set of unified APIs and tools that instantly enable businesses to accept and manage online payments. There are two ways for businesses to accept credit card payments on Stripe: via the dashboard or by integrating the service into their online stores.
With the dashboard, users can manually add customers and enter their credit card information. As for the website integration, users have the choice of using the Stripe API or embedding the easy-to-use Checkout app.
Stripe has 80% market share in the recurring billings and payments category and is a popular choice for small businesses, particularly the small office/home office (SOHO) sector, which constitutes 58% of their client base.

Recurly: Provides enterprise-class subscription management for businesses worldwide. Offers an enterprise-level platform for recurring billing management designed specifically for subscription-based SaaS, Web 2.0, mobile, content and publishing businesses with global reach.
The platform allows businesses to implement a subscription billing system and handles tasks like credit card number storage and supports integration with financial software like QuickBooks. Over 53% of Recurly’s clients, including Unbounce and LiveChat , belong to the IT-sector.

Zuora: Provides subscription billing as well as recurring revenue, payments, and billing solutions. Zuora offers users the flexibility to create pricing plans, bundles, promotional campaigns, or offers to get new customer acquisition without waiting for IT resources.
The rating and billing system can take care of complex subscription invoicing and payments details as it summarizes and reconciles transactions. Zuora also provides real-time insights into subscription metrics, as well as insights into the accounts receivables and revenue operations. Zuora is popular among mid-sized companies, which constitutes of 37% of their client base.

Conclusion

What is the right choice for you? Well, the answer is not simple. You have to ask the right questions before deciding what is right for you, like what do your payments look like? Do you prefer simple plan-based billing, or are you going to be charging for variable usage?

Your location is another plays a big role. Some providers are only available in a select few countries. The payment processing law a complicated, region dependent problem and you want to make sure that you have the right mix of payment gateway and management layer to help you navigate the legal maze for where your company is headquartered.

And finally, you need to know how much can you spend. Most hybrid gateways don’t charge extra for their subscription layer. That’s great news if you’re doing something simple, but if you need the power of the subscription-focused services, you’re going to have to pay extra.

You can also take a look at other great Recurring Billing and Payments tools, which fits in with your company’s stack.