The Recurly Payment Gateway

We are proud to announce that we have built the first payment gateway designed to support recurring billing as the primary use-case. This means that we access rich error messages from the payment processor to optimize many different common credit card decline types. As we have communicated recently, credit card declines lead to painful customer churn, which is one of the most important and sensitive metrics for any subscription business.

During beta testing, our trials demonstrated a range of 10-27% incremental lift in recovered invoices for a variety of different kinds of businesses (Both B2B and B2C).

The new Recurly Payment Gateway is now bundled with the Recurly service. In addition, we are adding critical customer retention reports so that our customers can track the long term trends of their customers by cohort month, and by subscription plan.

New Recurly Pricing

As of today’s announcement, Recurly’s pricing structure has also changed.

We now charge a simple 1.25% and $0.10 per transaction per month, with a $69 monthly minimum (as there has been for some time).

Grandfathered Pricing

Existing Recurly ‘live production’ customers will remain on their original pricing unless they choose to take advantage of the Recurly Payment Gateway, or any of our premium features – such as Retention Reports, Salesforce Integration, PayPal Payments or Multi-Currency support. We will continue to support other payment gateways to offer the broadest choice to our customers, but the cost of other payment gateways are not inclusive with our new pricing.

No Merchant Account, No Problem

All you need to take advantage of the Recurly service is your own merchant bank account. If you don’t have one already, we can help you apply and get set up with an account offering extremely competitive rates.

We’re excited about our role in helping companies to optimize their subscriber renewal rates. Our ambition is to make the Recurly service a distinct competitive advantage for our customers.

If you have any questions about the Recurly service, or the Recurly Payment Gateway, please contact sales@recurly.com.

We can help.

Cheers,
The Recurly Team.

Multi-Currency Goes Hand-In-Hand with International Language Support

Recurly also supports 12 languages, (Chinese, Danish, Dutch, German, English, English (U.K.), French, Hindi, Japanese, Portuguese, Russian, Turkish) so that your customers’ experience will be defined by their browser settings and location. Recurly will present the appropriate language to your end customer so that they can not only pay in their preferred currency, but you will also speak to them in their native language.

Multi-Gateway Support and Intelligent Payment Routing

In order for companies to support multiple currencies, it is a common to require multiple payment gateways as well. Recurly supports multiple payment gateways per account, and our customers can easily configure routing rules so that transactions can be routed to the appropriate payment gateway according to the currency specified in the transaction.

See, it’s all coming together nicely!

If you have any questions about this enterprise feature, please contact sales@recurly.com.

Cheers,
-The Recurly Team

Error Code Fidelity

The error handling for most subscription billing services is pretty basic: the transaction either succeeded or failed. Yet, the actual type of failure is incredibly important. That’s why we categorized over 2,000 error codes from the dozen gateways we support down to over 60 unique errors.

For starters, we know if a card failed with a hard decline. There’s no need to retry hard declines because the card details will never work again. Soft declines, on the other hand, should be re-attempted at different intervals depending on the failure type. For example, a debit card with a temporary hold will likely work again sooner than a credit card at its limit. Additionally, any decline by a fraud filter during a renewal should set off an alert; fraud filters should only be applied to the first transaction, otherwise they are only increasing your subscriber churn.

Subscription billing systems that rely on card details being stored in Authorize.Net’s CIM are at a big disadvantage when it comes to errors during the renewal process. Authorize.Net CIM does not explain why a renewal failed. Because Recurly stores your card numbers in our PCI compliant card vault, we are able to get the full error fidelity from our Authorize.Net integration.

Optimizing Renewals

Every gateway has a unique set of parameters that must be set differently for the first transaction, or updated billing information, versus the recurring transaction. These parameters allow us to optimize all your initial and recurring transactions on your behalf.

On recurring transactions, we disable most fraud filters. Fraud filters validate that a card belongs to the cardholder and we do exactly that during the initial transaction. So, there is little incremental benefit in applying most fraud filters on recurring transactions. Have you ever moved, only to find your credit card no longer auto-renews for some services? These merchants are accidentally increasing their subscriber churn.

Recurly also leverages continuous authority, whenever possible. Continuous authority allows Recurly to continue charging a credit card on your behalf, even after its original expiration date has passed. For gateways that do not support continuous authority, Recurly is able to submit an updated expiration date for expired cards. Most issuing banks will accept the updated expiration date on recurring transactions.

Most payment gateways that token card numbers will not allow the card to be authorized after its original expiration date passes. Once again, Recurly has a big advantage over subscription billing systems that rely on the payment gateway’s tokenization.

Failure Alerts

Through our extensive effort to categorize payment gateway errors, we know exactly why your transaction failed. Temporary failures automatically recover, soft declines are retried according to a dunning schedule, and failures requiring attention trigger an alert to Recurly support for follow up.

Recurly Adds Value Where It Matters

Many companies offer subscription billing solutions, but the ‘mechanics’ of subscription billing are not the most difficult piece to get right. Companies that choose to build their own ‘homegrown’ solution always miss the optimization opportunities, presuming that a ‘decline is a decline’. Even the most expensive vendors frequently miss opportunities to optimize your renewal rates. We encourage you to take a close look at your existing decline rates by error type and contact Recurly.

Every year, the Under The Radar conference showcases a ‘curated’ group of young companies providing meaningful innovation in the Software as a Service market (SaaS).  This year, Recurly was honored to have been one of the companies chosen to present at the conference. The audience largely consists of Software industry leaders, SaaS experts, CIOs of fortune 500 companies, Industry analysts, investors and journalists.

We enjoyed presenting at the conference, and were flattered to have been chosen as the ‘Judges Choice’ in the SMB Tools category.

Judges on the panel included:

• Charlie J. Di Bona – Microsoft GM of Strategy, Server & Tools Business
• Daniel Levine – Accel Partners
• Guy Phillips – Visa – Head of Small Business, North America
• John Dillon – Alcatel Lucent – VP, Emerging Technology and Media

We were quite flattered by the positive response from the esteemed panel of judges. We made some good friends, caught up with some Recurly customers and gathered a few more Recurly converts at the event. All in all, it was a great experience, and we’re looking forward to keeping in touch with all of the other presenting companies through the coming year.

Cheers,

The Recurly Team

Step One: Define your own billing requirements – what are your needs?

Here is a punch-list of items for you to consider:

Be clear on the structure of your subscription offering:

• How many subscription plans will you be offering? One plan or multiple plans?
• What is the billing cycle interval? (Monthly, Quarterly, Bi-Annual, Annual?)
• Will you offer free trials?
• Will your subscriptions auto-renew, or terminate on some date?
• Will your business require one-time payments?
• Do you need optional items to be added? (Add-ons)

Define how you will you price your subscriptions:

• Are you charging a flat fee per month?
• Do you have a variable pricing component? (Requiring ‘metered billing’)
• Will your pricing change based on usage? (Tiered pricing?)

Communication Requirements:

• How and when would you like to communicate with your customers?
• What are your data integration needs? CRM? Finance/Accounting? Mailing lists?
• How important is it for your billing + subscriber status to be synced up with your application?

EXPERT TIP:

Step Two: Items to look for in a subscription billing provider

Think about your businesses end-goals and total cost of ownership (TCO).

Most subscription-based businesses ultimately care about the following:

• Minimizing Customer Churn
• Maximizing Lifetime Customer Value (LTV)
• Maximizing Return on Investment (ROI) – which means minimizing TCO

You cannot achieve these goals if your billing platform doesn’t support key daily functions efficiently. Your billing system should be a valuable tool, not an impediment.

PCI Compliance:

If your vendor is not PCI Level 1 compliant, ‘do not pass go’. You cannot afford to store your customer credit cards with a company that is not invested enough to achieve PCI Level 1 certification.

Functional capabilities:

Daily administration (This is frequently overlooked):

• Is there a Customer Support console? If so, is it functional? Intuitive to use?
• Search / Sort / Filter – How easy is it to find accounts?
• Account changes – How easy is it to make a manual override?
  • Upgrades/Downgrades
  • Pro-ration of accounting? Is this automated or manual?

Really push on this. Some very expensive vendors require 30+ clicks to make simple manual changes to subscriptions.

Customer Invoicing

Automated – Are customer invoices delivered automatically?

Manual – Can you create invoices manually?

Credits and Refunds (Both whole and partial credits)

This is key functionality to keep your customers happy. It needs to be incredibly easy to issue a credit or a refund.

Transaction History

It is always critical to be able to call up the transaction history for an account in order to provide customer support.

Marketing Support: Coupon and Discount code management

Your business might require coupons or discounts for promotional purposes, or channel discounts. Coupon and discount support needs to be seamless and easy to manage. Not all systems are created equal.

• How easy is it to set up a new coupon or discount code? (60 sec. max).
• Can you manually apply coupons or discounts to an account?
• How flexible is the coupon/discount functionality?
  • One-time, Limited Time, Evergreen applications
  • Percentage discounts vs. absolute dollar off?
  • Expiration date management?
  • Applies to specific billing plans?
  • Limited count offers? “First 500 subscribers receive…”

Error Handling: Credit Card Error and Decline Management

Like it or not, your recurring payments will encounter errors. This is a given when you are charging credit cards on a recurring basis. Cards will be declined for a variety of reasons, and from a variety of sources.

Q: At the highest level, you need to know whether your provider stores credit cards and tokenizes cards in their own environment.

A: If the answer is no, then that vendor cannot remediate credit card errors and declines on your behalf. It’s that simple.

Reporting: Data or Business Insights?

What kind or reporting capabilities do they provide?

Revenue by period, Revenue by plan, Monthly Recurring Revenue (MRR), Cohort analysis, Credit card decline rates, Lifetime value analysis?

What is the support model? Look at support forums and evaluate quality and timeliness of responses.

Step Three: Evaluate Total Cost of Ownership

Total cost of ownership is often underestimated.

It breaks down simply to the following four buckets:

1. Cost of Integration (often a hidden cost – Recurly takes days rather than months)
2. Cost of Administration
3. Cost of Customer Churn and Non-renewing subscribers (another hidden cost)
4. Marginal Cost of Billing Service

Is your billing system working for you? Or are you working for your billing system?

Expert Tip:

Most evaluations of subscription billing providers erroneously focus only on #4. Total Cost of Ownership surprises most companies. Ease of integration, ease of use and ease of administration can be very costly. (Employee resignations have occurred over frustration with complex billing systems)

Pricing Gotchas

Be clear on Setup Fees, Cancellation Fees, Extra charges.

(Recurly does not charge for any of these)

Network Availability

Don’t be shy. You’re the customer.

Ask for third party auditing of network uptime and availability reports. [Recurly has proudly maintained 99.994% uptime in 2011]

Final Thoughts:

Expensive ≠ Better

Your subscription billing system should work for you, not the other way around. Paying more for an expensive enterprise ‘solution’ does NOT mean that you get more value.

If you consider the elements from this guide, you will not only be much happier with your ultimate decision, but your business will have a greater chance of success.

If you would like to learn more about Recurly’s capabilities, please contact sales@recurly.com

Recurly was invited to Supernova as one of the spotlight innovating startups, which enabled us to present our service to attendees. More importantly, it let us attend the various sessions. These ranged from panels focusing on the evolving “real-time web” to the changing landscape of venture funding to the future of global internet policy. The common thread through all of these areas was rapid, real-time change. Rapidly changing times, rapidly changing customer needs and rapidly evolving business models.

How Subscription Billing Fit in

We were really curious to see how the movement towards subscription billing and Freemium models would be discussed. Over the past few months, we’ve spoken to companies ranging from SaaS companies to small newspapers and nonprofits- all of whom are looking at new ways to gain revenue and donations. It was encouraging to hear that the trends we’ve seen over the past year- a movement from traditional ad based revenue models to subscription models- highlighted several times by the panel speakers. One particular presentation stood out in this area- the panel on building startups today in the aftermath of the recent recession. Rashimi Sinha (Slideshare) , Christine Heron (First Round Capital) and Dave McClure (Founders Fund) discussed their thoughts on building a company now, how to fund it and guide it to success.

What was mentioned time and again was that now is the time is right for creating a new company. More can be accomplished with less capital- thus the reasoning for the drop in the size of funding rounds and the increase in the quantity of smaller fuding rounds. For many startups, pure bootstrapping is a very viable and real option. With the drop in dollars put in by VCs to startups,  Dave felt VC’s now offer an even greater level of support for startups in non-tangible resources (assistance with marketing, partnerships, advice on social media). Most interestingly, Dave and Christine suggested if you’re building a startup today, you should be looking at a subscription-based revenue model for success.

What does this mean?
As time goes on, there is going to be a larger shift towards service paid for in smaller- but recurring- increments. Multiple attendees I spoke to from several larger enterprise software executive to the manager of a nonprofit agreed that this shift towards subscription billing/donations is a direct factor of the economy. By lowering the bar to trying a new service (or donating to a charity)- it makes it much easier for an end user to sign up for. Even if the cost of the service over the user’s lifetime is higher, the value of being able to amortize the cost over time is a great incentivizer to using a product. With the explosion in the area of subscription billing and the growing amount of businesses interested in subscription billing, we see this number only growing, And we look forward to assisting make it easy.