Subscription revenue is enticing for any company. It offers more financial stability, reduces customer acquisition costs, and is easier to maintain than irregular purchases.
Monthly recurring revenue (MRR) has become a baseline metric for many companies. It’s the amount of predictable revenue that your business expects, based on your active subscriptions. Not only does your MRR predict your cash flow, but it can help you forecast future revenue so you can make business decisions.
But even recurring revenue can have hiccups — unrelated to the product or service your company provides. Collecting payments presents a variety of challenges, even if it feels like this part of your business should be on autopilot.
Offering pay by bank can eliminate some of these problems and ensure you’re not missing opportunities to increase your MRR.
Avoid involuntary churn and failed payments
Customers don't think much about subscription payments after their initial signup. They plug in their debit or credit card info and assume payments will process on a monthly basis.
Some customers will inevitably churn because they’re unhappy or trying to reduce spending. If a customer opts to leave, you can try to draw them back in with email marketing or special offers.
But involuntary churn is trickier. It happens when something interrupts the customer’s payment method, such as an expired credit card. Payments can also fail when a credit card hits its spending limit or a debit card transaction is returned due to insufficient funds. In these cases, you either need interaction with the customer to correct the issue or need to try the payment again. Either way, you’re not collecting the payment as expected and potentially interrupting the delivery of goods or services to the customer.
Pay by bank offers a more reliable and consistent payment method for your current customers, ultimately improving the MRR of your subscription business. You won’t have to worry about issues with expired or changed credit cards. Credit cards expire every 3 years but Americans tend to hold onto their checking accounts for 17 years. You’ll also have fewer failed payments since the money is taken directly from the customer’s account when the payment is initiated.
Collect payments with lower fees
Credit card processing is well-known for its associated fees. From payment processing fees to card network fees, it can add up quickly. If you’re a business with lower margins, in particular, you’ll find that these fees eat into their profits.
In some cases, businesses may try to pass these fees along to the customer. But that can be a turnoff to a customer who gets all the way to checkout, and then finds an additional fee tacked on as they’re ready to complete the transaction. And as a recurring subscription, that might be hard to swallow.
Pay by bank can have lower costs than the fees imposed by debit and credit card vendors. Since the payment is more direct (passing through fewer parties), there are lower fees as a result. Lower fees will have an immediate impact on your net MRR.
Give customers more payment options
Not every customer will want to use a debit or credit card at checkout. There will always be a segment of the population that doesn’t want to use a card, either due to how they manage their finances or their ability to access credit. Some customers may even distrust credit cards and feel that pay by bank is more secure.
In some regions, pay by bank has a much higher penetration. Offering pay by bank can help you expand into new markets --- especially where pay by bank is preferred over credit cards.
By offering pay by bank, you’re capturing additional customers you might not otherwise acquire. Whether they see pay by bank as more convenient or simply preferable, you’re giving them options. And your MRR will improve as a result of converting more prospects into paying customers.
Pay by bank offers an innovative solution that can be a significant customer advantage for subscription businesses. Customers crave convenience and security, and pay by bank meets both of these needs. It’s a seamless transaction experience that benefits both customers and your MRR.
Link Money provides a fast and low-cost pay by bank solution for merchants. Learn more here.