Subscription Payment Gateway Guide (UK 2024)

Planning to implement a subscription pricing model for your UK business? One of the first things you’ll need to do is choose a payment gateway.

This is the platform that will process recurring payments from your customers each week, month or year. You will also use it to manage subscriptions, as well as potentially providing customers with a self-service model to amend or cancel subscriptions.

In this helpful guide, we’ll cover everything you need to know about subscription payment processing services in the UK. This includes how they work, benefits, a list of popular providers and much more.

And while you’re looking into cost-effective ways of getting paid by your customers, make sure to check out Wise Business. It’s the ideal solution for receiving international payments from gateway providers like Stripe, without losing out to high fees and currency conversion costs.

💡 Learn more about Wise Business

What is a subscription payment gateway?

A payment gateway is a platform or service which processes payments on behalf of businesses. A subscription payment gateway is just the same, but with the ability to automate recurring payments according to a pre-set schedule.

An example of this in action is a fitness company offering gym memberships. The customer signs up for a gym membership, which includes an agreement to sign up for automatic billing. The fitness company uses a payment gateway to automate the collection of monthly payments, which are automatically taken from the customer’s bank account or debit card.

The subscription model is also commonly used by utility and telecommunications companies, entertainment streaming platforms, insurance companies, Software-as-a-service (SaaS) providers and magazine subscriptions.

It can even be used for fruit/veg box or meal delivery services, beauty businesses, gaming platforms and much more.

How does a subscription payment gateway work?

Subscription payment gateways are typically paired with a billing service, if not already included in the platform. When used together, these services automate every step related to the capture, collection and processing of recurring payments.

This includes the following steps:

• Secure storage of card data and other customer payment information
• Payment pre-authorisation
• Capturing and authenticating customer information
• Retrieving customer details from the secure vault to automatically process payments according to a set billing cycle.

Subscription payment best practices

As you get started implementing your new subscription model, here are some best practice tips to bear in mind:

• Your business and the payment gateway you use should be Payment Card Industry (PCI) compliant.
• Document customer authorisation or you could face chargeback claims. It needs to be completely clear to the customer what they are signing up to, and you need strong evidence of explicit consent in your records.
• All subscription models should be backed by a clear and transparent payment policy.
• Improve the customer experience with features such as - allowing customers to choose their payment dates, and automated notifications when payments are due/have been collected.

Types of subscription payment

There are a few different types of billing models commonly used for subscription payments. This includes:

• Fixed rate - this is just one fixed rate charged weekly, monthly, quarterly or yearly.
• Tiered plans - subscribers can choose from a selection of plans, where they pay an increasing amount for an upgraded level of service.
• Per-user - often used for software-as-a-service (SaaS), this is where pricing is determined by the number of users accessing the service.
• Usage-based - commonly used by utility companies, this is where subscribers are charged according to what they use within the billing period.
• ‘Freemium’ - this is where the core service is free but there’s an expectation that customers will upgrade to a premium plan to access more services and features.

Subscription payment services

Now, let’s take a look at some of the UK’s most popular payment gateways which support subscription billing:

Subscription payment benefits

The subscription payments model can offer many benefits to both your business and its customers. These include:

• Predictable revenue, which can improve cash flow management and financial planning.
• Improving cost efficiency, through the automation of the billing process. This can save valuable time compared to manual billing, speed up the process and reduce the risk of errors and delays.
• Reducing late and missed payments, which can save the business from wasting resources chasing up late payments.
• Increased customer retention, as customers who subscribe to the service and are billed automatically are more likely to remain with the business. As long as billing is convenient and easy, customers are likely to continue using the service.
• Upselling and cross-selling opportunities. Subscribed customers have an existing relationship with a company, and loyalty only grows over time. This creates opportunities to market other products and services to the customer, which can further boost revenue as well as loyalty.
• Simpler accounting. With a regular, consistent stream of set-amount payments, it’s easier to track revenue and reconcile accounts.
• Improved customer experience, as payment for the services they use is completely hassle-free and hands-off.

How to implement a subscription payment gateway

Now, how do you get started with implementing a subscription payment gateway? Here’s a step-by-step look at what to do first:

1. Decide on a pricing model - i.e. flat rate, tiered, per user or usage-based.
2. Choose a payment processor and create an account.
3. Check that your recurring billing model meets UK compliance laws - you might need specialist assistance for this. If you operate globally, this can be more complicated, as you need to ensure you’re compliant with the laws in all companies you operate in.
4. Set up recurring billing in the payment gateway. You’ll need to set the payment frequency (i.e. monthly or annually) and a range of prices based on your billing model. You might also want to segment customers based on what subscription tier they’re signed up to.
5. Choose what payment methods you’ll accept. This may be determined by what methods your payment processor supports, but aim to offer as many as possible. The more flexible you are, the better the experience for the customer.
6. Develop a system for customer authorisation. You’ll need explicit consent from your customers before you can start collecting payments automatically. For this, you’ll need to develop policies, terms and conditions, a checkout process and clear communications. It’s crucial that your customers understand exactly what they’re signing up for, including the billing cycle, amount and how they can amend or cancel the subscription.
7. Create a plan for failed payments. This is rare with an automated system, but it can happen - especially if a customer’s card expires during the billing cycle. You’ll need to plan for this, with options such as email notifications and automated retries.
8. Train your customer support team. They’ll need to be able to respond effectively to all customer queries and issues related to subscriptions and recurring billing. This will ensure that issues are resolved quickly.

FAQs - subscription payment gateways

Which payment gateway is best for subscriptions?

All of the payment gateways we’ve covered in this guide are suitable for subscriptions. So you’ll need to choose the right fit for your business model and needs, comparing key features, cost, user-friendliness and other factors that are important to you.

Can I use Stripe for subscriptions?

Yes, Stripe supports subscription payments through Stripe Billing. This is an add-on to the processor’s core service, which offers features specifically for subscription billing models and has monthly or pay as you go fees.

What is an example of a subscription-based service?

Entertainment streaming services such as Netflix, Apple TV+, Amazon Prime Video or Disney+ offer the perfect examples of subscription services in action.

The customer signs up for recurring billing directly with the streaming service, and subscription payments for a set amount are automatically taken from the bank account or card on the customer account each month.

Receive payments in multiple currencies with Wise Business

Wise can help UK businesses to receive payments in multiple currencies, with low fees and the mid-market exchange rate.

A Wise Business account comes with local account details to get paid in 8+ major foreign currencies like Euros and US Dollars just as easily as you do in Pounds, these payments can come directly from your customers, from PSPs like Stripe and Amazon, or from platforms like Chargebee.

All you need to do is add the relevant currency account details to the platform you need to withdraw the funds. Once you receive the payment in Euros, Dollars or other supported currencies, you can hold this money into your multi-currency account, send with Wise Business debit card or convert back to Pounds with low fees and the mid-market exchange rate.

Get started with Wise Business 🚀

After reading this guide, you should be all set to choose and implement a subscription payment gateway.
We’ve given you a list of popular UK payment processing providers, all of which support subscription billing. And we’ve looked at how to get set up, the benefits of subscription payments and a few best practice tips too.

All that’s left to do is pick the right payment gateway for your business and its customers.

Sources used:

Sources last checked on date: 30-Oct-2024