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Accepting payments online is complicated, especially for companies selling digital goods and services.

Because of the complicated nature, it seems like every day there is a new startup that is trying to revolutionize the industry with a new payment method, or billing solution to make accepting traditional payments less complex. Because of this, we are talking to more and more companies that are confused or that have been burned by choosing the wrong billing system.

Background

Let’s talk a little about what it takes to process payments online. The graphic below shows the major components necessary for a company to manage their customer’s billing plans, allow them access to the service, store their payment information and bill them on a regular basis through subscriptions or one-time purchases.

Almost all of the new, simple solutions on the marketplace focus on just one of these areas and leave it to their customers to build or source the other components from a compatible 3rd party. This may seem like a win-win scenario initially – quick implementations, minimal technology considerations and a limited list of other systems to worry about. A typical new billing system may be pre-integrated with authorize.net to handle the gateway functionality (including storage of payment information to minimize PCI concerns). The solution will have a minimal set of customer account management functionality and will focus mostly on setting up a new billing plan and linking the customers on that plan to it. Additional customer details are typically stored in a CRM system that is accessible by customer service representatives.

From an integration standpoint, this means only 2 major integration points – the billing system (with pre-integrated gateway) to the website and the CRM system to the billing system.

Problems at Scale

Now let’s consider the longer-term operational picture. You need to manage the billing system and all of it’s updates, the integration to the CRM system and use the gateway reporting functionality to reconcile your company books. This is manageable at low levels of monthly transactions, but managing each of the components becomes an issue when companies start to scale. This is before adding additional services such as fraud screening, chargeback management and sales tax that become necessary as a company grows.

Becoming More Successful

As mentioned, when a company starts to achieve scale and enter new markets, certain issues that were previously ignored must be addressed.

• Fraud Screening
• Chargeback Management
• Sales Tax
• Reporting
• Multiple Payment Methods, Currencies and Languages for Global markets
• Regulatory Compliance – PCI DSS & Sarbanes Oxley

Each of these areas adds considerable complexity to accepting online payments and greatly depends on the choices made by your company.

Main Factors

The two biggest factors for billing at scale are the billing system and payment processor. In-house systems may connect to a top-tier payment processor, but fall down around flexibility to launch new products and retain existing customers. Simple billing systems don’t offer the best choices for payment processors, or offer a limited integration that restricts functionality and reliability.

Summary

As more and more new billing solutions enter the market, the confusion and scale issues will only multiply. The best thing that you, as an digital goods and services company, can do is to spend the time upfront asking the tough questions before you make the wrong choice and what seemed like a good deal turns into an expensive migration later.