Subscriptions are becoming an increasingly prominent part of modern-day life, with more and more subscription services available with every passing day. From movie and TV streaming services to digital magazines and even food deliveries, there are all sorts of subscriptions out there for users to choose from, and this can be a very lucrative business to get into.
Indeed, there’s plenty of money to be made in subscriptions of all kinds, whether you’re running a wine club subscription or a pet food subscription. However, in order to set up these kinds of businesses, a lot of planning and preparation is required; not only do you need to have a smart idea and good products to offer, but you also need to consider the payment side of the business.
The concept of subscription-based services has been around for a long time. Years ago, subscriptions were mostly associated with magazines, with people paying a weekly, monthly, or annual fee in order to receive regular deliveries of their favorite magazines. But in the modern world, subscriptions have expanded to cover all kinds of goods and services.
Statistics show that the average US household has nine separate subscriptions at any one time. These subscriptions can include anything from movie streaming to gaming services, food deliveries, cosmetic boxes, and so much more. There are always new sorts of subscriptions being released, and a subscription can be a win-win for both consumers and businesses.
Consumers get the advantage of a simple one-off automatic payment to cover their needs, without having to worry about making individual orders of their favorite things. Meanwhile, businesses get to enjoy scheduled, regular payments every month, with fewer periods of “downtime” to worry about. However, in order to make the whole system work, you have to have a subscription merchant account.
So what exactly is a subscription merchant account and why is it so important for businesses that are offering subscription services? Well, a subscription merchant account is just like any other merchant account; it’s a type of business account that basically makes it possible for you to receive digital credit and debit card payments.
The merchant account essentially acts as a middleman in your business transactions. The customer pays for the subscription via your site or payment portal. That money then gets processed and enters the merchant account, before later being sent through to your main business account. It adds an extra step to the transaction process, but it’s a key part of running this sort of business, helping to facilitate secure credit card payments online.
Because subscription companies do most of their business online and receive all or almost all of their payments in this way, they need to have subscription merchant accounts in place. Otherwise, it becomes impossible for these brands to do business. However, the downside is that getting a subscription merchant account can be very difficult, as subscription services are seen as high risk businesses.
The subscription business model works well and has a lot of fans around the world, but in the eyes of banks and payment processors, subscription services are seen as high risk and linked with high risk payment processing. This makes it very difficult for those in the business to get their own subscription merchant account, with many banks rejecting applications from subscription companies outright.
So what makes subscription services and recurring billing business models associated with high risk credit card processing? Well, at first glance, it can seem strange that subscription businesses are classed as high risk, but when you look at the statistics, you see that these business models regularly have quite high rates of chargebacks.
A chargeback is basically when a customer disputes a payment on their credit card statement or bank statement and requests their money back. This can lead to a lot of confusion and fees for the banks and payment providers involved, and so it’s something that banks want to try and avoid as much as possible. Unfortunately, if you’re in the subscription business, then chargebacks are something you may have to get used to.
Why? Well, there are several reasons. One of the main issues is that people can forget that they have signed up for subscriptions or may be unaware that recurring billing has been activated for something they signed up for. People can also forget to cancel their subscriptions or find it difficult to get through the cancellation process. So, when they see these payments on their statements, they make a claim and the chargeback process begins.
The high risk payment processing of subscription business models makes it very difficult to get a subscription merchant account in the traditional way with your usual bank. So what can you do if you need to get a subscription merchant account in order to offer subscription-based goods and services to your customers?
Well, Shark Processing can help with that. At Shark Processing, we’re experts in high risk payment processing and high risk merchant accounts. We work closely with different banks and payment processors who are willing to offer these kinds of accounts for companies like yours. So, if you need a subscription merchant account, we can help you get one.
We have years of experience in high risk merchant accounts and are able to offer fair, competitive rates, reliable customer support, and many other advantages to our high risk subscription merchant account holders. Reach out and contact the Shark Processing team today to find out more about what we can do for you.