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Subscription Compliance: How to Build a Successful Subscription Offering

By: Andy Carrane
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Subscription billing models are more popular than ever and are being adopted by companies across industries — from medical markets to new innovations in the IoT space. The subscription model offers a lot of value, but companies looking to introduce a new subscription offering need to get three things right if they want to be successful:

  1. Provide a great user experience
  2. Achieve a high billing authorization rate
  3. Meet all regulatory requirements

This is obviously easier said than done. The regulatory aspect can be particularly challenging because of how subscription providers store, manage and use data. Unique compliance issues impact nearly every aspect of the subscription experience.

From consumer messaging to back-end billing systems, brands need to understand the risks and challenges associated with subscriptions and be proactive in planning for long-term growth. Successfully selling subscriptions online requires a multilayered approach that addresses every level of regulatory governance while also providing optimized processing capabilities on the back-end.

Compliance and the customer experience

In days gone by, subscribers who got roped into contracts — often with free introductory offers — had to fight tooth and nail to opt out of their agreements. Software companies in particular often relied on this model to achieve growth. But that’s all changed. Modern regulations have largely put control back in the hands of the consumer. Now, it’s brands who have to secure authorization from consumers opting in to subscription agreements.

Data privacy and consumer protection laws like GDPR, CCPA and others mean that ecommerce brands need to make sure their websites, policies and customer-facing communications are updated with clear messaging about subscription terms. In truth, the entire customer experience needs to be informed by compliance requirements. Brands need sound policies and controls around customer notification, billing cycle renewals, stored credentials and all forms of customer data. When planning long-term, subscription leaders need to consider how partnerships and technology investments today can improve scalability down the road.

For example, let’s say you are selling in Denmark and their federal government or a national regulatory body changes a consumer data privacy law. Do you have the technology tools in place to respond and update all of your online content once on the back end? Or would you have to go in and manually update every page? How fast and easy (or slow and difficult) is it to implement these kinds of changes across your entire online network?

Thinking about these questions and choosing the right partnerships will enable brands to future-proof operations while ensuring compliance obligations are met here and now.

Billing done right

Billing processes and payment systems are central to any subscription offering. To maximize new opportunities, brands need the right technology and expertise to optimize authorization rates and ensure a smooth billing process. For example, Digital River uses machine learning and advanced retry logic to find the best time of day or day of the week to process recurring transactions at the optimal rate. This helps minimize churn and false declines, maximizing profits for your brand.

On the compliance side, the proliferation of stored credentials and merchant-initiated transactions have brought a wave of new regulations for billing optimization security. Brands already have to consider how they manage data from stored user credentials like name and credit card information. Experts say payment tokenization is likely the next major focus area for regulators. Forward-thinking ecommerce leaders should strive to understand how these new regulations will impact both customer experiences and back-end processes.

For example, let’s say you are processing a recurring transaction against a new credit card that has been issued. How can you make sure you’re sending the appropriate identifiers to the issuer so they can verify they are the ones who initiated the transaction? What technology tools do you have in place to automatically notify customers about billing activity and allow them to affirmatively opt in to continue receiving your services? Brands should be proactive in shaping internal processes, consumer touchpoints and technology investments to meet current and future compliance requirements regarding back-end billing processes.

Taking on the complexity of compliance

Regulatory compliance is such a far-reaching concept that even if you have a great in-house compliance team, it can be nearly impossible to keep up with the sheer scale and complexity of the global regulatory environment. Brands need to be aware of compliance issues at the local, state, federal and international level, unpacking layers of regulations that change regularly and govern products, customer experiences and go-to-market processes.

Brands should consider finding partners with deep compliance expertise that not only have the geographic footprint to facilitate global expansion, but also the technology tools to scale as your operations grow. Partnering with experts allows you to focus on what your company does best without having to worry about whether or not you are meeting every single regulation in every market you operate in.

Realizing the value of the subscription model

Creating a successful subscription offering requires companies to rethink a host of processes and experiences — from website copy and email notifications to identity verification and back-end billing systems. But for companies that can get it right, the subscription model provides a path to stability and sustained growth. By engaging the right compliance experts, forming key partnerships, and investing in the right technology, brands can navigate compliance issues and build a successful subscription business.

Ready to take your subscription billing model global? Connect with Digital River today to learn how we can help to simplify the complex regulatory landscape so you can focus on building a subscription offering your customers will love.