B2B Payments

How Subscriptions Complicate Cross-Border B2B Payments

Companies like Netflix and Spotify have burst the doors open to the subscription economy beyond magazines and newspapers. As these recurring services go online, demand for recurring electronic payment capabilities rises as well.

The subscription economy is often considered a consumer-facing ecosystem. However, with cloud storage and computing a requirement for many businesses, with the surge of Software-as-a-Service (SaaS) and with B2C services like Amazon Prime embracing the B2B opportunity, recurring B2B electronic payments are an increasingly complex challenge for these service providers and the businesses paying them.

In this month’s Global Recurring Payments Tracker, a collaboration with GoCardless, PYMNTS dives into the world of recurring payments as the subscription economy proliferates around the globe. As the Tracker explores, supporting recurring payment capabilities continues to meet new hurdles as service providers expand their customer bases cross-border and into emerging markets — with many of these challenges applicable to both B2B and B2C subscription services.

“SaaS providers must understand each market’s cultural differences, tax considerations and preferred payment methods,” the Tracker explained, along with Rob Charlebois, executive vice president of global eCommerce and digital marketing at Corel, a company that offers both B2B and B2C word processing and graphics software subscription services.

“The bar these days is to have a full complement of local payment methods, and the relevant currency in each market,” he told PYMNTS of the challenge in cross-border recurring payments.

For consumers, many of these challenges include the need to support card transactions so users don’t have to manually calculate foreign exchange (FX) conversion rates. FX transparency is also important, while, in some markets, customers need the option to pay in installments using local payment services, like Boleto Bancário in Brazil. Supporting local payment services, and staying on top of which localized payment services support automatic renewal, is key to mitigating churn, he noted.

The B2B Subscription Challenge

Earlier this week, GoCardless announced a partnership with TransferWise to support the often-unique challenges of global B2B recurring payments.

An announcement on Wednesday (Nov. 6) said that GoCardless is working with TransferWise to develop a global network for bank debit transactions, allowing service providers to collect recurring payments not only on their subscription services, but on invoices and installments. Bank debits reduce payment failure rates, the firms noted, and allow businesses to collect payments from an array of bank debit schemes, linking into those schemes via the GoCardless API.

This solution supports the need for businesses to pay for their recurring services in their local currencies, and with a familiar payment method, without forcing the service providers to navigate the individual rules for each market’s bank debit scheme.

In an interview with PYMNTS, GoCardless Vice President and General Manager of International Expansion Pranav Sood said the opportunity to address the recurring B2B payment demand is significant.

“There is a huge amount of growth in the recurring business model globally,” he told PYMNTS’ Karen Webster. “Businesses are moving toward these forms, partly because of consumer preference and partly because of cloud technology.”

While businesses may be expanding their subscription offerings, plans to grow cross-border can be quickly thwarted by their inability to accept recurring payments in other markets. This process traditionally requires companies to set up individual bank accounts in each market abroad, and manage FX hedging and other tasks related to global payments.

Though card payments are often in demand in the consumer realm, Sood added that GoCardless’ bank debit collaboration with TransferWise has particular potential in the B2B space, where bank debits like ACH in the U.S. are often a preferred payment tool for both sender and receiver.

“It tends to work where there is parity between businesses,” he said, particularly in cases where large vendors invoice smaller businesses, and need a pull payment mechanism to collect.

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