Tackling recurring payments for Product-As-A-Service

Authored by: Michael Mansard, EMEA Chair of the Subscribed Institute and Principal Director of Subscription Strategy, Zuora, and Yann Toutant, CEO and Founder, Black Winch

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Compared to traditional business, with their one-off transactions, As-A-Service recurring subscriptions generate more volume per customer given the higher frequency of invoicing and more complex invoices per customer given associated rules such as consumption/usage rating or proration when a subscription changes. 

Download the Secrets of Physical Product-As-A-Service whitepaper 

This makes the whole process a lot trickier for two reasons: first, invoicing and payments are a source of overhead costs if not properly automated, and second, if you don’t do it right, customers will be dissatisfied. 

Because of lower price points, digital consumer subscription businesses had to tackle recurring invoicing and payment automation a long time ago (or at least the successful ones did!). Without doing so, there is no way to scale a business, as most, if not all, margins would be eaten by back-office processes. 

As a result, highest-converting consumer subscription offerings have seamless digital invoicing and payment processes that let their customers select their favorite recurring payment methods against which to collect automatically.  

By comparison, it is not uncommon in the B2B space for the cost of invoicing to clock in at around $10 per invoice (and as a matter of fact, very often a multiple of that). Such numbers can be tolerable for “classic” one-off invoices of amounts large enough to make $10/invoice a negligible cost, but as the volume of invoices and payments per customer grows in a recurring subscription business, this cost would be a real problem. 

Beyond undesired overhead costs, non-automated processes are also often linked to later payment, weaker collection, and, consequently, higher write-offs and even lower customer conversion rate.


The case for digital invoices and payments

Even though there is a popular belief that digital invoicing and digital payments methods aren’t really mainstream in B2B, the Subscribed Institute’s data show the exact opposite. In fact, almost 90% of high-growth B2B companies are leveraging digital invoicing and very close to 50% are doing recurring digital payments, versus respectively less than 80% and less than 22% for low-growth companies. 

Here are a selection of key reasons proving the point:

  • Glitches in invoicing and payment processes often represent 20% to 40% of all involuntary churn, which can silently, but surely, kill a subscription business.
  • Invoicing and payment errors directly translate into revenue leakage, that can average around 3% of total revenue. 
  • Inspired by consumer-like practices, high-growth subscription B2B companies tend to leverage practices that make renewal a non-event as much as possible. For example, 56% of customer contracts are on automatic renewal, which certainly impacts churn positively with a significant 13-point positive difference versus lower-growth subscription businesses.


More important: beyond operations, catering to customer payment preference is crucial, making payments an integral part of the subscriber experience. This means your As-a-Service shift needs to treat this dimension as an important FACTOR, and not simply as a back-office “necessary evil task”. 

Again, research from Zuora’s Subscribed Institute shows that choice of payment methods and currencies have direct correlations with business growth:

  • Businesses that accept more payment methods grow their revenue 4 points faster through both better acquisition and retention
  • Businesses that accept more payment methods have 4 to 5 point more effective invoice payment rate (i.e. defined as the percentage of total invoices being paid 90 days after due date)
  • Business that accept more currencies grow their revenue 8 points faster
  • There are significant differences in terms of preferred recurring payment methods preferences depending on geographies, industries, services offered, invoice amount bands, etc. For instance, card payments are a lot more frequent in the US as compared to Germany.


Finally, we can’t talk about recurring payments without addressing the issue of fraud. Frauds of course can happen, as in any other payment models, but can easily be mitigated with the right strategy. In the As-A-Service industry fraud can take several forms, such as:

  • Document falsification
  • Fictitious asset
  • Overestimation of equipment worth 
  • Double Financing of the same piece of equipment 
  • Fraudulent financial statements 
  • Kickbacks 
  • Theft of one’s identity


Fraudulent activities often occur due to inadequate verification procedures of the applicant company. Nevertheless, the implementation of detection technology can effectively reduce the incidence of fraud. Furthermore, equipment finance entities can serve as a reliable mitigation strategy against fraudulent activities, given their professional approach to customer screening.

All these reasons combined make it clear as to why best-in-class As-A-Service businesses digitize early on their invoicing and payment to be able to scale properly even, both in B2C and B2B. A strong capability in these fields is thus required to support your As-A-Service offering. 

Customers want end-to-end solutions for simplicity purposes. Therefore, teaming up with best-in-class partners will ensure your customers access to the best platforms, software and services for a superior user experience. 


The complete playbook to launching your own Product-As-A-Service solution

Despite the fact that the As-A-Service literature is quite vast, executives from the “physical product world” are often left behind due to the lack of concrete guides on deploying Product-As-A-Service models. The vast majority of literature falls short when it comes to explaining what to do from a funding, finance, and accounting standpoint.

The Secrets of Physical Product-As-A-Service whitepaper will offer you the essential advice for effectively building your own solution and the strategies employed by industry leaders.

Learn more about the authors

Michael Mansard

EMEA Chair, the Subscribed Institute 

Principal Director of Subscription Strategy, Zuora

Yann Toutant

CEO and Founder

Black Winch

The Subscribed Institute

The Subscribed Institute is Zuora’s dedicated think tank that cultivates and serves a community of business leaders through research, content, events, and advisory services. Strategists from the Subscribed Institute are a resource for our customers to help them chart strategic, tailored paths toward recurring revenue business model success, build internal capabilities, and navigate an accelerated Journey to Usership.

Interested in learning more?

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