The car subscription model has rapidly gained popularity among consumers looking for flexible and affordable car access without the hassles of traditional leasing or ownership. According to research, the global car subscription market size reached USD 2.78 billion in 2022 and is projected to grow at a CAGR of 33.5% from 2023 to 2031. As this new business model scales globally, optimizing billing operations is crucial for car subscription platforms to maximize revenue growth and customer retention.
Without streamlined recurring billing processes, car subscription businesses often struggle with failed payments, inaccurate billing data, and poor visibility into revenue streams. This frequently leads to involuntary customer churn due to payment issues. Industry research indicates that nearly 68% of subscribers cancel their plan due to payment failures, highlighting the need for robust billing workflows.
To sustain growth and mitigate revenue leakage, automating billing should be a top priority for any car subscription service. Car subscription platforms need to implement flexible billing systems that can seamlessly handle usage-based plans, support convenient payment methods, automatically recover from failed payments, and provide complete visibility into billing operations.
Challenges with Manual/Legacy Billing Systems
Many car subscription startups initially rely on manual billing processes or legacy systems not optimized for recurring billing. This leads to major pain points including:
- Error-prone: Manual billing using spreadsheets is prone to human error, missed payments, and duplication of work. Over 70% of businesses report occasionally double-charging customers due to spreadsheet errors. Automating billing eliminates errors and provides accurate tracking of billing operations.
- Limited scalability: Spreadsheets and legacy systems aren't built to scale with a growing subscriber base. As the number of customers and transactions increases, manual billing becomes highly inefficient. This leads to billing delays, poor customer experience, and revenue leakage.
- Poor visibility into billing operations: With manual processes, it's nearly impossible to get an accurate, real-time view of billing and payment activities. This lack of visibility results in reactive management rather than data-driven optimization.
- Higher churn due to failed payments: Failed recurring payments are the #1 cause of involuntary churn. Manual billing makes it difficult to recover from declined payments, leading to higher payment failure rates. Automating billing recovery workflows significantly lowers involuntary churn.
Automating Billing for Frictionless Customer Experience
Legacy rental and manual billing systems for car subscriptions often lead to poor customer experiences. Without automation, billing is an error-prone and time-consuming process. This frequently results in failed payments and involuntary churn due to lack of payment visibility and reminders.
Automating billing streamlines the entire billing lifecycle and provides flexibility for customers. Automated billing software enables subscription businesses to offer convenient billing plans and payment methods tailored to customer needs.
Key benefits of automating billing include:
- Flexible billing plans - Offer options like monthly, quarterly or annual billing aligned to customer preferences.
- Payment method flexibility - Allow customers to pay via credit card, ACH or other preferred payment modes.
- Self-service account management - Customers can easily update payment info, view statements online.
- Payment reminders - Automated alerts ensure customers are notified before payment dates.
- Failed payment recovery - Software can automatically re-attempt failed payments per business rules.
- Usage-based billing - Bill customers based on actual vehicle usage like miles driven.
With recurring billing automation, car subscription platforms can significantly improve customer experience. Frictionless billing helps reduce involuntary churn from failed payments while also lowering overhead costs.
Features to Look for in Billing Software
When evaluating billing software, car subscription companies should look for solutions that provide core recurring billing capabilities as well as integrations and analytics for streamlined operations.
Key features to prioritize include:
Robust recurring billing engine
The billing software should support flexible subscription and usage-based billing models to align with diverse customer needs (1). This includes setting up customized billing schedules, metered billing, subscription add-ons, and volume pricing.
Payment gateways integration
Seamless integration with payment gateways like Stripe and GoCardless is essential for securely accepting one-time and recurring payments. This ensures PCI compliance and minimizes failed payments.
Managing the entire subscription lifecycle from signup to renewal requires automation for scalability. The billing platform should make it easy to create customer accounts, apply promotions, upgrade/downgrade plans, and more.
Reporting and analytics
Data-driven insights into revenue metrics, customer lifecycles, churn risk factors, and payment performance are invaluable. Look for a billing solution with customizable reports and dashboards for visibility.
Accounting and tax compliance
Integrations with accounting software and automated tax calculations for global businesses streamline back-office workflows. This ensures billing data flows smoothly across financial systems.
With these capabilities, car subscription platforms can optimize their billing operations for business growth and customer retention.
Best Practices for Billing Optimization
By following industry best practices, car subscription businesses can optimize their billing operations to maximize revenue collection while retaining customers.
Some key best practices include:
- Offer convenient payment methods - Allow customers to pay how they want, whether that's credit card, ACH or another option. Offering flexibility boosts on-time payments.
- Leverage usage-based billing models - Subscription plans based on actual vehicle usage, rather than a flat fee, better aligns costs for customers.
- Automate dunning and failed payment recovery - Software tools can automatically re-attempt failed payments per customized business rules to recover revenue.
- Proactively identify and prevent churn - Analyze usage data and other metrics to identity at-risk customers and prevent cancellations.
- Provide billing transparency and self-service - Detailed billing histories and account management portals give customers insight and control.
Employing automated billing tools that streamline recurring payments, pricing changes, failed transaction retries and dunning can boost customer retention by 5-8%.
Optimizing billing operations is critical for car subscription businesses to scale while retaining customers. By leveraging automated billing software, companies can streamline processes, reduce churn, and enable frictionless recurring payments. When evaluating billing solutions, look for features like flexible billing plans, payment gateways integration, reporting tools, and accounting compliance. Best practices include offering convenient payment methods, automating failed payment recovery, providing billing transparency through self-service portals, and identifying churn risks early. With the right billing infrastructure, car subscription platforms can focus on acquisition and growth while delighting customers.