Payment orchestration for subscriptions: routing, cascading and chargebacks

Payment orchestration is a layer between a business and its payment service providers (PSPs). Instead of sending every card payment to one provider, it connects several, decides where each payment goes, retries declined payments on another route, and gathers the results in one place.

For a subscription business this matters more than for a one-off sale. Every subscriber is charged again and again, so small differences in approval rates, failed renewals and chargebacks add up month after month. Here is how orchestration works, and how we run it for our own apps on Paypoye, our card billing platform.

Why subscriptions need more than one provider

A single provider is simple to set up, but it puts every payment behind one set of rules, one risk engine and one point of failure. Providers differ in which card types, currencies and markets they handle well, and the same payment can be declined by one and approved by another.

With several providers connected, a subscription business can:

• Route each payment to the provider best suited to its market, currency and card.
• Keep selling when one provider has an outage.
• Compare approval rates and costs across providers, instead of guessing.

Routing and PSP cascading

Routing decides where a payment goes first. Rules can use the customer’s country, the currency, the card and the product plan.

PSP cascading decides what happens when that payment is declined. A cascade retries it on the next provider in the route, so a sale that one provider would have lost can still be approved by another.

Cascading has to be selective. Some declines are temporary, such as a timeout or a risk check that was too strict; those are worth retrying. Others, such as a stolen or closed card, are final, and card network rules limit how often a declined payment can be retried. A good cascade retries the first kind and stops at the second.

Renewals and failed payments

Most subscription revenue comes from renewals, and renewals fail for reasons that have nothing to do with the customer leaving: an expired card, a temporary lack of funds, a bank’s fraud check.

Dunning is the process of recovering those payments: retrying at sensible times, and telling the customer when their card needs updating. Diagnosing why renewals fail, by provider, card and market, shows which problems are worth fixing first.

Chargebacks: prevent, resolve, contest

A chargeback happens when a cardholder disputes a charge with their bank and the money is pulled back from the merchant, usually with a fee. Too many chargebacks put a merchant into the card networks’ monitoring programmes and can end its ability to take cards at all. Handling them takes three layers.

Prevent. Many disputes come from customers who do not recognise a charge or could not find how to cancel. Clear billing descriptors, honest trial terms, renewal reminders and an easy way to cancel stop many of them before they start. Screening risky payments before they reach a provider stops fraudulent ones.

Resolve before they become chargebacks. Pre-dispute services connect a merchant to the card issuer when a customer first complains, so the merchant can refund or resolve the charge before a formal chargeback is filed. A refund costs less than a chargeback and does not count against the merchant’s ratio.

Contest the ones that should not stand. Some disputes are wrong: the customer used the service, or agreed to the renewal. Merchants can fight back with evidence, a process known as representment, and win the money back.

Currencies, taxes and invoices

Selling subscriptions across countries also means charging in local currencies, applying the right tax in each region, and issuing invoices that meet local rules. Handled in the payment layer, these stay consistent across every provider instead of being rebuilt for each one.

How we run it on Paypoye

We built Paypoye to sell our own apps by card, and it is the same platform partners use:

• Many providers behind one product, with payment routes and PSP cascading.
• Funnels and paywalls, from the same landing page and creative engine as our carrier billing on VMS.
• Fraud prevention through payment orchestration, and our own technology for chargeback prevention.
• Ethoca (Mastercard) and RDR (Visa) to resolve disputes early, and a process to fight back against disputes that should not stand.
• Multi-currency, taxes and invoicing for different regions and currencies.
• Dunning and renewal diagnostics, plus ARPU analysis and customer segmentation.

Our own apps run on it first, so every route and protection is tested in market before a partner relies on it.

A short checklist

Before you scale a card subscription product, check that you can answer yes to these:

1. Can a declined payment be retried on a second provider, and only when the decline is worth retrying?
2. Do you know your approval rate by provider, market and card?
3. Do failed renewals get retried and the customer told, before they churn?
4. Will a customer recognise your name on their statement, and can they cancel easily?
5. Can you resolve a dispute before it becomes a chargeback, and contest one that is wrong?
6. Do prices, taxes and invoices follow each market you sell in?

Selling subscriptions by card and want to compare notes? Tell us about your product and the markets you sell in.