Lessons Learned in Online Billing

Demystifying Online Billing Pivotal Labs TechTalk January 20th, 2010

Isaac Hall: My relevant experience ✤ Built e-commerce sites from 1997-2004 for a consulting ﬁrm ✤ VP of Technology for Syncplicity, 2007-2009 ✤ Spent way too much time on billing issues ✤ CEO, Founder of Recurly ✤ Making subscription billing easier for everyone else

How a Payment Works peepcode.com ✤ YourSite.com -> Payment Gateway -> Merchant Service Provider / Merchant Bank -> Credit Card Interchange -> Customer’s Bank

Getting a Merchant Account ✤ Use PayPal WebSite Payments Pro for small projects ✤ Use Silicon Valley Bank for your business ✤ Also check out TransFS.com ✤ Only try a brick and mortar bank if your company is well established ✤ Bank of America denied Recurly for being: high risk, no history, & internet based. Thanks for wasting 2 weeks of my time. ✤ Start coordinating your merchant account 1 month before you need it

Payment Gateways ✤ If you signup for a payment gateway through a reseller, make sure you own your payment gateway account. This is critical if you store your credit card numbers in your payment gateway. ✤ Gateways we recommend: ✤ Authorize.Net ✤ Beanstream ✤ Braintree ✤ First Data

Maximizing Acceptance Rates: Address Verification ✤ Once a credit card number is verified and the dollar amount is approved, the payment gateway can then validate the address if supported by the customer’s bank. It’s an extra security level to prevent fraud. ✤ Address Verification (AVS) uses advanced 1960’s string matching technology. ✤ US: use AVS however you like International: allow it to pass if street OR zip matches, or if it is not supported by the customer’s bank. ✤ Zip code verification will fail if it contains an alpha character

Expiration Dates ✤ One time transactions: don’t worry. Subscriptions: worry. ✤ Payment Industry Secret: Years ago, credit card companies stopped validating expiration dates. ✤ But, if you store the card number with your payment gateway, they will enforce the expiration date! ✤ It’s okay to auto-bump it forward if you’re processing recurring payments. Utility companies do it all the time.

Charging a Credit Card: Authorize & Capture, or Purchase ✤ Authorize: Approve the transaction amount, do not transfer Capture: Process a previously authorized transaction Purchase: Authorize & Capture at the same time ✤ Most APIs test credit cards for 1 cent authorization. Do not use it! ✤ Always authorize at least a dollar. Ideally, authorize the amount you need to capture later. ✤ Void your authorization if you don’t intend to collect it.

Simple pricing wins! ✤ If your pricing is complicated: ✤ Your sales guy won’t be able to sell it, ✤ You will spend too much time building it, and ✤ Your customers won’t want to pay you. Customers will pay more for less headaches: Think tiered pricing, not overage fees.

Minimize your billing support for subscriptions ✤ Billing support will overwhelm you if your customers cannot self-service their accounts. Be ready on day one. ✤ If you offer more than one billing cycle or price point, let your users upgrade or downgrade themselves. ✤ Make it easy for subscribers to cancel. And make it easy for them to subscribe again. ✤ Don’t upset your users -- only email them about payment failures if their card legitimately was declined. ✤ If you can build your own subscription billing system, disproportionate amounts of time will go to handling past-due accounts.

Other tidbits ✤ Gateway subscription APIs barely do anything ✤ Use integers to store transaction amounts in cents ✤ Pro tip: Be nice and grep the credit card number ﬁeld for digits. Don’t ask your users to enter numbers only. ✤ Always use the Credit Validation Value (CVV) on the ﬁrst transaction. Prevent fraud. ✤ Filter out credit card numbers from your logs.

Questions? Isaac Hall isaac@recurly.com Tim Van Loan tim@recurly.com

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Lessons Learned in Online Billing

by Recurly on Jan 25, 2010

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Lessons Learned in Online Billing — Presentation Transcript