3 Things Subscription Businesses Can Learn from Stripe’s State of Billing Report

In the subscription economy, churn is your worst enemy. It’s that annoying little leak in your bottom line bucket. Every customer your business loses represents lost revenue, eroded profit margins, and a significant blow to your business’s long-term growth.

Retaining existing customers is crucial to minimize churn and enhance the predictability of recurring revenue. This constant outflow of subscribers threatens the very foundation of a subscription business—making churn reduction your top priority.

Recently, Stripe published their State of the Billing Report. In this report, they highlighted crucial information concerning the significant issues that plague subscription businesses of today. Let’s walk through the key takeaways from this report as well as the practices and solutions your business can implement to recover revenue lost from churn.

3 key takeaways from Stripe’s State of Billing Report

1. Most billing systems can’t support creative recurring revenue models

Traditional billing systems often struggle to support the creative pricing models that are becoming increasingly popular in the subscription economy. Here’s why:

• Limited flexibility: Many legacy systems are designed for simple, one-size-fits-all pricing models like fixed monthly subscriptions. They may lack the flexibility to accommodate more complex models needed to cater to price sensitive customers, such as usage-based or tiered pricing.
• Integration challenges: Integrating these creative pricing models with existing systems can be challenging and time-consuming, requiring significant customization and potentially disrupting existing workflows.
• Data limitations: Traditional systems can’t effectively capture and analyze the data required to support these complex pricing models. Making tasks like tracking usage, calculating charges accurately, and optimizing pricing strategies more difficult.

As a result, many subscription businesses are turning to more modern and flexible billing platforms that can support a wider range of pricing models and provide the data and analytics needed to optimize revenue and customer experience.

2. Involuntary churn is a significant issue

The report highlights that failed payments are a major cause of churn. In fact, 43% say they don’t even know how much they are losing due to involuntary churn and failed payments. This means businesses lose substantial revenue when customers pay with expired cards or insufficient funds. Here’s a breakdown of its negative effects on businesses:

• Direct revenue loss: Each involuntary churn incident represents immediate and direct revenue loss for the subscription business.
• Erosion of MRR: Consistent involuntary churn significantly erodes a subscription business’s core foundation—its predictable monthly recurring revenue. This makes it difficult to plan for growth and invest in new initiatives.
• Damaged customer relationships: Even though unintentional, involuntary churn can negatively impact customer relationships. Customers may become frustrated or confused when their service is unexpectedly interrupted, potentially damaging brand loyalty.
• Increased customer acquisition costs: To offset revenue lost to involuntary churn, businesses must constantly acquire new customers. This incurs significant marketing and sales costs, making it harder to achieve profitability.

3. The complexities of global-scale billing systems hinder growth

Scaling billing systems globally presents unique challenges. Here’s how these complexities can hinder growth for subscription businesses:

Recurring revenue models are particularly affected by these global complexities, as they rely on predictable revenue streams and require adaptable strategies to ensure customer retention and expansion amidst economic challenges.

Regulatory compliance

Each country has varying tax laws, including VAT, GST, and sales tax, which significantly impact the implementation of a subscription business model. Complying with these regulations across multiple jurisdictions can be incredibly complex and time-consuming. Additionally, data privacy laws and regulations like GDPR and CCPA have strict requirements for data handling and privacy. Meeting these requirements across borders adds significant complexity.

Last but not least, especially for subscription businesses, different countries have varying preferences for payment methods. Some regions may favor local payment gateways or mobile wallets, while others rely heavily on credit cards.

Currency fluctuations

Fluctuating exchange rates can significantly impact revenue and profitability. Managing currency conversions and hedging against exchange rate risks can be complex and requires specialized expertise.

Localization challenges

Providing a localized billing experience (including invoices, customer support, and payment options) in different languages and currencies can be challenging and resource-intensive.

Integration challenges

Integrating with local payment processors, tax authorities, and other relevant systems can be complex and time-consuming. Ensuring seamless data flow and compliance across different systems and jurisdictions is a significant technical challenge.

Lack of confidence

These complexities can lead to a lack of confidence among subscription businesses in their ability to successfully expand internationally. This hesitation can hinder growth and stifle innovation.

How can you apply these learnings to your subscription business in 2025?

Businesses can apply these learnings to optimize their subscription model, ensuring they cater to various industries and enhance customer engagement. By evaluating market demand and product suitability, companies can generate recurring revenue and offer personalized experiences.

Invest in modern billing systems

Adopt modern and creative billing systems with features like automated retries, account updater tools, and self-serve customer portals. These systems efficiently manage the recurring monthly fee for subscription services, ensuring customers have continuous access to products, content, or exclusive benefits. Businesses can identify churn patterns and proactively address payment issues by leveraging data and analytics—ultimately improving customer satisfaction and driving sustainable growth.

• Automation: Recurring billing software that helps with automating tasks like payment retries, invoice generation, and customer communication frees up valuable time and resources for other business priorities.
• Improved accuracy: Automated systems minimize human error, reducing the risk of billing inaccuracies and ensuring that customers are charged correctly.
• Enhanced customer experience: Features like self-service portals and automated notifications provide a smoother and more convenient experience for customers, leading to increased satisfaction and loyalty.
• Data-driven insights: Modern billing systems often include robust analytics and reporting features, providing valuable data on customer behavior, payment patterns, and churn rates. This data can be used to make informed business decisions and optimize revenue streams.

Prioritize involuntary churn reduction to retain loyal customers

Make it a key focus to minimize involuntary churn in subscription services by implementing robust payment recovery strategies. Here are some practices and solutions you can implement:

• Proactive payment recovery: Implement automated retries, offer alternative payment methods (e.g., Apple Pay, Google Pay), and provide clear communication about upcoming payments.
• Data-driven analysis: Analyze churn data to identify patterns and understand the root causes of involuntary churn.
• Customer communication: Proactively communicate with customers about upcoming payment dates, potential issues, and how to update payment information.
• Improve payment page experience: Ensure a secure and user-friendly payment experience on the website or app.
• Regularly review and optimize: Continuously review and optimize payment processes based on data analysis and customer feedback.

Focus on modernizing your billing systems and optimizing customer experience

Subscription companies can address the complexities of global expansion by implementing the following:

• Partnering with specialized providers: Utilize global payment gateways and billing platforms that specialize in international operations. These providers have the infrastructure, expertise, and partnerships to navigate complex regulatory landscapes, manage currency conversions, and ensure compliance with local regulations.
• Investing in robust technology: Implement a robust billing system that can handle multi-currency transactions, automate tax calculations, and integrate with local payment processors seamlessly.
• Building a strong legal and compliance team: Assemble a team with expertise in international tax laws, data privacy regulations, and payment processing compliance in different jurisdictions.
• Localizing the customer experience: Tailor the billing experience to local markets by offering localized payment options, providing customer support in local languages, and ensuring that invoices and communication are culturally appropriate.

Reduce your involuntary churn with modern and proactive solutions

The Stripe State of Billing Report highlights the critical role of modern billing systems in managing the recurring charges of a monthly subscription and combating churn for subscription businesses. Key takeaways include the significant impact of involuntary churn due to failed payments and the need for robust payment infrastructure.

Businesses can apply these learnings by prioritizing proactive payment recovery strategies, investing in modern billing systems with features like automated retries and account updater tools, leveraging data and analytics to understand churn patterns, and focusing on improving customer experience.

With Recover Payments, we can help you recover up to 50% of your monthly lost revenue from failed payments. Contact us today and let the failed payment recovery experts do it for you.