E-Commerce Payment Processing for Online Coffee Subscription Services

A few years ago, coffee subscriptions were almost unheard of. But now, especially after the Covid-19 pandemic, they’ve surged in popularity. Big brands like Nespresso and Grind have all embraced this trend.

In this article, we explore e-commerce payment processing for online coffee subscription services. We'll look at available solutions and other important factors to consider.

What Is a Coffee Subscription?

Coffee subscriptions are, quite simply, subscription services for coffee products. Providers deliver coffee beans, pods, or grounds to their clients at regular time intervals, and these services can be tailored to meet individual preferences. Customers enjoy a steady supply of fresh, delicious coffee, and merchants benefit from predictable, consistent revenues.

How Do Coffee Subscriptions Work?

Coffee is delivered directly to a customer’s home or office. Some suppliers include extras like booklets about the selected coffee or other goodies. Customers can typically cancel their subscriptions anytime unless they’ve committed to a specific term like 3, 6, or 12 months. Coffee subscriptions also make great gifts.

Types of Coffee Subscriptions

There are generally two types of coffee subscriptions, depending on the merchant’s coffee offering and customer preferences.

Subscribe & Save

Subscribe and save lets customers regularly order coffee at a discounted price. Amazon’s Subscribe & Save option is a prime example of this model.

With this option, customers receive a specific type of coffee at time periods, for example, monthly. The product type and size remain consistent with each delivery, while customers enjoy savings per order. There is usually a minimum term for this type of subscription.

Discovery Subscription

The discovery subscription is completely different in its concept. Often called coffee clubs or coffee box subscriptions, customers get to sample different types of the beverage instead of receiving the same coffee each time.

These plans usually deliver multiple bags of coffee in one box. There are many discovery subscriptions available, each offers its own unique features such as different bean types, flavours, and countries of origin.

Coffee Subscription Pricing

The first question for a coffee merchant is how to price their subscription service. The simplest model is the flat rate, where customers pay a fixed fee for regular access to the coffee. This pricing plan works well with Subscribe & Save.

Discovery coffee subscription offers much more flexibility and creativity in how to approach its pricing. As subscription models, particularly in e-commerce, gain momentum—TBRC projects the global market to reach $904.2 billion by 2026—the structure of these models is evolving. Let's take a look at some of the examples in more detail.

• Tiered Pricing: This model lets customers pick from various subscription levels, each offering different quantities of coffee or exclusive blends. For example, a basic tier might give you one bag per month, while a premium tier could provide three bags of rare, high-quality beans.
• Bundles & Features: This option allows customers to choose packages that come with extra goodies like coffee accessories, tasting notes, or pairing suggestions. These bundles can improve the overall experience and add value, making the subscription more appealing to committed coffee lovers.

E-Commerce Payment Processing for Online Coffee Subscription Services

Once you've determined the pricing plan for your services, it's time to set up an efficient payment system. Here are some key features of the best payment solutions for e-commerce payment processing for online coffee subscription services.

• Recurring Payments: This is the lifeblood of a subscription business. Recurring payments ensure your customers are billed automatically, maintaining their subscriptions without friction.
• Smooth UX: An efficient payment experience is crucial when customers sign up. Ensure there’s no friction at checkout and offer a wide range of popular payment methods to accommodate everyone and avoid shopping cart abandonment.
• Security: Protecting your customers' sensitive information is essential. Your payment system should comply with PCI DSS, PSD2, and other relevant regulations to guard against cybercriminals.

How do Recurring Transactions Work?

Recurring payments are usually processed through direct debit. This would involve customers authorising their bank to make regular payments to the coffee merchant. This can be arranged online, by mail, or over the phone.

Direct debits are processed through the Bankers' Automated Clearing System (BACS), which typically completes transactions within three days.

Other payment options include setting up automatic recurring payments with credit cards or using digital wallets like Apple Pay, Google Pay, and PayPal, which also support regular transactions.

How to Set Up Recurring Payments for Coffee Subscriptions

Coffee merchants might opt to develop recurring payments in-house, but this requires navigating a complex application process and building a payment gateway from scratch.

A simpler alternative is partnering with a licensed Payment Service Provider (PSP) like Noda to get a ready-made online coffee subscription payment solutions. PSPs offer seamless integration with a payment gateway and streamlined communication with banks via a processor.

They also provide various payment methods, UX guidance and data analytics. And you don’t have to worry about security and compliance, as these are in-built features.

Future of Coffee Subscriptions: VRPs & Open Banking

In the future, subscription payments are likely to be facilitated through Variable Recurring Payments (VRP). VRPs enable customers to make payments of varying amounts at regular intervals.

Unlike direct debits, VRPs are based on the open banking ecosystem and use the pay-by-bank method, which makes them cheaper and quicker. The payments are authorised through strong customer authentication (SCA).

VRPs are currently quite common for sweeping "me-to-me" transactions, such as automated savings or investments. Non-sweeping commercial VRPs involve transactions between a customer's account and a company, and they are less common. In the UK, for example, banks are only required to offer sweeping VRPs.

Some banks are exploring the commercial applications of this open-banking technology. In 2022, NatWest partnered with third-party providers (TPPs) to introduce VRPs as a new payment option for businesses and consumers.

The commercial use of non-sweeping VRPs could unlock numerous opportunities, such as more efficient payments for coffee subscriptions and other recurring transactions.

Direct Debit vs Variable Recurring Payments for Subscriptions

Online Subscription Payments with Noda

Noda is a payment and open banking provider. We help merchants with payment processing  including subscription services via card payments, offer intuitive UX, smart routing and a variety of popular payment methods.

With Noda, you can leverage AI-powered data analytics to forecast customer’s lifetime value (LTV) and personalise your marketing campaigns based on customers’ spending. Our Open Banking API allows online businesses to easily integrate pay-by-bank transactions.

We ensure the highest security of payments – from PCI DSS compliance to encryption and fraud prevention systems. Noda offers scalable plans and a variety of global currencies, connecting with 2,000 banks across 30 countries (UK, EU, Canada and now Brazil), spanning over 30,000 bank branches. Noda is your partner in growth.