Alongside WorldPay and Mastercard, I recently hosted a roundtable discussion at their joint industry event at United Spaces Waterfront in Stockholm on the topic of recurring payments. It’s no secret that businesses love recurring revenue–in fact, the global subscription economy is projected to hit $1.5 trillion by 2025. Furthermore, consumers love subscriptions, spending an average of $273 monthly. Over the next three years, consumers expect to pay 33% more on annual subscriptions–they’re already anticipating subscribing to more businesses.
This post was first published on recurly.com.
The reality of recurring payments
However, recurring payments can be difficult to start and maintain as subscriptions become more complex. Here’s why:
- The industry is maturing due to commoditization, increased competition, and deeper saturation of the market.
- Macroeconomic pressures are compounding. The recession and inflation are forcing subscription businesses and consumers to reevaluate their priorities, and consumer confidence is shrinking as a result.
- Consumer expectations are changing, and, right now, consumers demand subscription personalization options, pertinent value in their spending, obvious convenience, and unmatchable subscriber experiences.
Consumers are fickle, competition is tough, and it’s becoming increasingly difficult to keep up with the changing subscription landscape. Undoubtedly, these issues are creating challenges for subscription businesses. From subscriber retention and plan flexibility to global expansion and scalability, the success of recurring payments becomes less feasible without a strong subscription management and recurring billing solution.
The importance of payment personalisation
One of the most compelling elements of recurring payments is payment personalisation, especially in direct-to-consumer subscriptions. Our research has found that beyond not increasing the cost of a subscription, 18% of consumers say the ability to personalise their subscriptions–including preferred payments and plan types–would more likely make them feel valued as a subscriber. Moreover, 65% would reconsider canceling a subscription if they could customise their plan based on what they use.
According to our State of Subscriptions report, the top subscription payment methods are:
- Debit: 52.9%
- Credit: 26.7%
- PayPal: 18.8%
- Other 1.6%
The future of recurring payments
The payment space continues to evolve with advanced technology and changing consumer demands. At the event, Mastercard discussed their network tokenisation solution, Secure Card on File, which “allows merchants, PSPs and commerce platforms to tokenize Account PANs entered by consumers or existing Account PANs held on file, replacing each PAN with a unique token.” With this method, consumers can check out more confidently than with Primary Account Numbers using a token value that is faster, more secure, and more convenient.
Additionally, the company’s P2P payment solution, Mastercard Send, enables “secure, near real-time payment transfers to and from billions of card, bank and digital accounts globally.” This new take on payments allows participants of the program to send money anywhere in the world, making funds available to recipients faster than ever before.
What this means for subscriptions
The future of subscription payments is here. These solutions are designed to create a more secure ecosystem and provide more end-to-end product innovations.
However, 3-D Secure is still a complex protocol to implement, as methods vary between each bank, institution, country, and card type–more standardization and directive are needed, and the vendor ecosystem must be ready to adapt quickly. Additionally, network tokens are only useful for businesses when all their vendors support them–this chain breaks if one vendor on the critical path doesn’t support this innovation.
Working with a subscription and billing platform that stays on top of payment security innovations and convenience is key to driving personalisation in checkout flows.