Managing Payments in the Subscription Economy
The subscription economy brings the need for a completely different approach to building and expanding a business.
Driven by changes in purchasing behavior and consumer preference, the subscription economy is in full effect. The industry has grown 200 percent annually since 2011, and in 2017, subscription businesses attracted more than 11 million U.S. subscribers.
Looking back, the model worked well for media consumption, data storage and telecommunication services. However, over the last decade, the mainstream adoption has been driven by a wave of new disruptors changing the world of retail. While companies like Stitch Fix and Birchbox have been leading the charge, traditional retailers that have been built on pay-per-product models aren't far behind and have played a major role in influencing the changing landscape.
For example, Target released its new baby outfit box, and Ann Taylor now offers an Infinite Style box. These retailers have created innovative offerings to compete in the subscription economy while maintaining their existing sales channels to accommodate their loyal customer bases.
Part of the success of the subscription economy is due to its ability to optimize the customer experience and streamline the payment process. Customers only need to make the purchase decision and input their payment information one time, making for an expedited buying process. Then, the physical products or services are automatically shipped or made available for immediate access.
To ensure a subscription-based company, product or service runs smoothly, retailers need to start with the customer in mind. How will the brand store customer information as well as accept and process payments? One of the primary reasons customers enjoy the subscription economy is because the payment process is easy and recurring. But on the back end, retailers often look at payments as an afterthought, especially all the operating costs and vendors associated with payment processing.
Retailers need to understand what their requirement needs are first then determine the type of technology best suited to support the roll out of products and services without customer interruption.
Recurring billing is a core requirement for retailers to support the subscription economy and a product that when implemented allows them to accept and automate recurring, installment or subscription payments on a pre-agreed upon cadence. When implementing recurring payments, consider if the product can help create and customize billing plans, create and store customer data, create subscriptions by pairing a plan to the customer, effectively manage payments by pausing and resuming subscriptions, and support and accept multiple currencies.
If these areas aren't addressed up front, the retailer will end up adding different tools and capabilities after the fact, increasing complexity, cost and time. When taken care of, customers will have an easy sign-up process. Once customers have inputted their payment information, their involvement in the process is, for the most part, complete. But what happens when a credit or debit card has been lost, stolen or expired?
In most circumstances, when a replacement card has been provided, customers are prompted to log into their account and input the new payment information. However, account updater is a service that, when coupled with recurring billing, works directly with financial institutions to automatically update the credit card information for the customer. The customer can be notified of the change without having the hassle of facilitating the manual update. This streamlines the entire payment process, taking the onus off the customer and eliminating time for them to reconsider the product and service.
With a subscription-based model, businesses need to review if their payment processing platform is equipped to handle customizable recurring billing scenarios. Down the line, this will be beneficial if there's an opportunity to tap a different revenue stream — e.g., managing multiple subscriptions per customer.
But for now, retailers need to start the process with payment and a customer-first approach to optimizing process flows for the subscription economy. Once the infrastructure is in place, retailers can focus on the quality of products and services that will bring in new paying customers. The effort should be seamless for the customer, with as few touchpoints requiring action as possible.
With the right technology in place and customer satisfaction always top of mind, retailers can build a successful brand that stands out in the subscription economy.
Craig Gass is the CEO of Qualpay, a provider of integrated omnichannel payment solutions.