THE SUBSCRIPTION PAYMENTS ECOSYSTEM: Consumers' rising interest in subscriptions is driving merchants to offer these services — here's what solutions providers need to know to capitalize on the opportunity
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More and more merchants are introducing subscription services to take advantage of consumers' growing appetite for the services and to reap the benefits of recurring revenue.
Business Insider Intelligence estimates that B2C e-commerce, video streaming, and music streaming alone will bring in over $54 billion in payments volume in the US in 2020, highlighting the market's value. With additional opportunities in industries like health and fitness, video games, and transportation, there's ample opportunity for merchants to attract revenue and for subscription solutions providers to add more volume.
But merchants have to be prepared to handle potential pain points resulting from subscriptions' recurring payments. Subscription payments are defined as payments that recur on a scheduled or usage-based basis for products, memberships, services, and more, offering new and consistent revenue opportunities for merchants.
And because subscription payments see consumers enter their payment information once and have the same account charged in the future, consumers aren't present to address any problems after that point, potentially causing merchants and payments providers to lose volume that will be difficult to recover.
Several types of solution providers are jumping at the opportunity to help merchants handle subscription payments in order to take advantage of the model's rise themselves. These firms fall into three groups: payments providers like Stripe and PayPal that already handle merchants' payments and are offering additional solutions specific to subscriptions; subscription-dedicated solutions providers, such as Ordergroove and Recurly, that don't process payments but do offer tools that help merchants with many stages of the subscription process, including payments; and merchant platforms, like BigCommerce and Shopify, that offer merchants access to multiple subscription solutions providers or their own suite of offerings. All of these providers have the potential to rack up volume and revenue by becoming merchants' choice to handle their subscription programs.
In The Subscription Payments Ecosystem, Business Insider Intelligence examines the size of the current subscription payments opportunity and discusses what's driving its growth. We then evaluate the top types of subscription payments solutions providers, as well as their strengths and weaknesses, before analyzing the subscription payments process and what makes it unique from a standard one-time payment.
Finally, we make recommendations for both solutions providers looking to facilitate subscription payments and attract clients, and merchants that offer subscription products and want to maximize their performances with solutions and efficient payment processes.
The companies mentioned in this report are: ACI Worldwide, Adyen, Amazon, AMC, American Express, Apple, The Atlantic, Automated Clearing House, BarkBox, BigCommerce, Birchbox, Blue Apron, Braintree, Chargebee, Chargify, Discover, Disney, Dollar Shave Club, EMVCo, Fusebill, GoCardless, Global Payments, Grubhub, Harry's, HBO, HelloFresh, Hulu, JCB, Loot Crate, Lyft, Mastercard, Magento, Mailchimp, MoonClerk, Netflix, Nets, The New York Times, Ordergroove, Pandora, Panera Bread, Patreon, PayPal, PayWhirl, Peloton, PlayStation, The RealReal, Rebillia, Recurly, Rent The Runway, Shopify, Spotify, Square, Squarespace, Stitch Fix, Stripe, Target, Tidal, TSYS, Uber, UnionPay, Visa, The Wall Street Journal, Walmart, Weebly, Wix, WooCommerce, WordPress, Zoho, Zuora, 24 Hour Fitness, 3dcart.
Here are some key takeaways from the report:
- Consumers and merchants are both interested in benefits from subscriptions, increasing the popularity of services using the model to the point that they're attracting millions of dollars of volume each year across a number of industries. Merchants are jumping at the opportunity to offer subscriptions because their recurring format can support unique offerings and rack up more revenue, while consumers are attracted by the convenience, savings, and access they can offer.
- As more merchants start providing subscriptions, a number of firms are looking to tap into this market to capitalize on the industry's growth potential. Each type of solution provider offers its own strengths and weaknesses — but all of them have the chance to succeed.
- Solutions providers and merchants alike need to understand the best practices for their segments in order to succeed in subscription payments. Providers must find ways to limit churn and find new ways to improve and innovate their processes. At the same time, merchants should consider whether they would benefit from developing their own subscription solutions, while also looking for new opportunities to attract subscription revenue.
In full, the report:
- Lays out the volume opportunity subscription payments offer both merchants and subscription solutions providers across industries.
- Considers why the subscription opportunity is growing by looking at why the subscription model appeals to merchants and consumers.
- Discusses the three types of solutions providers targeting the subscription payment opportunities and their strengths and weaknesses in doing so.
- Examines how the subscription payment process differs from a one-time purchase.
- Highlights the main pain points of handling subscription payments for merchants and solutions providers and offers way firms can address them.
- Provides recommendations for solutions providers and merchants that can enable them to maximize their performances in the subscription payments space.
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