Subscriptions are shaping the payments landscape as we know it

By Nick Raper, Head of UK at Nuapay 

Subscriptions are a rapidly increasing trend in today’s payments landscape, particularly since the pandemic began restricting consumers’ access to physical stores. Nuapay’s clients are testament to this, with some video streaming services using Nuapay’s payment solutions seeing a 25% jump in subscriptions in March 2020 alone.

Subscriptions provide a method of receiving services or products at a specified rate and according to personal preferences, and were already growing in popularity even before COVID-19. Over two thirds of adults internationally used at least one subscription service during 2019, and in Europe alone spent an average of €130 per month on subscriptions in the same year. This is because consumers are increasingly seeking services that are fast, convenient and accessible, and subscriptions fit this description.

Subscription models are attractive to businesses too. Organisations in an array of sectors, including online event providers, online entertainment services, food and drink retailers, and even online fitness classes are favouring subscriptions as a method of securing regular revenue. Additionally, subscriptions allow businesses transitioning into the digital space to monetise their services in a more efficient way. Newspapers and magazines are a great example of businesses that have transitioned to digital subscription models as a practical alternative to selling their editions on a one-off basis. In fact, research has found that during the first UK lockdown, 90% of businesses with a subscription model maintained or grew memberships.

Looking forward, Gartner predicts that by 2023, three quarters of organisations selling direct to consumers will offer subscription services. Businesses should consider subscriptions, enabled by recurring payments technology, as an effective way to offer their consumers the best customised service.

Delivering high quality experiences 

Implementing a subscription based model has previously been difficult for organisations, given the limits of collecting recurring payments. These challenges impact small and medium sized businesses in particular, as they do not have the same resources as enterprise-scale merchants.

Now, new providers in the Account-2-Account payments space make it possible to set up and process recurring payments with ease, enabling retailers to deliver the fast and seamless experience that their customers expect.

New payment innovations are starting to transform historic recurring payments solutions, which have been solely Direct Debit based up until now, to include broader Account-2-Account solutions. New recurring payment options known as Variable Recurring Payments (VRP) were piloted in the FCA’s sandbox earlier this year. This technology, said to be the next generation of Open Banking, enables businesses to collect payments from a consumer in real-time, up to an agreed maximum amount, subject to monthly limits. VRP will be a secure and convenient alternative to online card payments and, as it is based on Open Banking technology, will offer customers the opportunity to pay without needing to disclose their card details.

Some of the world’s biggest payment companies in the world are seeing the potential behind subscription payments via the Account-to-Account networks. Visa’s global payment management platform, CyberSource, recently partnered with Nuapay to deliver Account-to-Account payment solutions to its merchant client base, enabling seamless recurring payments.

With an increasing number of subscription options now available, a good payment service provider will be able to provide businesses with access to and advice on the best options for them and their situation – whether that is Direct Debits, Standing Orders, VRP, or other new integrated Open Banking based solutions.

Benefits for businesses 

Businesses can attract more customers that are price driven simply by employing recurring payments. A £400 lump sum for one product is a lot less attractive for consumers than a £20 per month cost in exchange for something new each month.

Another benefit of subscription models includes the ability to cross-sell or up-sell products and services. Purchases with little product feedback make it harder for businesses to gauge an understanding of consumer behaviours and personal

preferences. By forming an ongoing relationship with customers, businesses can receive deeper insights which can be used to bring new products to market, or update existing products.

Additionally, subscription based business models make it easier to predict business revenues. This enables improved decision-making as strategic planning can be informed by revenue from ongoing recurring payments.

Continuous growth for subscriptions 

Subscriptions will only continue to grow in demand as consumers increasingly flock to online environments.

With the range of insight-led advantages for organisations evident, it would be an oversight for business leaders not to consider sharing their products and services via a subscription based model.