Subscription payments: how merchants can bolster revenue and reduce churn

Ray Bak, Head of Commercial Partnerships at Worldline, explains the benefits of the modern subscription management systems for both merchants and consumers alike, with a focus on security concerns and customer experience.

Subscription management systems form a vital part of companies’ business models. Having been consigned initially to newspaper and magazine subscriptions, for example, the rise of SaaS providers and streaming services such as Netflix, Amazon Prime, and Disney+, have further propelled companies’ propensity to incentivise customers with offers or discounts to onboard them on a long-term revenue plan.

The subscription economy grew by over 300% between 2013 and 2020 and shows no sign of abating - 18% of companies have seen their subscription rate increase since the start of the pandemic. With this in mind, choosing the right subscription model – one that ensures customers have a seamless payment journey through outsourced card storage and reduced involuntary churn through smart dunning. Enabling payments to be retried at bespoke frequencies to minimise the likelihood of another failed payment attempt, has never been more important. 

In addition to the US, Europe has also seen a huge surge in the use of subscriptions, with 31% of Europeans having increased their number of digital subscriptions since the COVID-19 pandemic. This number is set to be even higher among companies where it is typical to harness subscription-based software, such as Customer Relationship Management (CRM) services and accounting solutions.

A fundamental advantage of this model is that it allows the customer to benefit from a hassle-free shopping experience. Similar to paying utility bills through direct debit, subscriptions increase convenience for the customer as payments are processed seamlessly, with additional perks deriving from incentives for loyalty or referrals.

The benefits of this model are two-fold. Customers have the advantage of a more efficient experience and companies receive a steady flow of income over an extended period without the inconvenience or aggravation of having to pay for potentially expensive marketing or sales campaigns.

This also ensures businesses can better plan future revenue forecasts. Once the customer has subscribed, they are less likely to cancel (typically just 40% do). Nevertheless, implementing an effective recurring payment system is not simple, particularly as companies aim to minimise churn and boost the customer experience and their subsequent loyalty to the business wherever possible.

Understanding how recurring payments work is important, as it’s not as easy as simply taking one-off payments from the customer, particularly once the complexity of free trials, referral payments, and loyalty rewards are factored into the process. Typically, these payments can be offered through tokenisation or direct debits. But these methods can be complex to manage, labour-intensive, and raise potential security challenges and concerns through the storing of customer payment information.

Businesses are not always able to handle this effectively. To address these issues, they could use alternative solutions to improve operational efficiency and profitability. This can be achieved through multiple payment methods, effective retry, metrics to quantify conversion rates, and cross-border payments - the aim of which is to minimise customer churn.

To lift the responsibility of abiding by changing rules and regulations, online retailers can work with payment processors that follow the highest level of PCI DSS compliance, making sure each customer’s payment information is stored securely.

A resilient system needs to be in place to react to all eventualities including, for example, when a customer changes their billing details having signed up for a service or lacks the funds to make a payment, which is consequently declined. These instances are common and therefore mitigating the issues they raise is crucial. 

To further automate the customer journey, companies can integrate their subscription into their wider digital ecosystem. If a customer’s subscription is about to expire, dedicated and targeted messaging, for example, an email reminder can be sent out to encourage them to renew. Going above and beyond just the payment aspect in this respect will inevitably improve customer loyalty and in turn, customer retention and revenue.

Thanks to its new partnership with Chargebee, one of the biggest companies in the subscription management space - Worldline - provides its customers with the opportunity to implement subscription systems which are centralised and compliant with PSD2 regulations. By implementing CRMs, ERP, accounting systems, among other technologies, businesses have a bird’s-eye view of their recurring and one-off payments and their subscription and non-subscription products.

Iris Hosman, Partner Success Specialist at Chargebee, said: ‘Partnering with Worldline has allowed us to significantly upgrade our subscription management solution through its payment processing system. With processing and compliance safely in Worldline’s hands, our clients are now able to concentrate on strengthening other aspects of their business in the best interests of the customer. Doing so only serves to enhance long-term loyalty between the customer and the merchant’.

A CTO of one of Worldline’s merchants said: ‘Despite receiving approximately one million visits to our website every year, our conversion rate was still low, but thanks to this new solution powered by Worldline and Chargebee, we are now aiming to double our conversion rate. New technologies like smart dunning and market automation are a key driver of this’.

Companies can see huge boosts to their revenue in both the long and short term if they make the most of a subscription-based business model. Excitingly, the model directly relates to loyalty; another important element for any merchant today. So, by making use of the out-of-the-box solution from Worldline and Chargebee, both customers and merchants will reap the benefits in the long term.

We are hosting a webinar in partnership with The Paypers on the 15th of September where we will explore the key strategies for reducing churn and increasing ARR. Join us live here.

For more information about Worldline & Chargebee’s solution, visit our website.

About Ray Bak

Ray Bak is Head of Commercial Partnerships & Bid Management at Worldline. He has been at Worldline for over 10 years, having started at Ingenico in 2009, working in various sales and account management roles before progressing to Director of Sales for Northern Europe and into his current role. He brings a mix of payments expertise along with ecommerce experience, having worked with large enterprises as well as small and medium businesses. He completed his studies in General Management at Hoge School, Holland. In his spare time, you can find him doing a tee-refic job on the golf course.

About Worldline

Worldline [Euronext: WLN] is a global leader in the payments industry and the technology partner of choice for merchants, banks and acquirers. Powered by c. 20,000 employees in more than 50 countries, Worldline provides its clients with sustainable, trusted and innovative solutions fostering their growth. Services offered by Worldline include in-store and online commercial acquiring, highly secure payment transaction processing and numerous digital services. In 2021 Worldline generated a proforma revenue close to 4 billion euros. worldline.com.