Subscription illustration
Subscription illustration
Subscription illustration
Guides and reports

The Adyen guide to subscriptions

From movies to meal kits, people love the ease and delight of subscription services. And brands certainly don’t mind the consistent customer relationships. Here we explore the main ways merchants can make the most of this booming market.

September 30, 2020
 ·  6 minutes

Streaming services for movies and music have been the big standouts, and they’re certainly not alone. From software and razors to fresh produce, subscriptions services are everywhere – growing more than 300% in the last seven years alone.

Give your customers something to look forward to

80% of vendors will offer subscriptions

It’s estimated that soon all entrants to the software market and 80% of historical vendors will offer subscription based models

6X the customer lifetime

Subscription business models result in customer lifetimes that are six times longer than single purchase models

6% more revenue with a unified platform

An efficient and secure unified platform can unlock up to 6% more revenue for subscriptions

How to boost and secure subscription business with a unified payments platform

With built-in flexibility, agility, and security, the right payments platform can be a powerful business growth tool for this business model. We see these four recurring solutions across the subscription system.

Optimize the sign up process with local payment methods

Let your customers pay the way they want no matter where they are in the world. In North America, the UK, and Australia the majority of transactions are made by credit card. However, they only represent a fraction of global consumers, millions of whom don’t use cards.

In Germany and Russia, for example, credit cards are less common. Local services such as SEPA and QIWI are used for recurring and subscription payments. SEPA payments also account for a significant market share in Austria and the Netherlands.

Payment method

QIWI

Market opportunity

21 million users in Russia

Functionality

The customer authorizes the wallet to make transactions on a repeat basis.


Payment method

SOFORT / Giropay / SEPA Direct Debit

Market opportunity

50% share of online payments in Germany

Functionality

Accounts validated by SOFORT or Giropay. Subscription is paid with SEPA Direct Debit.


Payment method

SOFORT / EPS / SEPA DD

Market opportunity

60% share in Austria

Functionality

Accounts validated by SOFORT or EPS. Subscription is paid with SEPA Direct Debit.


Payment method

iDEAL / SEPA DD

Market opportunity

80% share in the Netherlands

Functionality

Accounts validated by iDEAL. Subscription is paid with SEPA Direct Debit.


Payment method

Momo

Market opportunity

90% market share in Vietnam

Functionality

Shopper authorizes merchants during initial transaction to tokenize the wallet, allowing merchants to do merchant-initiated subsequent recurring transactions.


Payment method

Dana

Market opportunity

30 million users in Indonesia

Functionality

Shopper authorizes merchants during initial transaction to tokenize the wallet, allowing merchants to do merchant-initiated subsequent recurring transactions.


Payment method

KaKaoPay

Market opportunity

93% of smart phone users in Korea

Functionality

Shopper authorizes merchants during initial transaction to tokenize the wallet, allowing merchants to do merchant-initiated subsequent recurring transactions.

Deliver uninterrupted access by adjusting your billing intervals

Factors such as the time of day and day of the month can have a significant impact on transaction success rates. In the US for example, most customers are paid bi-weekly, typically on a Friday, with an uplift of successful payments at the beginning and middle of each month. In the UK, people tend to be paid monthly, with one spike towards the end of the month.

By analyzing transaction success rates across individual markets, you can make data-driven decisions about optimal times to bill subscribers. Consider asking customers what intervals and times they prefer to be billed.

Refusals due to insufficient funds

Apply smarter approaches to recovery with data-driven retries

When a transaction fails for technical reasons, the best practice is to retry immediately. If a transaction fails for non-technical reasons, such as insufficient funds, it may be better to retry over a longer-term period to allow time for the cardholder’s payday to come around.

Intelligent systems can sense when to retry and when to allow for more time, improving the customer experience while minding the busines.

Retry success: two adyen features head-to-head

Protect against fraud with an individualized approach

The traditional approach to minimizing fraud is to stop all suspicious transactions. However, this blanket approach ignores the intricacies of a successful payment authorization and can also block legitimate customers.

One way of reducing blocks on genuine subscribers is to focus on identifying which transactions are most likely to be legitimate. When it comes to subscriptions, higher chargeback rates are typically associated with the initial setup and, as the subscription ages, the chance of a recurring transaction turning into a chargeback diminishes.

Most chargebacks will come through within six months of the subscription set-up. Therefore, it makes sense to whitelist recurring transactions where the subscription age is greater than six months so you can treat the payer as a loyal shopper.

About Adyen

Adyen is the payments platform of choice for many of the world’s leading companies, providing a modern end-to-end infrastructure connecting directly to Visa, Mastercard, and consumers’ globally preferred payment methods. Adyen delivers frictionless payments across online, mobile, and in-store channels. With offices across the world, Adyen serves customers including Facebook, Uber, Spotify, H&M, Casper, Bonobos, and L’Oréal.


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