"What makes a subscriber better than a one-time customer is the journey...the full experience the subscriber gets to be a part of."

This quote, from a recently-hosted subscriber lifecycle workshop, is poignant and pervasive. Because it's true, and especially true for the recurring revenue model. Subscriptions, memberships, XaaS, it's all about delivering value on a repeat basis to your customers—giving your customers what they want. Trendsetters and leaders within the space—brands like BarkBox, FabFitFun, Amazon, and Netflix, and payment processors, like PayPal (which now supports Bitcoin), are always finding new and innovative ways to adapt to reimagine the customer experience, advance the industry at large, and push the boundaries of what's possible with payments. 

Those boundaries are being ever-tested by shifts in consumer behavior and preferences, and in the last year or so, have been nearly upended due to the COVID-19 pandemic. Additionally, the evolution of subscription-based businesses has brought payments to the forefront of profitability and the customer experience. What we're left with is a digitization within the payments landscape and a breakneck pace toward personalizing payments for profits.  

Seamless, digital payments are the next (if not already) area of focus in moving past customer-focused to customer-centric to increase your margins and decrease churn in an automated and scalable way. The following are the main areas we see this shift having a direct impact. 

New digital payments methods reign supreme

Over the last several months, we've continued to see the impact of the coronavirus pandemic in the ecommerce space. Commerce Signals found that total consumer retail spending increased 21% in October, 17.9% in November and 16% in December. Online, though, grew even more: 55.9%, 53.2% and 47%, respectively. As every business across the globe finds a way to create a digital offering and accept digital payments, market competition has increased in an already hypercompetitive space. Payment processes at checkout and renewal are more important than ever: they need to be effortless.

New trends include contactless mobile payments, such as Apple Pay and Google Pay, and the ability to pay with QR codes. In 2020, according to FIS, payments using mobile digital wallets overtook cash payments on in-store purchases for the first time. Additionally, Juniper Research found that 11% of U.S. consumers started using QR codes in 2020, and that 27% of all digital commerce transactions in the next five years will involve a QR code. These payment methods make the transaction part of the value proposition. 

Multiple payment methods are a need, not a nice-to-have

Aside from needing to be effortless, payment processes need to be diversified. Customers expect multiple payment methods—26% of consumers will leave if they don't see the payment method they prefer; offering your customers' preferred payment method will drive more revenue through the front door. Millennials want Venmo; a business may want ACH.

But it's not just about giving your customers what they want: you also need to leverage the payment methods that drive big impact for you. Aside from the ability to capture a larger target market, offering alternate payment methods (APMs) besides credit and debit cards can deliver higher checkout completions as well as revenue lift. PayPal typically delivers a 19% lift in conversions and 25% revenue lift.

Venmo is one of the newest APMs, and supporting Venmo is an excellent way to expand your reach to a younger consumer audience. Unique in its approach to payments as more of a social platform, businesses leveraging the power of social for promotions via Venmo are able to capitalize on social sharing to create viral acquisition strategies. 

An accelerating trend that allows billions of otherwise "unbanked" people to access financial payment services is the rise of digital wallets. A digital wallet (or e-wallet) is a software-based system that securely stores customers' payment information and passwords for numerous payment methods and websites. With wallet customers are also able to set up multiple payment methods on the same account and set preferences for payment types by transaction type. For example, a customer might purchase a Peloton bike on their credit card but choose to route their monthly subscription payment through PayPal. A business may purchase digital advertising, opting to process platform fees via ACH and use a company card for monthly ad spend.  

Wallet functionality can help businesses mitigate churn and maximize recovery of failed payments. If a customer's first payment method fails, businesses can fail over to a backup payment method. The end result: improved acceptance rates, decreased failed payments, and increased cost efficiency.

The speed of checkout, like much else, has become nearly instantaneous for many consumers. With Amazon, you needn't make more than a single click to buy now—you don't even need to "add to cart." PayPal One Touch offers this capability across a variety of sites, delivering one-tap checkouts so consumers can shop online without needing to enter their account details every time they pay. PayPal also recently released an interest-free buy-now-pay-later capability (different from services such as Affirm, which can charge interest) that lowers the barrier to entry for more expensive items, widening your potential audience and increasing conversions.

Payment globalization folds the map

The payment landscape itself is evolving, and while the borders on the map are disappearing, that has not translated into a one-size-fits-all strategy for subscription companies.

According to American Express, nearly 30% of international consumers will abandon a purchase if the product is priced only in US dollars, and 92% of online customers prefer to buy in their local currency. Aside from consumer preferences for local payment options, there are sizable impacts and implications to businesses. 

Let's talk about the key differences first. Cross-border payments are where the merchant's bank requests authorization from the customer's bank in a different country, which can have a devastating effect on authorization rates and increase the chance of declines, depending on the country. Brazil in particular has a very low authorization rate for cross-border payments, close to 30% (where the standard is 90%). Aside from the cost of failed payments, every hop made from the bank to the processor (which, with cross-border transactions, happens several times) costs money. There's additional requirements for invoicing, taxes, repatriation and more with cross-border payments that are more complex than with a local payment where all of these considerations are accounted for automatically. 

For local payments, the merchant contracts with the country or region specific to the acquirer and the country or region-specific acquirer handles the authorization with the customer's local bank. Having a local payment method given the local options and a routing engine that knows to send that transaction to the right gateway at the right time helps you optimize for cost regardless of where you do business.

Since we're talking about Brazil, we'll continue with the LATAM example. PrimeroPay allows merchants to pretend they have a local entity in Brazil, allowing them to process as if local acquiring, unlocking 60-70% of the market in LATAM by accepting local credit cards. By leveraging PrimeroPay businesses can expand to Brazil and Mexico, reaching over 70% of the population that only pays with local payment methods, without the heavy costs of operating a local entity. You can also minimize in-market payment decline rates—from 70% to 10%—boosting customer acquisition rates.

What's next?

The "pay as you wish" theme within the payments space will expand as consumer preferences continue to shape the next normal and coming evolutions of payments trends. With every industry seeing a shift from one-to-many to one-to-one everything standing out and delivering value is tantamount, or synonymous, with success. Being able to make decisions to support the move to personalized payments in the aforementioned points will require heightened levels of visibility into your customer data. Going beyond the who, what, and where to intimately understand buying behavior and preferences to deliver value on repeat, and finding new ways to stay relevant and engaged.  

We're here to deliver the data and insights you need to make these decisions, the automations to remove the roadblocks, and the payment methods and gateways required—including PayPal, Venmo, Wallet, and 22 gateways, including PrimeroPay. With Recurly, you have everything you need to give your customers the ability to pay how they want, from where they want, creating a frictionless payments experience to exponentially increase LTV, lower transaction costs, and drive more revenue.