The future of subscriptions: How digital is changing the way we pay
The growing popularity of cryptocurrencies, NFTs, and micropayments is quickly changing the way consumers spend and save. In 2021, a study found that 16% of U.S. adults had invested in, traded, or used cryptocurrency — up from just 1% in 2015. For Americans between the ages of 18 and 29, that number jumps to 31%. NFT popularity saw an even bigger spike in popularity with trades increasing 21,000% from 2020 to 2021.
At the same time, consumers are growing increasingly frustrated with the predominantly subscription-based economy. They’re becoming tired of being prompted to pay costly all-access membership fees for yet another service just to access one or two pieces of content, creating a real need for micropayment or minimal transaction alternatives.
These trends are creating an uncertain future for the payments industry (and within that, how subscription-based models succeed) — something all companies need to consider when creating their purchasing experience.
The ever-evolving future of payments
A memorable purchasing experience (one that convinces the customer to buy again and again) is easy, flexible, and secure. Customers can pay the way they want to without needing to jump through complicated hoops or maneuver through lengthy payment processes to complete their checkout.
As new payment methods appear and customers’ options expand, businesses need to be willing to accept multiple forms of payment — including nontraditional avenues like digital currencies and tokens. But while enhancing the customer experience is a top priority, businesses also need to prioritize payment methods or formats that are profitable for them.
Finding that balance has become increasingly challenging, especially for subscription-based brands. But new technology also creates new opportunities. Here are some of the biggest changes companies can expect to see:
1. Crypto-based subscription payments can provide stability for companies
Recurring payments in the crypto world are still a new concept, so there is still work that needs to be done to establish reliable crypto-based subscription payments. But using crypto to secure recurring payments can provide companies with new stability and reliability.
Unlike credit cards, crypto wallets don’t expire. Customers and companies don’t need to worry about involuntary churn and unintentionally ending a subscription-based service due to an expired or canceled credit card. Available funds are also validated before the transaction is finalized, so companies have increased confidence that customers can afford their purchase before it is processed.
But crypto also comes with increased barriers that can make recurring transactions difficult. The anonymous nature of crypto payments adds a new challenge that the industry will need to overcome before cryptocurrency can be a viable subscription-based payment option.
2. NFT memberships as a long-term investment
NFT enthusiasts are continuing to come up with creative ways to make the most of the technology — including using tokens to offer exclusive access to digital (and real-life) social clubs. Companies can follow the same framework and use NFTs to provide exclusive content, access, or features to particular groups.
To make NFT-based membership plans work, companies will need to move beyond subscription-based payments, which can create complicated pricing models. Customers would pay in one large sum rather than in recurring payments, which means customers will need to see the value of their larger investment up front.
But the one-time purchase puts ownership back in the customers’ hands, eliminating the annoying need to buy again and again. Customers can also transfer, sell, or share their membership token, increasing the value of their investment and creating a more enticing opportunity.
3. Micropayments create win-win environments for low-investment customers
Micropayments let customers buy access to exactly the content they want without needing to invest in what they don’t. But many companies have avoided offering micropayments because the associated fees are too high.
Blockchain and digital wallets can finally create low-friction micropayments that are financially viable for companies and customers. Customers have more options for accessing pay-restricted content and companies are able to convert low-investment customers who would have turned to a competitor otherwise.
How to prepare for the future of payments
While crypto payments and NFT memberships aren’t the anticipated norm today, the future of payments might be closer than we think. Companies need to start preparing for the challenges (and opportunities) that lie ahead.
Here are our best tips.
1. Know your audience
Digital currencies and NFTs aren’t for everyone. More and more people are starting to pay attention, but not everyone is going to jump on board. Knowing where your target audience falls is crucial for timing a potential move into new payment spaces.
If your audience includes early adopters of new technology, they’ll likely expect next-generation payment options sooner rather than later. On the other hand, if your audience is primarily older generations or those comfortable with the status quo, you don’t need to jump to change your payment strategy.
Dig into audience preferences and needs to determine how they feel about these new payment methods. Focus groups, customer surveys, and third-party research can give you a good idea of how heavily you need to invest.
2. Focus on customer experience
Accepting multiple forms of payment make it easy for customers to buy what they want in a way that works for them — but that doesn’t mean you need to offer every form of payment available. If adding micropayments or accepting cryptocurrency takes away from the purchasing experience instead of adding to it, it might not be the right option for you.
Offering new technology for the sake of offering new technology rarely works out well. Before you start incorporating new payment options, make sure it fits seamlessly into your purchasing experience.
3. Continue to prioritize trust
Regardless of what the future of payments or subscription-based services holds, customers will choose to buy from companies they trust. In order to weather the many technological changes that lie ahead, prioritize building trust with your customers.
Continue to meet (and exceed) customer expectations by delivering superior products and support. Stay in communication with your audience so you can adjust according to their unique needs and preferences.
And be sure to make security a focus, regardless of the technology you choose to use. With more and more scams around cryptocurrency and NFTs appearing as the technology gets more popular, its natural customers might feel skeptical. If you choose to offer next-generation payment options, make sure your customers know they can trust you with their sensitive information.
4. Be ready for more change
Technology is advancing rapidly, and we don’t see that progress slowing down any time soon. Crypto, NFTs, and micropayments are on our horizon now, but new technologies — and new ways of using those technologies — are likely to pop up and further disrupt the way our customers pay.
Preparing for the future means being ready for anything. If we’ve learned anything over the last few years, it’s that in order to succeed, businesses need to be flexible, agile, and prepared to adjust at a moment’s notice.
Digitally transforming your payment landscape can’t be treated as a one-and-done endeavor. Creating sustainable, successful subscription-based businesses requires keeping a pulse on the market, new emerging technologies, and what customers want. When you prioritize customer experience — from how you attract new customers to how you convert them into paying customers — you can build a brand that succeeds in even the most challenging times.