Real-Time Payments: The Future for Subscriptions

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Much like disco, payphones, and flashbulbs, ownership is a thing of the past. More than half of adults wish they could own less stuff and 70 percent say that subscribing to products and services releases people from the burden of ownership (e.g., maintenance, clutter, declining value).

In short, the subscription market is growing exponentially. According to one survey, 71 percent of adults pay for one or more subscriptions, an increase of 18 percent from five years ago. And the businesses that provide them are also booming. Over the past seven years, companies throughout North America, Europe, and Asia Pacific have seen subscription-based sales increase by more than 300 percent.

But simply relying on an increased appetite for subscription services will not drive success. Consumers are rapidly adopting new payment methods. In fact, more than 16 percent report using digital channels to pay bills more frequently, according to the latest ACI Speedpay® Pulse Study.1 The study also shows that 35 percent of consumers would consider paying a bill using an alternative payment method such as Zelle or Venmo. 

Subscription providers must keep up with the changing payment priorities of their customers or else risk losing customers to competitors and churn – and that means looking beyond credit cards to real-time and alternative payments.

Paying the Bill: Subscribers vs. Subscription Businesses

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Subscribers love their credit cards. While there are a host of popular payment types when it comes to paying for subscriptions, credit cards are the top way to pay for subscriptions. 41 percent of subscribers prefer credit cards versus ACH (19 percent), debit cards (17 percent) and alternative payment methods (13 percent).2 This can be attributed to both a desire for convenience and to take advantage of rewards.

Subscription businesses, on the other hand, have an almost reverse preference in how they prefer to be paid. While 27 percent of providers also prefer cards, alternative payment methods are the top choice, coming in at 35 percent.2

Fast, Flexible and Final: Alternative Methods and Real-Time Rails 

Alternative payment methods, such as mobile wallets that include Apple Pay and Google Pay, as well as PayPal, Venmo, and Zelle, are increasingly popular with both subscribers and subscription businesses. 82 percent of providers list a lack of speed as their biggest pain point2, which helps explain why alternative payment methods are their most preferred payment method. These payments are not just easy, they’re also incredibly fast. Funds are sent in near-real-time, generally from a subscriber’s mobile device.

But if you’re looking for fast, nothing is faster than real-time payments. Real-time payments deliver the ultimate in speed and data. This helps subscription companies gain the funds they need while also receiving a wealth of data that can be used to reduce churn, improve the customer experience and drive back-office efficiency by improving payments posting accuracy. Funds are sent almost instantly, and cannot be canceled or recalled, which is especially crucial for “box-of-the-month”-type subscription companies that send out tangible goods.

While adding alternative payment methods and real-time payments functionality seems like a no-brainer, nearly one in three subscription companies say that system integration is a pain point when receiving and processing payments, while 36 percent mention manual processes and reconciliation headaches.2 Modern billing and payment providers can solve these issues for subscription companies with simple integration with their existing platform that provides a seamless experience for the subscriber.

One thing to consider is that real-time payments are relatively new. Only one in five consumers have heard of real-time payments, while two in five say they would use them once they were explained what they were. For subscription companies, real-time payments represent a unique opportunity to offer a true differentiator within its payments platform — one that benefits all parties involved.

In Conclusion

While credit cards are currently the most popular payment method for subscribers, real-time and alternative payments are the wave of the future. Subscription companies must work to incorporate these payments into their platforms and incentivize their usage. Not only will this improve revenues, but it will also help reduce payments-related churn due to expired subscriber payments information and burdensome payment processes.

For more information on how you can win during these changing times, download our eBook, “Subscription Payments: Growing Pains and a Need for Faster Payments

1 – ACI Speedpay Pulse survey, 2020

2 – Recurring Success: Exploring Subscription Payment Trends, ACI Worldwide and Mastercard, 2020