Guest Opinion: The future of payment will be driven by subscriptions
Are you a subscriber? On average, the UK adult population now spends £56 on subscriptions every month. With “simplicity” at its core, Duncan Barrigan, head of product management at online direct debit provider GoCardless, believes this “frictionless model” is set to become the most popular payment method for consumers in 2018…
The subscription payment model is frictionless and works for consumers, according to Hiroki Takeuchi, founder of online direct debit provider GoCardless.
There was a time when subscriptions were relegated to the world of glossy magazines, Sky TV and telecoms providers.
Fast forward to the digital world and what we’ve seen is a rampant rise in subscriptions business models for all types of services – from nappies and deodorant, to monthly vegetable boxes delivered to your door.
Even online retailers are getting in on the action. Fabletics, the athletics wear company founded by the actress Kate Hudson, has launched a VIP subscription service for her sportswear, giving customers the chance to use a monthly payment fee towards purchases at discounted rates.
According to a YouGov survey commissioned by enterprise software firm Zuora, the UK had become a subscription nation, with nearly 58 million Brits now subscribing to services. This adds up to 90 per cent of the adult population.
The uptick in adoption has driven the UK adult population to spend on average £56 per month on subscription services, with 35 to 54 year-olds spending the most at £62 every month.
Why has the nation taken to subscription models now? Quite simply, the payments model is frictionless and works for consumers. A monthly Direct Debit is easy to set up online with payment being automatically taken from the customer’s bank account.
It’s cost-effective as no intermediaries and as it’s bank to bank it removes the risk of involuntary churn due to expired or cancelled credit cards. And customers feel secure too as they are covered by the Direct Debit guarantee.
Indeed. It’s all about simplification. Everything is automated – we are living in a digital world and we are now able to capitalise on its potential to make it very simple to make payments and for merchants to accept payments via Direct Debit.
The subscription model is very customer focused – individuals can choose their package and how they wish to pay – in other words, they are in charge of their consumer journey.
We expect this trend to grow.
At the moment, businesses are focused on retention campaigns – and how to keep consumers happy with their subscription plan they are on – especially when a new scheme is launched to attract new customers and it looks like a better deal that the one existing customers is already on.
I’m sure there’s solution for these types of retention challenges.
From our experience, one thing is clear. As long as companies focus on keeping customers at the heart of their business – which means giving them an easy way to pay for services that are tailored for them, then new subscription models can become a conduit for tremendous revenue growth.