Payment Operations Failings Are Hurting Subscription Businesses

The latest ACI Speedpay Pulse study reveals that subscription businesses need to drive greater maturity in their payment operations to minimize risks such as involuntary churn.

Subscription-based pricing and business models offer customers greater flexibility, while offering companies the chance to generate recurring revenues. Today, consumers can subscribe to anything from media streaming to cars.

But competition is increasing for subscription-based businesses, whether from new entrants disrupting the disruptors, or incumbents pushing back with offerings of their own. It seems that no-one is immune from the impact of this competition. Netflix – a shining light of the subscription business model, but now assailed by competition from the “legacy” companies it disrupted – hit the headlines in recent weeks when it announced a massive drop in subscriber numbers for the first time in years.

In response, Netflix is reported to be looking to finally crack down on those that share passwords and accounts with others – a perennial challenge for many subscription businesses.

These businesses might be interested in the findings of the latest ACI Speedpay Pulse research into consumers’ sharing of passwords and the costs of subscriptions – and the operational causes of involuntary customer churn for subscription businesses.

Multiple subscriptions are on the rise – but so are missed payments

The research reiterates the fact that interest in subscription offerings is on the rise. Most consumers now hold multiple – and growing – numbers of subscriptions, with 26.2 percent of respondents in early 2022 saying they pay for four or more subscription services, compared to 19.2 percent just six months earlier.

It seems that having a subscription offering remains one surefire way to stay relevant with consumers, given the appeal that spans generations. Gen Z and Millennials remain the most comfortable with paying for subscription services, with 47.8 and 42.1 percent respectively paying for 2-3 subscriptions. A further 21.5 percent of Gen Z and 22.5 percent of Millennials pay for 4-5 subscription services. Nevertheless, one in five Boomers have at least one subscription and a further 30.8 percent have two or three.

However, with more subscriptions to keep track of it seems there are more opportunity for payments to be missed – and often for simple administrative reasons. More than one in four (28.2%) of those surveyed in early 2022 had missed a payment for a subscription because their account on file expired. The age groups with the most subscriptions, Gen Z and Millennials, are most at risk of missing a payment for this reason, with 40 percent and 35.4 percent respectively citing it as the reason for missing a payment.

While it might be tempting to blame forgetfulness, the reasons cited by respondents for why their account was allowed to expire in this way point to operational failings on the part of billers. 41.2 percent say a lack of notification reminders was behind them not updating their payment method before it expired. Only 14.6 percent reported that they wanted to cancel anyway, highlighting that this kind of involuntary churn is largely avoidable.

Subscription sharing is on the rise

Netflix appears to be right on the money when it comes to making subscription sharing harder and others might do well to follow their lead. Our research reveals subscription sharing to be on the rise in general, and it is a far from rare practice across age groups. The proportion of consumers who answered “Yes” to “Do you currently share your subscription services with other people?” rose to 36.7% in early 2022 compared to 31.8% in early 2021. Subscription sharing is extremely common among Gen Z – 55.2 percent report sharing their subscription services – but a quarter of Boomers (24%) also report sharing their subscriptions.

However, consumers are also starting to share the cost of subscriptions with others, indicating potential opportunities for subscription billers to further engage customers, with packages enabling them to share and spread the costs of subscriptions with friends and family. When asked “Do you ever split the cost of your subscription with those people with whom you share?” 40.6 percent answered “Yes” in the 2022 study.

Improve payment operations to reduce churn and increase satisfaction

Improving payment operations is a simple way to reduce churn and improve subscriber satisfaction – both vital outcomes for subscription businesses in the face of increased competition and greater churn.

ACI Speedpay is one solution that offers fast, safe and reliable payments, with features designed to keep customers happy and engaged. These include account updater services that automatically updates account numbers for cards that have expired or have been changed due to being lost/stolen. The solution also offers mobile notifications delivered straight to customers’ digital wallets, such as moBills.

ACI Worldwide’s payments acceptance rate of 98 percent consistently outperforms the industry average of 77 percent. Our billing and payment experts will be at SubSummit in Orlando, Florida, Jun 1-3 to share how subscription businesses engage, retain and protect subscribers through an integrated payments gateway and fraud management solution.

---