Like many of my fellow countrymen and women, I’ve switched from commuting by car to by bus and train in recent years. I sold my car after moving to the big city and haven’t been stuck in traffic once since then. I can even prepare for appointments during my journey to the office. It’s no surprise to me that an average of 30 million Germans take public transport each day. I actually now associate traveling by car with stress, whereas traveling by train is comfortable and timesaving.
The only way in which the transport operator makes it complicated for me in my new adopted home is when it comes to payments. Allow me to explain: Because I often travel to different cities and countries for work, it makes no sense for me to have a monthly ticket. When I go to the office or to friends in the evening, I either get a single ticket at the machine and pay with my debit card or I book a ticket online via app. Both options are practical but I’m regularly shocked when I check my bank account online. Each ticket is charged singly at amounts totaling between €1.70 and €2.80.
I often ask myself why billing has to be so complicated. It can be so simple by offering a product or service as a subscription and aggregating all charges in a single bill at the end of the month. Such a conceivably simple process has already been in use in many industries for a long time and is – understandably – becoming increasingly popular. After all, both retailers and consumers benefit from it. Once a customer has chosen a payment method and entered their account details, they generally do not need to do anything other than choose the products and receive the goods – or, as in my case, purchase a ticket.
It’s a fallacy that many receivables are onerous for retailers. Just the opposite. They are actually a blessing in the digital age. The reason is simple: For companies who employ a subscription model, the registration of payment details is not associated with one-off transactions, but with recurring payments that, in the best case, continue over several years. If a customer stores his or her card details during registration, the likelihood increases that he or she will require the product or service for longer as a subscription.
However, to successfully handle recurring payments, retailers require the support of a provider who not only processes payments but who also partially manages them too. The service a company chooses depends on various factors such as the product, tariff structure, and desired scope of functions. Vendors specializing in downloadable products that do not require payments for physical goods are usually well served with a subscription model involving the simple processing of recurring payments – as provided by standard payment service providers (PSPs).
However, subscriptions with more complex tariff structures require working with recurring billing and full-service providers. Their main advantage over PSPs is that they also manage contract management and settlement: two tasks that are associated with high time and cost requirements – particularly for retailers with a large number of customers or orders.
Find out in our new eBook on the challenges and opportunities of the subscription economy which kind of provider is right for your product and how you can increase your conversion rates in subscription commerce. Many advantages await retailers and manufacturers who have mastered the technical hurdles. These include stronger customer loyalty from consumers who, like me, enjoy the simplicity offered by subscription payments.