ACI Worldwide: Payment Transaction Failures Hurt Subscription Businesses
The latest ACI Speedpay Pulse study reveals that subscription businesses need to increase the maturity of their payment operations to minimize risks such as unintentional churn.
Subscription pricing and business models provide customers with greater flexibility, while providing businesses with the ability to generate recurring revenue. Today, consumers can subscribe to everything from streaming media to cars.
But competition is growing for subscription-based businesses, whether it’s new entrants disrupting disruptors or incumbents pushing back their own offerings. It seems that no one is immune to the impact of this competition. Netflix – a shining light of the subscription business model, but now beleaguered by competition from the “legacy” companies it disrupted – has been making headlines in recent weeks by announcing a massive drop in subscriber numbers for the first time in years.
In response, Netflix would finally seek to crack down on those who share passwords and accounts with others – an ongoing challenge for many subscription companies.
These companies may be interested in the findings of the latest ACI Speedpay Pulse study on consumer password sharing and subscription costs – and the operational causes of unintentional customer churn for subscription companies.
Multiple subscriptions are on the rise – but so are missed payments
The research reiterates that interest in subscription offers is on the rise. Most consumers now hold multiple – and growing – subscriptions, with 26.2% of respondents at the start of 2022 saying they pay for four or more subscription services, up from 19.2% just six months earlier.
It seems like having a subscription offer is still a 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% respectively paying for 2-3 subscriptions. An additional 21.5% of Gen Z and 22.5% of Gen Y pay for 4-5 subscription services. Nevertheless, one in five baby boomers has at least one subscription and 30.8% have two or three.
However, with more subscriptions to follow, there seems to be more opportunity for missed payments – and often for simple administrative reasons. More than one in four (28.2%) of respondents in early 2022 had missed a payment for a subscription because their registered account had 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% and 35.4%, respectively, citing this as the reason for missing a payment. payment.
While it may be tempting to blame forgetfulness, the reasons respondents gave for why their account was allowed to expire in this manner point to operational failures on the part of billers. 41.2% say a lack of notification reminders caused them to not update their payment method before it expired. Only 14.6% said they wanted to cancel anyway, pointing out that this type of unintentional unsubscribe is largely preventable.
Subscription sharing is on the rise
Netflix seems to be right when it comes to making subscription sharing more difficult and others would do well to follow their lead. Our research reveals that subscription sharing is on the rise in general, and it’s a far from uncommon practice across all age groups. The proportion of consumers who answered “Yes” to “Do you currently share your subscription services with other people?” rose to 36.7% at the start of 2022, from 31.8% at the start of 2021. Subscription sharing is extremely common among Gen Z – 55.2% say they share their subscription services – but a quarter of baby boomers (24%) say they also share their subscriptions.
However, consumers are also beginning to share the cost of subscriptions with others, indicating potential opportunities for subscription issuers to further engage customers, with packages allowing them to share and split subscription costs with their customers. friends and their family. To the question “Do you ever share the cost of your subscription with the people you share with?” 40.6% 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 – two vital outcomes for subscription businesses in the face of increased competition and higher churn.
ACI Speedpay is a solution that offers fast, secure and reliable payments, with features designed to keep customers satisfied and engaged. These include account update services that automatically update account numbers for cards that have expired or have been changed due to loss or theft. The solution also offers mobile notifications sent directly to customers’ digital wallets, such as moBills.
ACI Worldwide payment acceptance rate of 98%consistently outperforms the industry average of 77 percent. Our billing and payment experts will be at SubSummit in Orlando, Florida, June 1-3 to share how subscription businesses engage, retain and protect subscribersthrough an integrated payment gateway and fraud management solution.