Threats and opportunities for subscription businesses going global
Last editedAug 20202 min read
Ahead of his keynote speech at the Subscription Summit 2020, GoCardless CMO Neil Morgan gives his take on the opportunities facing businesses of the booming global subscription economy; and the pitfalls to avoid when thinking about payments.
What is the most significant challenge facing the subscription economy?
Look at the fastest growing businesses around the world, and they’re all subscription ones. In Europe the subscription economy is growing at around 64%, in North America it’s 48%. Subscription companies in APAC are growing at about x10 the rate as in Australia.
This global boom in the subscription economy represents a huge opportunity for business to expand abroad; but also a significant challenge. If you’ve already got an international footprint, you might know how frustrating the payment process can be. If you’re just starting off, you might not be aware of the complexities and costs you could face. 49% of businesses are frustrated by the admin of collecting payments abroad; and 39% say they are held back by the complexity of processing international payments.
But these are not inevitable numbers. The winners will be those who offer the most popular payment methods in each country; who can minimise the cost of navigating national banking regulations while not compromising on compliance; and who have a fixed and transparent FX fee that drives predictable cash-flow.
What is the biggest opportunity for subscription businesses?
How many subscription businesses start with the question: “I wonder how my customers actually want to pay?” Customer centricity has become embedded into every aspect of the subscription economy, except payments. Yet allowing people and businesses to pay in the way they want can make the difference between a customer won, and a prospect lost. Offer the popular methods early in the sales conversation, and you can transform payments from a financial afterthought to an upfront value sell.
This idea of preference is not just important for acquiring new customers, but keeping them too. Customers who pay in the way they want to will be happier for it, and more likely to stay with you. In a recent study by GoCardless, a third of consumers around the world said they are likely to choose bank debit to pay for online subscriptions. Yet of the 44 global subscription websites, only one offers this method. The opportunity gap is clear.
What advice would you give an organisation looking to enter the subscription economy?
If payment isn’t already part of your GTM strategy, get it in the conversation. Adopting a subscription model is only one half of a growth strategy. The other part is how you get your subscribers to pay. Because subscription is a recurring payment, selecting the best method - based on factors such as customer preference, cost, and payment success - has economies of scale. The more payment transactions you make, the more you feel the benefits in lower cost, lower churn, and improved cash-flow. That’s amplified again once you scale-up internationally. Conversely, if your payment method is falling short - for example, if it’s resulting in a high proportion of failed payments that require time and money to chase-up - you’ll simply be digging yourself into a bigger hole.
Where will we be in 5 years?
As more subscription businesses look to expand internationally, the imperative to build a truly international payments system for recurring payments will grow. We can predict what that will look like, and what the impact for subscription businesses will be. Businesses will be freed from the burden of needing a separate bank account and legal entity in every country. As a result risk and compliance teams can be scaled back. Automation will see accounts payable and receivable teams also reduce in size. And with the pain taken out of getting paid, headcount and resources will be diverted to core growth activities, such as product development, marketing and sales.