SUBSCRIPTION AND RECURRING PAYMENT MARKET ANALYSIS

Market Challenges And Opportunities

Global Subscription and Recurring Payment Market- Drivers

- Scalable pricing and promotions- The subscription and recurring payment model is gaining significant traction in today's digital economy, and is driven primarily by scalable pricing and targeted marketing promotions adopted by businesses. By offering flexible price points and payment packages catered for different consumer needs and budgets, companies are able to acquire more customers and build strong engagement over the long run. Such as, many online streaming platforms now provide very affordable monthly plans for single users alongside higher-priced family bundles, annual subscriptions with discounts, and bundled services. Such differentiated pricing, combined with attractive introductory offers, helps to drive traffic and increase the average amount of revenue per user over time. For instance, in November 2021, Netflix subscription video on-demand over-the-top streaming service had over 200 million paid subscription worldwide, demonstrating the power of scalable pricing and promotions in driving growth in the subscription and recurring payment market.

- Flexible payment options - Flexible payment options have allowed businesses to provide more choices to customers, fueling the expansion of the subscription and recurring payment market. By offering options like pay-as-you-go plans, monthly subscriptions, and others, companies are making their services more accessible to price-sensitive customers. This increase in affordability and convenience brings in more subscribers, driving higher revenues through longer customer retention and repeat purchases. For instance, Amazon Prime subscription video on-demand over-the-top streaming and rental service offers monthly and annual subscription options, providing customers the flexibility to choose based on their usage and budget. It also offer a discounted rate for students, catering to a specific demographic with different financial constraints. These instances clearly show how flexible payment options are significant driving factors in the subscription and recurring payment market.

Global Subscription and Recurring Payment Market- Opportunities

- B2B digital transformation - B2B digital transformation is poised to witness significant growth in the subscription and recurring payment market over the coming years. As business models continue shifting to deliver as a service offerings like SaaS, database services and more, the need for recurring billing and payments increases. This presents a huge opportunity for payment providers to partner with businesses and offer digital-first subscription management solutions. According to the data from the UN Conference on Trade and Development, global digital commerce reached US$ 26.7 trillion in 2020, and is forecast to grow at 15% annually through 2025. As more business transactions and customer interactions move online across industries, establishing recurring digital payment connections will be paramount for continuous service delivery and revenue streams. This growing digitalization of B2B commerce and services sets the stage for payment providers to develop capabilities around automated contract management, subscription billing administration and streamlined payment collection in order to meet demanding client needs.

- Emerging markets expansion- Emerging markets provide immense scope for expansion in the subscription and recurring payment industry. With rising internet penetration and adoption of digital payments in developing economies, more people now have access to subscription services. This untapped customer base can be a driver of future growth. Some factors that make emerging markets attractive include growing middle class populations with rising disposable incomes. For instance, according to World Data Lab, household spending in Indonesia is forecast to reach US$ 3.2 trillion by 2030, indicating higher affordability for paid subscriptions.

Global Subscription and Recurring Payment Market- Restraints

- Subscription fatigue - Subscription fatigue presents a huge opportunity for players in the subscription and recurring payments market. As consumers are increasingly getting tired of paying numerous monthly subscriptions for various services like entertainment, fitness, grocery, and others, they are looking for more consolidated and bundled offerings. This fatigue stems from the fact that the average household now pays for over 11 subscriptions, up from 4 subscriptions 5 years ago. Brands can bundle and bundle similar subscriptions under one cost to provide better value. This solves the problem of subscription fatigue for customers while also allowing brands to upsell and cross-sell more offerings under one package. Many media companies are already experimenting with offering bundled streaming subscriptions. In addition, fitness brands are grouping together their at home workout apps, in studio classes and nutrition programs. We're going to see a growing number of super bundled packages combining multiple recurring payments into one.

- Pricing transparency - Pricing transparency has significantly restrained the growth potential of the subscription and recurring payment market in recent times. With consumers demanding more visibility into recurring charges and fees, companies offering subscription services are finding it challenging to frequently tweak and adjust prices without facing backlash. This lack of flexibility in pricing is coming in the way of organizations testing different pricing tiers and monetization strategies through A/B testing. With prices and charges upfront for extended periods, it also leaves little room for occasional market-linked price corrections. Pricing transparency also restricts companies' ability to subsidize new consumer acquisition through occasional promotional recurring pricing. With companies unable to normalize prices post-promotion without appearing opaque, the subscriber base built through such introductory offers proves difficult to retain profitably over the long term. For instance, according to the 2021 study by U.S. PIRG, a non-profit federation of state PIRGs, streaming services doubled or tripled promotional monthly prices post the initial subscription period without adequate notice to consumers. This led to high consumer churn rates, defeating the purpose of such promotions.