The continuing rise of cross-border commerce, B2B digital transactions and international recurring payments are among the main trends that will carry into the 2020s. But there remains a significant amount of friction at the intersection of all those trends, and that provides an opportunity for payments services firms operating in this space.
At that intersection exist international B2B recurring payments and subscriptions — an area that can cover everything from the software used for daily operations to the loans needed for business growth. As those recurring payments take a more dominant role in the digital ecosystem, ways to reduce the costs of those transactions are emerging, including using direct debit instead of payment cards for such recurring payments.
In a PYMNTS interview with Karen Webster, GoCardless General Manager Pranav Sood talked about making things easier for B2B operations to digitally and seamlessly collect payments around the world, and how that space could evolve in the coming years. The interview came as GoCardless announced a new, recurring payments deal that involves U.S.-based DocuSign, a company that provides digital document signing services.
In general, the goals of recurring payments are pretty clear.
“They want to cater to customer preference, reduce payment failure rates and decrease transaction costs,” Sood told Webster.
Failures can happen, for instance, when credit cards on file expire, which introduces new friction into the relationship between buyers and sellers. To get around that, GoCardless has created a global bank debit network, which enables recurring payments without the friction associated with credit cards and other payment methods. The company processes some $10 billion worth of transactions per year.
“Users actually want to use direct debit,” Sood said. Not only does that reduces those transaction costs but it cuts down on subscriber churn. “You are significantly increasing your payment success rate.”
The new deal with DocuSign helps to illustrate those points.
The document-singing services provider is deploying the GoCardless SaaS-based payments platform to simplify the recurring payment process for DocuSign’s European customer base, the company said. Customers of DocuSign will access that payments platform via Zuora, and then be able to pay for DocuSign services via direct debit — another option alongside credit cards and PayPal. The GoCardless payment option will appear on DocuSign checkout pages, Sood told Webster.
The deal is based on the fact that about 25 percent of DocuSign’s new customers in the U.K. and Europe have paid via GoCardless-enabled direct debit, according to GoCardless. More broadly, the company said that in the U.S., direct debit stands as the second-most popular payment method for not only B2B-based online subscriptions, but for invoices and installment transactions as well. Such recurring payments, as Sood told it, can also include retainers to such professionals as accountants and attorneys, and loans.
“Invoicing is one of our core payment use cases,” he said. “We want to take the pain out of getting paid.”
As recurring payments and digital B2B transactions continue to gain steam, there will be more openings for companies such as GoCardless.
“We see a huge amount of opportunity,” Sood said. “The way cross-border and recurring payments have worked in the past has not been a way that worked for merchants or customers that have to deal with them.”
Not only that, but specific marketing regulations and FX risks can also put more anxiety and friction into these types of recurring payments.
“We are making bank debit super easy for businesses to use around the world,” he said.
Earlier this year, GoCardless raised $75 million in venture funding. It has recently expanded into the U.S. and serves some 40,000 businesses around the world.
Subscription commerce and recurring payments are among the hottest areas of digital going into 2020, and that goes for both the B2C and B2B areas. For example, according to PYMNTS research, more than half of all Americans now subscribe to digital news or entertainment streaming services, and such offerings are already beginning to crop up in new industries, like cars and financial services.
Just offering subscriptions isn’t enough to gain customers these days — not with the subscription market set to reach more than $500 billion by 2023. Merchants must also deal with consumers who are rapidly changing their minds about what they want. Additionally, offering competitive features, pricing and services can be a significant challenge for small and medium-sized businesses (SMBs).
This new deal involving DocuSign could perhaps offer a glimpse of what’s next on the path to less friction for recurring payments and B2B subscriptions.