Categories: Subscriptions

Recurring Payments: The Gift That Keeps On Giving

Whether it’s a monthly box of shaving stuff delivered to your door or a license for cloud-based collaboration software, subscriptions are a cornerstone of the recurring payments world. They are also a favorite flavor among fraudsters, adding a sense of urgency to advanced anti-fraud efforts now being rolled out to battle armies of bots and the fake accounts they spawn.

These themes are dominating the segment, as outlined in the Global Recurring Payments Tracker® from January 2020, a collaboration of PYMNTS and payments network GoCardless.

Considering that Cyber Monday 2019 subscription sales were up almost 82 percent over the previous year, we can predict two outcomes with absolute certainty: 1) the subscription sales push will continue and 2) subscription fraud will do its best to keep pace with growth.

While subscription services deal with bad robots, they’re also contending with churn as subscribers sign up, have fun, do work and then cancel. That’s often a matter of customer satisfaction and perception versus the monetary value of underused subscriptions.

How churn will impact the streaming entertainment giants – Amazon Prime, Disney+, Hulu, Netflix, etc. – is shaping up to be a very interesting business story, and one to keep an eye on for bellwether developments. Meanwhile, it’s all about monthly gift boxes, cloud-based business licenses and the dirty, rotten scoundrels who steal these services as a way of life.

Subscription Everything

Wherever possible, subscription services are fighting fraud with KYC tactics and good old reliability. Speech-to-text platform provider Trint has engineered its solution to work with some of the most demanding media brands on earth­, from the Associated Press to The Washington Post and Vice News. Their AI-powered transcription service cannot go down, nor can it be highly vulnerable to infiltration given their customer base of leading news organizations.

Trint says their secret weapon is a customer-centric culture. For computer behemoth Dell Technologies, their special sauce is an irresistible B2B subscription service. Dell has made a suite of its most popular functionality – networking, storage and virtualization – into an online subscription bundle that enables pay-per-use computing models.

Fitness startups like the wildly popular ClassPass subscription app for dance enthusiasts are all the proof one needs that subscriptions have legs, reaching a $1 billion valuation in six years while attracting hundreds of millions in investment capital to fund a steady global expansion.

Recurring billing solutions for SMBs are also getting hot as subscription activity builds. U.K.-based payments provider GoCardless has announced several deals where its technology will enable recurring payments for FinTechs like TransferWise and Xero. GoCardless has also partnered with KYC and secure payments specialist Accuity for a U.S. expansion.

Putting the ‘Cur’ in Recurring

Recurring subscription payments represent a revenue stream in the truest sense. Not surprisingly, there’s going to be a lot more of them. Given millennials’ proclivity to rent or pay with installments, recurring payments fit neatly into both their mindset and their financial realities.

That’s good news for card issuers and lenders in general, if they show creativity and urgency to field subscriptions people really want. But, as the Romans said, “caveat emptor.” Fraudsters in the subscription space have some cute tricks – like signing people up for small-dollar subscriptions they didn’t want, then relying on them not questioning (or even noticing) that $5 monthly charge.

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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