The pandemic has undoubtedly accelerated the trend of subscription-based models. These models are providing businesses with increased opportunities for new partnerships, across a variety of different industries – some of which you may not expect.
One company that has both driven and benefited from the rise of subscriptions, is GoCardless. The global fintech for recurring payments has recently announced several new partnerships and the deepening of existing ones, such as with business banking platform Tide, subscription management platform Zuora and SaaS provider Salesforce. It is also powering new customers, such as mobility solutions provider Bridgestone for its tyre subscription service, MOBOX, as well as the iconic folding bike maker Brompton.
Stephen Reidy was recently appointed to VP & General Manager for the UK and Ireland at GoCardless, from his previous position as Director of Sales for the UK and Ireland at the firm. An expert in high-growth technology and SaaS companies, Stephen believes this subscription trend is here to stay. Here he explains what this means for the future for fintechs and industry partnerships.
Before the pandemic started, subscription services were steadily on the rise. It’s a trend, driven by consumer demand, that has been growing in popularity for many years. But when the Covid-19 outbreak forced businesses to work remotely and consumers to rethink their lifestyle habits – such as travel, hospitality and leisure activities – many subscription-based businesses soared amid the huge demand for digital services. Most obviously, the likes of Zoom, Salesforce, Microsoft Teams and Netflix have benefited massively from this impact. But there are many other industries that are capitalising on the subscription trend too.
In addition to the industries that are well-known for their subscription-based models, such as SaaS companies and those operating in the film or music space, there is a hidden subscription economy rapidly emerging. This cuts across a variety of industries – some of which you may not expect.
For example, you can now buy car tyres from Bridgestone, folding bikes from Brompton, coffee at your local Pret, groceries from Waitrose, or even something as niche as razors from Dollar Shave Club – all for a much smaller, regular fee, in comparison to buying the goods outright or making a one-time purchase. The benefit for consumers and businesses is cost-efficiency and convenience, as well as, in many cases, access to a much broader range of products and services.
For many businesses there is an additional benefit still. It’s no secret that something fintechs do well is their ability to form new partnerships across the fintech ecosystem, to ensure that they are maximising the efficiency of their internal processes while providing best-of-breed services to their customers. This partnership model has enabled many fintechs to continue to innovate, adapt to changing demands and maintain fast-growth.
Zuora’s End of Ownership Report highlights that three quarters (74%) of consumers believe people will subscribe to more services and own fewer physical goods in the future. This increase in demand for subscription-based services is now encouraging other businesses to form new partnerships with tech and fintech companies, to enable the use of these services to improve their processes, as well as to provide their customers with a guaranteed quality of service.
For example, for us at GoCardless, our aim is to make collecting recurring payments easy and stress-free. For Tide, that guarantee is making banking for small businesses hassle-free, while for Salesforce, it’s supporting customer success. All of these services are becoming increasingly important for companies that are looking to upgrade their business model or service to one that is focused on subscriptions.
As this trend continues to grow for both consumers and enterprises, we can expect to see more businesses looking to partner with fintech and technology companies – as well as other businesses that may help to fulfil new servicing demands – to make this reality as seamless and efficient as possible.
It also has the potential to impact payment methods. For example, our Consumer Payment Preferences report found 48% of respondents were likely to choose Bank Debit to pay for traditional subscriptions and 45% for online. The increase in subscription-based businesses as whole, then, could accelerate the decline in preference for using cards for recurring payments.
The result is a new wave of successful business models, across industries, that are much more integrated, intuitive and focused on the best possible customer service. Companies riding this new wave can focus on what they do best – whether that is making car tyres or flat whites, or in our case, automating recurring payments via bank debit.
Businesses that capitalise on this trend and seek out good partnerships, will continue to thrive and be able to adapt according to customer demands, throughout the pandemic and beyond. And, at the very least, it will be exciting to see which industries will enter the subscription economy next!