Planning to implement a subscription-based payments model? Here are the key steps you need to get right.
We live in the subscription age. From movies and music, to gaming and smart phone apps, we’ve all become comfortable with seeing small recurring payments leave our bank accounts each month, in return for a wealth of content or convenience.
While content streaming is the best-known subscription model, it’s not only pure-play digital businesses that are profiting. Post-pandemic, all kinds of businesses want to understand how to integrate a subscription model into their existing brick-and-mortar, e-commerce or omnichannel makeup.
There are two aspects to mastering the subscription model. The first is customer acquisition, and the second is retention. Customer acquisition requires a compelling offer or product. Customer retention relies on continually earning the right to charge the customer, through ongoing enhancements of products and services. In short – if your product or service feels essential, people will be happy to pay for it again and again.
Here are some key points to keep top of mind if you’re looking to roll out a subscription model to boost revenues, increase cashflow stability and improve customer satisfaction.
1. Nail your value proposition
Newspapers used to be picked up curb side alongside a daily cup of coffee. Now, people stand in line for their coffee and scan the news via their newspaper’s app, which they’ve paid for via a customisable monthly subscription. Users have flexibility to choose digital news access during the working week and the option to relax with a delivery of the physical papers at the weekend.
‘Print is dead’ was the refrain echoing around media industry for years, but today we are in a dynamic landscape where both print and digital subscriptions are growing. What seemed like an unscalable (pay)wall a decade ago – of making people happily pay for content – is now a norm.
Newspapers have arguably been saved by subscriptions. Centuries-old media brands including The New York Times (7.6 million digital subscribers, +14.3% year-on-year growth) the UK’s Financial Times (1 digital million subscribers, +6% year-on-year growth) and The Times (367,000 digital subscribers, +19% year-on-year growth) are among the success stories. 1,2,3
It is not just heritage brands that are posting record profits. Online gaming platform Roblox offers thousands of games to subscribers, developed by fellow platform users. In turn, its creators earned US$500 million in ‘Robux’, a digital currency they are able to spend on the platform or exchange for real-world money. 4 Meanwhile, the global online live sports streaming market is set to grow at a compound annual growth rate of 21.3% to 2028, to become a US$87.3 billion market. 5
The lesson here is that these brands define themselves as high-quality content providers. To convince a consumer to commit to a recurring outgoing, they need to feel your offer outweighs the expense. Create a sense of quality, uniqueness and value and you are well on the way to building a strong subscription proposition.
2. Seamless onboarding and recurring payments are crucial
That said, if it’s not easy to subscribe, users won’t bite. Friction is the enemy of subscription growth. A declined payment, a ten-step signup process, overly aggressive marketing or making it difficult to cancel can turn off a potentially loyal customer for good.
Getting your payments process right at signup and on an ongoing basis is critical to winning subscribers. If one digital streaming service has a one-click, seamless subscription process, and a competitor makes users jump through multiple hoops to signup, it’s not hard to guess which brand will win the new subscription. In addition, regional nuances apply, and it is essential that the right payment options are offered in each market, whether that’s card, digital wallet, bank transfer or any of the other methods used around the world.
3. Get these factors right, and you have a platform on which to expand your brand
Perhaps the biggest benefit of operating a successful subscription-based revenue model is the financial stability it brings. Get the above factors right, and the revenue rewards can be significant. Streaming platforms are now bigger than all Hollywood studios combined in terms of original output, in large part because they have a consistent subscriber base which allows them to confidently make major investments in content and to scale their business.
Add-ons are another way to boost a subscription service. If a user loves one product or service, they are more likely to be open to paying for more products. For example, The New York Times offers digital add-ons such as Cooking and Games. Available as standalone subscriptions or for a small extra fee on top of the newspaper subscription, they each now have over a million subscribers. Modern media companies may start to resemble some Asian Super App businesses, where a single digital wallet can be used to access a wide range of services and build loyalty. For example, a streaming platform could reward subscribers to its content services with digital points that could be redeemed in stores or in other areas of its business. A car rental subscription could track your location and enable you to spend loyalty points in nearby gas stations or coffee shops.
4. Pick your payments partner carefully
Once you’ve mastered your subscription model, forward-thinking businesses will want to incorporate emerging payments innovations, and also think about how the way we access and consume content and products is changing. Your payments provider should be able to seamlessly adapt to your evolving business model and consumers’ payment preferences. An experienced payment provider should provide solutions based on the business needs, while also guiding strategy based on industry knowledge and best practice.
For example, media platforms must pay creators – who could be based anywhere in the world. Does your company have a strategy when it comes to paying out? Paying creators swiftly and on time can be a key differentiator and this is an example of where payments strategy can influence business strategy.
Alongside your payments partner, there is a tremendous opportunity to optimise the end-to-end process. How does the money come in? When – and where – does it settle? Can your customer pay however they want – by card, wallet, QR code, open banking, on their smart TV? As subscriber numbers grow, refunds and rebates will also increase – how are these handled? If your company expands internationally, how will it optimise Foreign Exchange rates?
Can your payments partner service recurring payments smoothly, and in multiple currencies? Can they scale with you? Cybersecurity is essential – and bank-grade security is necessary in order to prevent precious customer data being hacked, lost or stolen.
A strong payments partner can help you build a robust strategy which answers all these questions.
The world of subscription-based revenue models is evolving quickly. Ensuring your offering is clear, compelling and consistent is table stakes – the right payments partner can then optimize your payments strategy to help your business thrive and grow.
To learn more about subscription-based models, watch this webinar from J.P. Morgan.
1 nytimes.com, November 2021. ‘New York Times Adds 455,000 Subscriptions in Third Quarter.’ Accessed April 2022.
2 aboutus.ft.com, March 2022. ‘Financial Times reaches one million digital subscribers.’ Accessed April 2022.
3 thetimes.co.uk, March 2022. ‘Times Newspapers reports record profits.’ Accessed April 2022.
4 gamesindustry.biz, February 2022. ‘Roblox revenue soars 108% to $1.9bn in 2021.’ Accessed April 2022.
5 Tvtechnology.com, October 2021. ‘Live Sports Streaming Business to Quadruple by 2028.’ Accessed April 2022.
Jennifer Acosta, Managing Director, Industry Head — Technology, Media and Telecom
Jennifer Acosta is a Managing Director and the Industry Head for the Technology, Media and Telecom sector of Large Corporate Treasury Services. Jennifer manages the sales strategy and execution of a team that serves the large, global and complex needs of these corporates as well as personally manages some of the largest clients in this space. Jennifer and her team leverage their expertise and thought leadership to drive end-to-end payments and liquidity solutions that support corporate clients’ needs throughout the world. She is also Co-Chair for Women-on-the-Move across the JP Morgan Payments franchise and remains passionate about advancing career mobility and diversity across the business. She has been with the firm for 14 years. Prior to joining J.P. Morgan, Jennifer spent 15 years at GE Commercial Finance in progressive roles in sales leadership and relationship management tied to several strategic clients of the company.
Andrew Keighery, Head of Business Development, TMT e-Commerce Solutions
Andrew Keighery leads the Business Development function for e-Commerce Solutions, Payments at JPMorgan Chase & Co. In this role, Andrew manages the Corporate & Investment Bank (CIB) Technology, Media & Telecommunications Solutions and Commercial Bank (CB) e-Commerce Solutions Business Development activities, maximizing strategic engagement with clients and identifying innovative payment solutions to drive client success. Andrew brings over 20 years payments experience across card networks, global banks and fintechs. From large multinationals to thriving early stage ventures, Andrew has a history of successful design, implementation and go-to-market payment solutions and strategies for clients. Based in the Bay area, Andrew is actively involved in mentoring talent, networking organizations and volunteering.