How to Approach Subscription Payments Your source for payments education How to Approach Subscription Payments Michelle Vautier, Patreon, VP of Payments and Risk

Subscription Payments What’s the opportunity? How do they differ and how to approach them? Customer Retention Are subscription payments for everyone? Things to consider.

The opportunity* Subscription-based businesses grew revenue 5 X faster than companies of the S&P 500 from 2012 to 2018. By 2023, 75% of organizations selling direct to consumers will offer subscription services. Subscription companies have grown more than 300% in the past 7 years. An average company in the Subscription Economy has grown its revenue by 321% since 2012, a compound annual growth rate of 18.1%. After the US - Europe is leading this growth. According to the Subscription Economy Index study, subscription-based businesses grew revenue 5 times faster than companies of the S&P 500 from January 1, 2012 to December 31, 2018. By 2023, 75% of organizations selling direct to consumers will offer subscription services. Subscription companies have grown more than 300% in the past seven years. An average company in the Subscription Economy has grown its revenue by 321% since January 2012, a compound annual growth rate of 18.1%. The subscription e-commerce market has grown by more than 100% a year over the past five years While subscription payments in it of itself isn't a new concept in the consumer world, The type of businesses and markets in which is been applied has considerably increased over the last few years. Card on file; Mobile commerce; Subscription boxes; Has made subscription payments more and more relevant. * Subscription Economy Index study

Where is the growth coming from? New product offerings including services based products to older and younger demographics M-commerce New geographies, new methods of payments

But why? What are the benefits? The Advantages for Merchants? Predictive revenue Customer retention Simplicity for both you and the consumer More chances to up/cross sell! The Advantages for Consumers? Peace of mind, convenience no need to remember due dates. Managing your budget, you know what you’re spending ahead of time. No delayed payments or fees.

What does Frictionless Payments mean? Fast, Easy, Simple and Seamless onboarding Across all devices Meeting the customer in the way they want to pay Supporting their currency, language and regulatory needs While minimizing failures and interrupting the experience By 2019, 55 percent of all online transactions will be made using APMs. But what are they and how do you apply that to subscription payments? Can this only be accomplished with Cards?

Is one better for subscription payments than the other? Push vs Pull The difference between the two is the originator of the request. With push payments, the buyer initiates the payment. With pull payments, the merchant initiates the payment. Is one better for subscription payments than the other? Most would say Pull is better - and they are right but it doesn’t mean it’s the best way to capture that market WE all want to: Reduce churn Increase LTV (lifetime value) Get paid faster (pull-based model) But - Companies need to cater to local purchasing preferences if they seek to meet the changing needs of their domestic consumers or conduct business in different markets. Netflix, FB examples and how we are approaching it at Patreon now

Where do APMs come in? Wallet Based Solutions Paypal Apple/Google Pay Alipay/WeChat Pay Bank Transfer/Direct debit iDeal Sofort Cash In/Invoices Boleto OXXO PSE According to a WorldPay report, cards which accounted for over half (57%) of internet payments in 2012, will fall to 41% by 2017. Alternative Payments would take over and rule the online payment markets with a 59%. A digital wallet (or e-wallet) allows consumers to safely store funds for transfers and payments and are set to overtake credit cards as the main payment method in the US by 2021. Worldwide mobile payments are expected to exceed $1 trillion in 2019, and are also gaining traction in Europe, with a massive 200 percent increase from 2015 to 2016. By 2021, bank transfers will be the second most popular APM for ecommerce transactions.

Monthly, Yearly, One time - or all? What’s better for your model? While subscription stems from the concept of a “flat rate” business model; and that will definitely continue to be the primary driver; Value based models with differentiated pricing is also starting to grow and that will increase the level of complexity; and we payments professionals need to get ready for. Subscription companies employing a small amount of usage-based building In the revenue mix well more than twice as fast as those who do not use this model.

Customer Retention Take a data driven approach Track and action Voluntary vs Involuntary churn differently Decline code messaging Update card flows Email reminders

Other things to consider CB levels are normally higher, but not always Evaluate and adjust your refund policy It’s worth investing in Account Updater

Summary & Key Takeaways The opportunity is huge and is continuing to grow You need to understand your customer base and one size does not fit all Take a data driven approach, test, iterate and share knowledge with colleagues

Thank you Don’t forget to submit your session evaluation! Michelle Vautier, Patreon, VP of Payments and Risk michelle@patreon.com