GrowthPad

Let’s dive into the wild world of payments, the unsung heroes of subscription businesses. They’re like the quiet kid in class who suddenly shows up with straight A’s and a trophy. Payments are crucial for acquiring new members and keeping the old ones around. Trust me, I’ve seen more innovation value unlocked through payments than through the office’s coffee machine.

Top Five Takeaways:

1. Offering More Payment Methods is NOT Better Adding more payment methods is like giving your dog ten different treats and wondering why they look confused. Stick to the most customer-friendly, recurring-friendly, and merchant-friendly options. Nobody needs ten different ways to pay; they just need a few good ones.
   
2. Prepare for When Your Member Cannot Pay Most people live paycheck to paycheck, and they have savings that would make a squirrel laugh. Be ready for the inevitable moment when they can’t pay. Think about their journey after a payment fails: do you give them access to your service or shut them out like a bouncer at a club? Communicate clearly and frequently.
   
3. Asking for Payment Information is High-Friction Asking for too much payment info during signup is like trying to get someone to give you their life story on a first date. Keep it simple. Less is more. Avoid the mental friction that makes users question your motives.
   
4. Fraud and Abuse are Real Threats Fraudsters are like uninvited guests at a wedding – they’re just there to eat and run. Be vigilant, especially when growth looks unexpectedly good. If signups spike and it seems too good to be true, it probably is.
   
5. New Payment Options Impact Both Signup and Retention Rates Offering new payment options is a bit like offering different flavors of ice cream. Some will love it; others won’t care. Test, test, test! Introduce new options gradually and watch how they affect your churn and signup rates.

What Makes a Good Payment Method?

There’s no perfect payment method, but the best ones share a few traits:

1. Used by Your Consumer Base Offer what your customers use. Credit cards are great, but they’re not universal. Check out what’s common in different markets.
   
2. Real-Time Payments The faster, the better. Not all payment methods are instant, and waiting for funds to clear is like watching paint dry. Aim for real-time verification.
   
3. High Approval Rates Credit offers typically get higher approval rates. If someone has been paying you every month for two years, their bank should be able to cut them some slack.
   
4. Low Cost to the Merchant Transaction fees can eat into your revenue like termites in a wooden house. Choose methods with lower fees to keep more of your hard-earned money.

Retention: Why Do Payments Fail?

Historically, failed payments were mostly due to card expiration. Now, we have Automatic Card Updaters (ACU) that resolve 70% of expirations automatically. The main issues now are insufficient funds and “payment method no longer valid” due to fraud or theft. Fun times!

What if a Member’s Payment Fails?

Here are two disturbing facts:

1. Most Americans Live Paycheck-to-Paycheck
   • 74% of employees would struggle if their paychecks were delayed even for a week. That’s like having a financial house of cards.
     
2. Most Americans Don’t Have Savings
   • 58% have less than $1,000 in savings. So, when payments fail, they really fail.

So, what does this mean for your subscription business? Be prepared for members to hit financial roadblocks. Offer ways to pause their subscription instead of canceling it outright. This makes it easier for them to come back. Apple, for instance, has introduced a ‘grace period’ for lapsed subscriptions, trying for 60 days before canceling. Clever, right?

In conclusion, payments are the backbone of your subscription business. Keep them simple, efficient, and prepared for the inevitable hiccups. And remember, always keep a sense of humor. After all, what’s business without a bit of fun? ​​