Despite the post-covid hype surrounding subscriptions dying off, a new report from Stripe, the financial infrastructure platform for businesses has found that the subscription economy is still healthy.
The Stripe report found that 49 per cent of businesses are planning investments in global expansion to reach new customers over the next twelve months. However, 69 per cent of business leaders doubt their current billing systems can support their international growth strategy effectively. Consequently, many are considering reassessment of their billing software to facilitate global scalability.
Examining over 2,000 decision-makers in subscription businesses across nine countries, Stripe revealed that the majority plan to experiment with more flexible subscription plans in the future. For example, one way is by enabling usage-based billing (73 per cent). However, existing billing systems often lack the flexibility to support these creative pricing strategies.
Combatting involuntary churn
The new Billing report also reveals that involuntary churn remains a persistent issue for subscription businesses. Involuntary churn occurs when a subscription ends involuntarily, for example, because of failed payments due to expired credit cards.
Despite 40 per cent of businesses experiencing an uptick in involuntary churn over the past year, many lack comprehensive data to quantify revenue loss. Forty-three per cent of businesses cannot quantify the revenue impact from churn or payment failures. A further 79 per cent admit they have not implemented any measures like retry policies to mitigate involuntary churn.
“Reducing customer churn should be on every business leader’s agenda: it’s cheaper than acquiring new customers and an effective way to maximise revenue and increase customer lifetime value. We hope businesses find this report and Stripe’s revenue recovery features a useful foundation,” said Sarita Singh, regional head and MD for SEA, and India, Greater China at Stripe.
“For involuntary churn, we have found that Stripe’s Smart Retries have really worked for us. They’re built into Stripe Billing and use machine learning to retry cards at the optimal time. We’ve recovered millions of dollars in revenue that would have otherwise been lost—this is very substantial for us as a subscription business,” said Nadia Ali, CFO, Midjourney.
Providing a solution
To support businesses of all sizes in accelerating revenue growth, reducing churn, and growing globally easily, Stripe launched Stripe Billing in 2018.
Stripe Billing is a software product that helps over 300,000 companies manage hundreds of millions of billing relationships with their customers by making it easy to set up billing plans, customise pricing logic, calculate amounts owed, preview upcoming invoices, apply discounts, send payment reminders, track payments, among many other things.
The service supports a wide range of pricing models including one-off transactions, sales-based contracts, tiered pricing, and usage-based pricing.
