Avangate is working to meet its customers' demands for revenue-recovering tools for "freemium" business models, which offer a basic product or service for free but charge for add-ons or ongoing use.

"The world is shifting from a kind of product-centric focus to a service focus…and with that [consumers] are expecting to have a longer-term relationship," said Carl Theobald, CEO of Avangate.

Avangate's newest recovery tool includes three features meant to help merchants keep customers throughout the long relationships. Through Avangate's bank partnerships, the company is able to look up whether a merchant's customer was reissued a new card because of loss or theft or expiration and automatically obtain the new card's information.

This is for convenience for the consumer, since 90% of the time they don't bother to update their subscriptions, said Theobald.

The tool also optimizes for authentication with automated retries. Avangate will attempt to authenticate a payment several times, or after a day or two in case the consumer doesn't have enough funds in the account during the first try.

Avangate is also integrated with a network of payment processors on the back end. If the payment cannot be routed through one processor, it will be re-routed to another partner processor. 

All of these tools can help businesses grow revenue up to 15%, Theobald said.

Growing revenue is becoming especially important for the services industry since most consumers expect a freemium model. According to Avangate research, 46% of Web buyers refuse to purchase online subscriptions without a freemium option. But 25% of Web buyers are more willing to purchase an online service subscription when add-on features are available.

And once the subscriptions are set up, 71% of consumers want recurring subscriptions without monthly reminders.

While there will be many new devices on the market in the coming years, the real monetization will come from the services on top of those devices, Theobald said. Video games are a prime example, with many companies offering the basic game as a free download but charging a fee for online multiplayer or in-game items.

"There is an explosion of new and innovative services that are now possible because of the cloud and the availability of user data," said Theobald. "The traditional way of writing code to an API for payment processing is slow and costly and most importantly very difficult to maintain on an ongoing basis."

But the services economy is still nascent, and it needs the ability to experiment with new business models, markets and bundles, and be able to pivot quickly, he said. 

While the consumer sector is saturated with the services economy, this model is also starting to creep into the merchant market as well.

For example, the new startup Poynt, headed by ex-PayPal and ex-Google executive Osama Bedier, announced its tablet-like payment terminal which will provide a base layer of services for free. Merchants will have the ability to enhance the small business products through monetized apps.

Avangate is also launching its Growth Edition package, designed for startups as an on-ramp to the company's payments solution. Clients that use the growth edition are limited to processing $15,000 or less per month. They are charged 3.99% plus 99 cents per transaction. Merchants that use the Standard Edition are charged 4.9% plus $2.50 on transactions, and there's also a custom pricing model. 

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