What's next for subscription payments providers

Register now

The subscription payments market is increasingly popular, but acquirers won't get by on only handling the payments.

The recurring payments model has existed for years, but has taken off in the past three years, buoyed by services such as Netflix and Dollar Shave Club. That has in turn drawn the attention of e-commerce giants such Stripe, which is incorporating subscription payments into its menu of merchant acquiring services.

“We’re entering the 2.0 phase of this business, where there will be shakeouts,” said Georg Richter, CEO of OceanX, an El Segundo, Calif.-based subscription commerce platform that supports about 40 brands. "At first there was a rebirth of subscriptions, and now there are thousands of them."

OceanX is expanding its use of data analytics to measure KPIs, or performance metrics such as churn, average order value, fulfillment reporting and self-service data to serve more complex subscription types. OceanX is plugging in apparel shopping, food and other types of what Richter calls specialty markets as it attempts to differentiate from Amazon by combining a recurring billing relationship with more flexible shopping.

“There is a more sophisticated way to approach subscription billing,” Richter said. “We’re looking at anything around the body, skin care, etc.”

Since the logistics of these items can be difficult to manage, OceanX focuses on order routing, multi-warehouse logistics, personalization and identity security for recurring orders that involve different sourcing. It also manages the integration of shipping with checkout and cards, PayPal, or mobile wallets. Other services include real-time order processing, customized upselling, data capture and customizable renewal frequency.

“What was telling to me is that payments is not specifically discussed on [OceanX’s] website,” said Thad Peterson, a senior analyst at Aite Group. "Instead payments are embedded in a shopping cart offering. It’s a great example of the concept of ‘payment as ingredient,’ and an important lesson to those of us in the payment ecosystem. Payments are never an end in themselves, they are always an enabler of something else.”

Another e-commerce gateway, FastSpring, last week launched an integration with WordPress to support single location for product descriptions, images and pricing.

“A lot of what’s happening now is building a web presence. By plugging into Wordpress, we can provide the next transformation for digital content,” said Brian Deignan, a vice president at the Santa Barbara, Calif.-based FastSpring, which sells e-commerce software, digital media, payments technology and subscription services.

The WordPress integration also aids in compliance, supporting language, currency, payment methods and tax regulation.

Taxes for e-commerce are becoming more complex, with changes in value-added taxes in European markets and sales taxes in the U.S. creating tax responsibilities that smaller sellers may not be aware of.

“With taxes and regulations such as GDPR, if you are a digital business you are required to keep up with all of this, and it can be difficult,” Deignan said. “You can be responsible for taxes getting more complex as physical retail becomes less of a factor.”

For reprint and licensing requests for this article, click here.