By Nick Raper, Head of UK at Nuapay
Ask the next person you speak to whether they’ve ever had a subscription to a business (the most common being a gym membership) that they forgot about, or just didn’t use, losing money as a result. Guaranteed, nine out of ten times, the answer you receive will be a ‘yes’. This is often followed by a disgruntled anecdote about how the individual kept forgetting to cancel the direct debit, using the service for much longer than he or she intended to. It proves just how sticky customers are when they are signed up to subscriptions – a trend that is rapidly increasing in the current environment.
Today, consumers are increasingly demanding ‘always on’ services that are fast, easy and can be personalised. With the COVID19 pandemic restricting consumers’ access to physical shops and driving almost all of them online, this expectation is growing the world over. Subscriptions provide a method of receiving services or products at a specified regularity and according to predefined preferences.
Subscriptions also allow businesses transitioning into the digital space to better monetise their services. Newspapers are a great example of this; it isn’t practical to sell newspapers on a “one-off” basis online, so many publishers have transitioned to digital subscriber models. With many other businesses from fitness classes to online events providers, forced to find a viable virtual business model, subscriptions have become an attractive option. Indeed, research from Zuora has shown that throughout the first lockdown nearly 90% of subscription businesses maintained or grew memberships. And this trend shows no sign of slowing down.
Businesses looking to offer their customers the best service would do well to consider consumer subscriptions, enabled by recurring payments technology. Subscriptions can be used across a growing range of sectors, from traditional subscription users like gyms, and online entertainment and media services, to food and beverage retailers, health providers in dental and eyecare sectors, and even online matchmaking and dating services. Going forward, subscription payments are expected to grow further as Gartner predicts that by 2023, 75% of organisations selling direct to consumers will offer subscription services.
What’s the business benefit?
By employing recurring payments, businesses can attract more customers that are price driven. A £25 per month cost in return for something new each month, is often much easier to accept than a £300 lump sum for one product.
Another benefit of subscription models is the ability to drive increases in customer revenue through reduced attrition and the ability to upsell or cross-sell products and services. One-off purchases with little or no product feedback, make it difficult to develop an understanding of consumer behaviours and preferences. By building an ongoing relationship with customers businesses can gain deeper insights which can be used to inform product alterations or even bring entirely new products to market.
Data from Nuapay shows the benefit of having members signed up on subscription services from the over 700 gyms serviced by Nuapay. Of gyms that were forced to close their doors and stop collecting membership fees in April as a result of Covid, many saw a relatively quick return in their revenue over the summer. By August, on average 83% of customers were back and paying their gym memberships again, despite continued restrictions in many European countries. Additionally, these gyms only saw a +0.9% increase in cancelled payments in August, compared to pre-Covid levels, suggesting no lasting impact on their attrition rate.
The additional beauty of subscription based business models is that, Covid aside, the stability of the customer base makes it easier to predict business revenues, enabling improved decision-making as strategic planning can be informed by revenue from ongoing recurring payments.
Partnering for success
Historically, implementing a subscription based business model has been difficult for organisations given the limits of collecting via recurring payments – this is particularly so for businesses at the small to medium end of the spectrum.
Today, improved digital payment infrastructure and new providers in the Account-2-Account payments space makes it possible to set up and process recurring payments quickly and easily. Payment providers are increasingly being integrated into a range of business software and payment solutions – large and small – to ensure they deliver the speed and exemplary experience demanded by consumers.
CyberSource, Visa’s global payment management platform, recently announced a partnership with Nuapay to take advantage of Nuapay’s Account-2-Account capabilities, and deliver additional payment solutions to its merchants client base. At the other end of the spectrum, specialist software platforms, such as gym management software Deciplus, can also integrate Account-2-Account solutions into its platform, providing an effortless Direct Debit experience for payers and merchants.
New payment innovations are now starting to transform historic Account-2-Account recurring solutions, which have been Direct Debit based till now. As an example, a merchant can now use Open Banking payments to improve the Direct Debit sign up process for payers, while also helping merchants reduce their failed payments, indemnity claims, and lost payments. Additionally, new recurring payment options known as Variable Recurring Payments (VRP) is said to be the next generation of Open Banking. Currently being tested in the FCA’s sandbox, this technology enables businesses to collect payments from a consumer up to an agreed maximum amount, subject to monthly limits. As it is based on Open Banking technology, VRP will be SCA compliant, providing a secure and convenient alternative to online card payments.
With an increasing number of subscription options now available, a good payment service provider will be able to provide businesses with access to and advice on the best options for them and their situation, whether that is Direct Debits, Standing Orders, or new integrated Open Banking solutions.
Subscribing to subscriptions
Subscriptions will only continue to grow in demand as consumers increasingly flock to online environments. Subscriptions were already growing in popularity even before the pandemic came along. 71% of adults internationally used at least one subscription service during 2019, and in Europe alone spent an average of €130 per month on subscriptions over the same period.
Covid has only accelerated this trend in some areas. It is no surprise that video streaming services saw a massive increase in subscribers, with some providers seeing a 25% jump in subscriptions in March 2020 according to Nuapay data.
Players in other sectors also seem to be transitioning their business model during this time. Food and nutrition suppliers who have been actively pushing subscriptions for regular deliveries have seen their subscriber base grow as much as 3 times higher than the start of the year in everything from seafood to coffee to vitamin deliveries. Some home office suppliers who introduced subscriber models for items like printer ink, have seen growth in subscribers as high as 40% since January. Even some travel businesses have managed to pivot their business to increase recurring sales by taking a more locally focused approach.
With the range of insight-led advantages for organisations evident, it would be an oversight for business leaders not to consider sharing their products and services via a subscription based model.
MASTER YOUR DATA: TACKLING CUSTOMER RETENTION CHALLENGES IN FINANCIAL SERVICES
Helena Schwenk, Market Intelligence Manager at Exasol
Customer retention has always been crucial to financial institutions (FSIs), with the majority (80%) of senior FSI decision-makers in our recent survey affirming customer loyalty as a key priority.
However, the truly unprecedented and unforeseen events of 2020 have created a fluctuating backdrop of behavioural shifts and economic constraints that has amplified the value of robust customer relationships. In this increasingly digital-first world, where face-to-face interactions — often the best way of building trust with customers — have been further reduced by the impact of the pandemic, FSIs are left hunting for new avenues and ideas. As McKinsey testifies, nowhere is this more important than in retail banking.
As more customer interactions shift online, the market is flooded with new digital products and services from digital disrupters whose agile and diverse digital sales and marketing strategies, amplify the challenge of digital transformation for more traditional legacy FSIs.
We’ve become used to the new challenger banks disrupting and transforming the retail banking sector but interestingly the pandemic has actually seen a renewed consumer interest in traditional brands. I recently hosted a podcast on the topic of data leadership in financial services. One of the key takeaways from that discussion is the way the pandemic has heightened customer’s focus on trust and confidence, which has seemed to favour traditional banks and created customer loyalty consequences for challenger banks.
To find competitive advantage and move their digital business forward, FSIs of all types must unlock the true potential of their data. Thanks to its large number of customer touchpoints, the financial services industry generates an especially high volume of data. Handled well this data is enormously empowering. But high data intensity and the prevalence of data silos, means that poor attempts to manage and use data often create more problems than they solve.
Mastering financial services data to drive customer loyalty ultimately requires FSIs to focus on data analytics as a means to better connect their data and uncover the valuable insights needed to improve business operations, develop new products and services and, crucially, enhance their customer experience.
The challenges of customer loyalty
According to Bain & Co, the value of customer loyalty is exponential. Increasing customer retention by as little as 5% can boost profits by up to 95%. That said, no attempt to reinforce customer relationships is ever easy.
More than half (54%) of respondents in our survey believe customers have higher expectations around their experience when interacting with FSI organisations. This makes loyalty increasingly difficult to earn and maintain. Strict regulations such as PSD2 and GDPR also impact FSIs ability to develop and improve customer loyalty initiatives according to 41% of respondents.
These loyalty challenges if not successfully addressed have consequences: the impact on lost opportunities for customer engagement and advocacy; lost revenue generating opportunities; and higher levels of customer churn are significant. This last point is particularly pertinent considering that, according to Invesp, the cost of acquiring a customer is five times more expensive than selling to an existing one.
Therefore, one of the key areas where data and analytics can benefit customer loyalty initiatives is by giving a deeper understanding of customer lifetime value and allowing organisations to interpret and measure the loyalty of customers and predict customers’ future behaviour. Data analytics also allows FSI to actively identify clients at risk of attrition by using behavioural analytics to generate personalised customer action plans – which they can then choose to implement, tailored to the client’s specific needs.
Signs of maturity
Overall, there are encouraging signs of maturity in terms of FSIs adoption of data analytics compared to other industry sectors. Our survey found 97% of FSIs using predictive analytics to help them drive better customer insights and loyalty initiatives, with three fifths (62%) using it as a key part of these programs.
However, the data shows UK FSIs lagging behind their US counterparts. In the US 93% of FSI’s departments have embraced data analytics, with over half of these (51%) encompassing the entire workforce; however, in the UK only 37% of the workforce is fully embracing data analytics.
Clearly there’s much room for improvement when it comes to fostering a data-driven
culture in FSI organisations. Research by McKinsey also supports this trend. It found that despite more than half of the banks it surveyed having analytics is a strategic theme, the majority struggle to connect the high-level analytics strategy to a targeted selection and prioritisation of use cases, and to implement them in an orchestrated way. This is understandable. As FSIs step up their sophistication in data analytics, the skills and demands required mean that some struggle or are challenged to leverage them effectively.
The biggest challenge FSI organizations face when implementing data/analytics into customer loyalty initiatives is most commonly their inability to use advanced analytic methods for their desired analyses and activities and/or a lack of access to external and more detailed customer data. By adopting better analytics tools and a more progressive data strategy and culture FSIs can access data that was previously unattainable.
If 2020’s pandemic has made one thing clear, it’s that business conditions can flip very quickly, meaning the infrastructure to support fast decision-making needs to be more responsive than ever. Adapting and innovating to provide products and services that customers need during these uncertain times, using insights to de-risk and accelerate offerings helps to secure their loyalty now and beyond.
Revolut’s data revolution
Revolut is a disruptor bank that’s showcasing the growth potential of a truly data-driven organisation. As one of the biggest players in the crowded fintech ecosystem it has approximately 13 million global users, meaning it has large datasets from several sources. In order to achieve incredible granular personalisation for its customers it needed to reduce the time it took to analyse all this data.
In fact, Revolut’s data volumes had increased 20-fold in the space of one year, which coincided with the need to maintain circa. 800 dashboards and 100,000 SQL queries every day across the business. Action needed to be taken to support its need for a flexible, hybrid cloud environment data analytics platform.
With an in-memory data analytics database as a central data repository, time is now saved across multiple business departments with queries and reports completed in seconds rather than hours. As a result, Revolut has experienced query rates that are 100 times faster than its previous solution – greatly improving decision making processes.
Analysing large datasets spanning several sources drives customer experiences and satisfaction. The business can now define tens of thousands of micro-segmentations in its customer base with the ability to explore payments data, debit card statements, customer demographics, mobile transfers and transaction and point of sale. It’s also seeing an increase in sales and customer retention as this has led to ‘next product to purchase’ models being built according to this unique insight.
Importantly, it’s not just data scientists that have access to the central data repository either, but everyone in the organisation. Key performance indicators (KPIs) for each team are constructed on this data too, meaning every employee has an understanding of the company’s goals, performance and progress, and can see industry trends and insights based on the data, which they can act upon.
With customers able to choose between tech giants, mobile-only banks and well-known financial institutions that have been around for well over a century, data has an incredibly important role in how all of these organisations can attract and retain customers and strengthen their loyalty through great user experiences, tailored products and innovative services.
Financial services organisations can gain competitive advantage during these challenging times with a progressive data strategy that operationalises and governs data, and empowers users to make fast, informed decisions.
The path to success is the same for challenger or legacy banks – provide services in a clear, timely and satisfying way for customers.
Underpinning this has to be the right analytics database that can support your needs, regardless of whether you store your data in the cloud, on-premise or in a hybrid environment. This is central to knowing your customers better and predicting and detecting customer trends to improve experiences. In turn, this will increase customer loyalty.
DIGITAL FINANCE: UNLOCKING NEW CAPITAL IN DISRUPTED MARKETS
Krishnan Raghunathan, Head of Finance & Accounting Services at WNS, explores how a digitally transformed finance department can give enterprises the ability they need to improve cash flow and revenue through better use of data and improved analytics-driven visibility.
Businesses everywhere are scrambling to recover lost revenues and protect cash flow. But as countries globally grapple with a dreaded second wave of the pandemic, imposing far more stringent localised lockdowns and new restrictions, it is set to be the hardest winter in living memory for many sectors.
The likelihood of winter peaks, so often the saviour of sectors such as travel and hospitality, benefitting businesses is diminishing rapidly. While many have pivoted to a greater or lesser degree, few have been able to offset the impact of falling revenues on cash flow. Even retail, riding an e-commerce boom in many regions, is finding itself in choppy waters, with 17 percent of consumers switching brands due to the economic pressures and changing priorities caused by the pandemic.
As one McKinsey article notes, “With some companies losing up to 75 percent of their revenues in a single quarter, cash isn’t just king – it’s now critical for survival”. Where then do businesses find new sources of cash to sustain their operations through the coming months?
Tapping Overlooked Cash Opportunities
For many, the answer could depend on whether they have digitally transformed their finance department. Why? Because many organisations are sitting on unidentified opportunities, funds that could be vital in shoring up businesses over the next few months or plugging the gap between operating costs and government bailouts. Yet those that have been slow to start their digital transformation journey are at a disadvantage;. At the same time, it is possible to identify these hidden seams in an analogue organisation, the process is time-consuming, manually intensive and, without the right digital tools, prone to human error.
Where deploying digital tools helps is by bringing speed, automation and reliable data to the fore. Connecting them with digital finance and accounting systems can give businesses clear insights into how money is being spent, where wastage is occurring, and where opportunities for optimisation exist.
It might be something as simple as automating the accuracy checking, issuing and chasing of invoices and late payments. This could reduce errors and invoice disputes and ultimately lead to faster payments. Accuracy and organisation are also important in billing – better records enable faster billing for work completed, and in turn, should deliver quicker payments.
It could also be around having the ability to review the supply chain and procurement data and identify where a supplier is subsidising a larger customer’s product line through drawn-out payment terms, or where a variety of vendors are on different terms across the business. Using that data and overall knowledge of the business to negotiate better terms that work for both supplier and customer can create new opportunities. It could even be to identify late-paying customers, determine the reason for late payments, and use that intelligence to develop products or financing solutions that continue to support those customers (and improve loyalty) without increasing the burden on the balance sheet.
Generating Reliable Insights for Faster Decision-making
To do any of these manually would take months, generating data slowly that would quickly go out of date. But digital finance departments have evidence they can trust to inform business decision-making. That’s because old, manual processes built around Order-to-Cash lack the flexibility and agility that businesses require in today’s markets. The fact is that even before the global pandemic crisis, the pace of digitisation across all sectors was demanding new approaches to finance and book balance.
The opportunities are significant – from cognitive credit and improved forecasting accuracy to enhanced customer analytics. All use similar tools, based on artificial intelligence and quality, trusted data. Cognitive credit can be deployed to quickly make decisions on whether to advance or restrict credit, based on individual company positions and available data. Doing so enables businesses to either capitalise on opportunities (for instance, agreeing credit for a supplier that has run out but is a supportive and integral partner) or avoid risk (in the cases where a business might be in administration).
With more accurate forecasts, businesses can better manage their currency purchases and deposits, selling currency that is not required or buying more where predictions identify an upcoming demand.
It is the same with customer analytics – with a greater understanding of customer needs, businesses can make decisions based on the right mix of the product (and how it meets demand) and supply chain suitability (such as production costs and location in relation to customers).
In many ways, the events of the past year have accelerated the process. In doing so, the problem is the pandemic has also accelerated the speed at which failure to act can lead to obsolescence. Therefore, it is vital that businesses, and more particularly their finance and accounting departments, kick start their digital transformation. This will enable them to deploy the tools and analytics that is needed to capture data, generate insights and drive fast, accurate decision-making to uncover previously untapped sources of cash and reverse revenue degradation.
The Importance of Digitally Enabled Finance Teams
Forward-thinking CFOs have already begun the process of digitising their departments, but for those that have been slow to start, now is the time to push forward. It is only through digital tools and analytics that finance leaders can identify both the internal and external opportunities to recover revenue and improve cash flow. Whether that’s releasing working capital, minimising revenue loss and accelerating revenue recovery, reducing total cost of ownership or enhancing customer retention – only digitally enabled finance teams will be in a position to capitalise and, ultimately, bolster business performance during what will be a trading period like no other.
About the author: Krishnan Raghunathan
Krishnan Raghunathan is the head of Finance & Accounting (F&A) practice and operations at WNS. He also leads the international delivery locations in China, Costa Rica, Spain, Sri Lanka, Romania, The Philippines, Poland and USA.
Prior to this, Krishnan was Chief Capability Officer for WNS, in that role he headed Horizontal practices across Finance & Accounting, Customer Interaction Services and Research & Analytics, Transformation & Process Excellence, Program Management (Transitions) and Solutions development.
He has more than 27 years of experience across Finance & Accounting, Business Process Management, Sales Solutions and Capability functions including 7 years in Accounting practice.
Before joining WNS in 2013, Krishnan led several challenging roles at Genpact, supporting strategic deals and consultative selling. In addition, Krishnan was also the business leader for a number of industry verticals at Genpact, including hospitality, transportation, logistics, media and professional services
Krishnan is a Chartered Accountant, a Certified Six Sigma Green Belt and a trained Six Sigma Black Belt
MASTER YOUR DATA: TACKLING CUSTOMER RETENTION CHALLENGES IN FINANCIAL SERVICES
Helena Schwenk, Market Intelligence Manager at Exasol Customer retention has always been crucial to financial institutions (FSIs), with the majority...
HOW ALGORITHMS CAN BOOST YOUR TRADING PROFITS
Gabriele Musella is CEO and co-founder of Coinrule Trading, whether for cryptocurrencies or stocks, is about buying and selling...
BLACK FRIDAY WEEKEND SET TO SMASH ONLINE SALES RECORDS, ACCORDING TO ECOMMERCE EXPERT
The Black Friday weekend is anticipated to be the largest for online sales on record as the UK remains in lockdown, according...
ONE IN FIVE INSURANCE CUSTOMERS SAW AN IMPROVEMENT IN CUSTOMER SERVICE OVER LOCKDOWN, RESEARCH SHOWS
SAS research reveals that insurers improved their customer experience during lockdown One in five insurance customers noted an improvement...
PASSWORDS, BIOMETRICS AND BEYOND
By: Hicham Bouali, Pre-Sales Director EMEA of One Identity, a specialist in identity and access management At any given...
AVATRADE NOW SUPPORTING DEPOSITS VIA PAYPAL AND RAPID TRANSFER
AvaTrade continues to grow its customer offering by adding PayPal and Rapid Transfer to its supported payment methods. AvaTrade’s customers...
GOING GLOBAL: 7 TIPS TO GET STARTED
The idea of selling your products or services to new markets across the globe is an attractive prospect for any...
KASHFLOW AND YAPILY PARTNER TO SUPPORT SMES WITH DIGITAL BOOKKEEPING AND CASH FLOW MANAGEMENT
KashFlow continues its mission to provide SMEs and accountancy firms with software that keeps bookkeeping easy to understand and even...
WHY HIGH NET WORTHS SHOULD BE LOOKING AT ANGEL INVESTING IN A NEGATIVE INTEREST RATE ENVIRONMENT
By Oliver Woolley, Envestors As England gets through its second lockdown, Bank of England policymakers report the UK we...
VIVA WALLET SUPPORTS E-COMMERCE GROWTH THROUGH ITS MARKETPLACE SOLUTION
Viva Wallet’s PSD2-compliant payment solution for online marketplaces removes the requirement for them to become licensed providers of regulated payment services. Viva Wallet is able to handle the streamlined processing of customer transactions through a PSD2-compliant escrow account...
REDUCING FRICTION ONLINE HAS BECOME BUSINESS CRITICAL
Andrew Shikiar, Executive Director at the FIDO Alliance The global pandemic has pushed the importance of remote access and authentication...
QUICK FIXES TO LOWER YOUR CAR INSURANCE
Car insurance is something we all have to pay for, no matter how much we despise it. However, it’s not...
ALL-SEASON TYRES AND HOW TECHNOLOGY IS CHANGING THE FUTURE OF TRANSPORT
Avid vehicle enthusiasts will likely know that summer and winter tyres are developed from different rubber compounds which work at...
EQUIPPING YOUR TEAM WITH THE SKILLS TO MANAGE THE CHANGING LANDSCAPE
By David Wharram, CEO of Coast Digital For businesses to emerge from the COVID-19 pandemic stronger than ever, companies...
BANKING ON THE FUTURE: WHY PAYMENTS TRANSFORMATION IS THE KEY TO SUCCESS
Simon Wilson, Co-Head, Payments at Icon Solutions Standardisation, regulation and technological innovation means payments are well on the way...
DIGITAL FINANCE: UNLOCKING NEW CAPITAL IN DISRUPTED MARKETS
Krishnan Raghunathan, Head of Finance & Accounting Services at WNS, explores how a digitally transformed finance department can give enterprises...
DATA DILEMMAS IMPACTING ESGS
Mario Mantrisi, Chief Strategy and Knowledge Officer, Kneip It’s been well documented over the past few months that the...
SIX PILLARS FOR A SUCCESSFUL CLOUD
by Giuseppe Paternò, IT Infrastructure Architect, Security Expert, and Cloud Solution Guru COVID-19 pandemic is pushing many companies to...
MARQETA CONTINUES EUROPEAN GROWTH, SIGNING THREE NEW DIGITAL BANKING CUSTOMERS
Marqeta is supporting the development and launch of three new digital banks across the UK and Europe Marqeta, the...
TECHNOLOGY IS OUR FIRST DEFENCE AGAINST MONEY LAUNDERING
Jesse Chenard, CEO of MonetaGo Fraud is an age-old problem that has plagued every industry since businesses began trading. It...