Happy Business Starts Here

Subscription Business Model

 

By: Marc Fiscalini, @PossibilIT

 

Paying methods can be divided into three categories: pay before, pay now and pay later. Payment by payment cheques, direct-debit, cash, debit (paying by switch cards) and credit cards were the ways one could pay for a purchase made.

 

Within organizations, traditionally, the ownership of the payments processes belongs to the financial department. With much care they look after cash management, invoicing and credit management. Payment providers (acquirers and processors) found themselves on an oligopolistic market; mainly banks which had control of their home markets. Debt-collection agencies had to make sure part of the money of non-paying customers was paid eventually. This payment-landscape has changed tremendously in the last 2 decades.

 

A growing number of payment methods and related services created more awareness for payments within organizations. The payment method of preference is defined by the degree in which one can affect conversion, data, costs and risks. Chosen business model and corresponding earnings are affected by the possibilities payment methods offers. However this development, the main business model in most organizations is still focused on direct sales and margins of those sales.

 

Nevertheless, a lot has changed over the last few years. Online sales, network infrastructures and digitalization attracted newcomers to the traditional (local) markets. These newbies have changed the world. Famous examples are eBay, Spotify, Netflix, Apple, Booking.com, PayPal, Amazon.com, Uber, Alibaba, Bol.com, Airbnb, Uber. These disruptors haven’t exactly restricted themselves. They thought in possibilities from the beginning. New business models, with corresponding earnings have been introduced. They’ve used the opportunities the online world gave them. The payment industry had to adjust and is no comparison with fifteen years ago. Local payment methods in Europe have disappeared and replaced with international brands like Maestro and VPAY. The European local currencies have been replaced by the Europe and SEPA-standards were introduced. New roles and services were added to the payment chain, provided by new players.

 

Technological, digital and social developments continue unabated at high pace. Organizations must think about new business and earning models. Progressive digitalization (cloud solutions, IoT, big data, 3D printing, augmented reality, gamification, virtual reality, robotization, etcetera) and social awareness (environment, wellness, sharing of ownership) affect all markets and disciplines in more to a certain extent.

 

Not every organization is fully aware of what is going on. The issues of the day, lack of vision, legacy systems and commitment for change are important reasons for missing chances. The more time goes by, threats become more realistic and more concrete. Altogether, one has to look at current business and earning models.

 

One upcoming model is licensing or the subscription model. At high speed, subscriptions take over or appear next to the existing sales model. A subscription-based transaction has impact on cash flow, systems and processes. It requires time and money, but then again it gives you the opportunity to renew the relationship with your customer or client, to enlarge your turnover and to reduce your dependency on the payment morale of your clients. Viewed from that perspective, a subscription model is worth it.

 

Marc Fiscalini

Marc Fiscalini's background is in the field of payment and subscription economy

 

 

 

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PossibilIT BV, a Subscription Factory partner Company, offers IT Solutions to organizations that want to be the leaders of today and tomorrow. We develop, implement, and manage solutions based on our knowledge and experience to ensure continuity of business operations.

1 Comment
Zuora Support Moderator

Thanks for the article, @PossibilIT.

 

I'm curious to know while working with your customers, what challenges do you see them running into as they shift to a subscription model?