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Subscription payments, also known as recurring billing, is getting renewed attention in the payments industry from companies that provide direct-to-consumer services merchants use, like Recurly Inc., and some providing merchant services, like Fattmerchant Inc.
Merchants selling goods and services paid for with subscription payments likely had a busy Cyber Monday according to a report from Recurly, a payments provider specializing in recurring payments.
San Francisco-based Recurly says merchants using its service experienced a 230% increase in total payment volume on Cyber Monday, the Monday following Thanksgiving when many consumers typically shop online. That increase is in comparison to other days within the two-week period from Nov. 22 to Dec. 5. Cyber Monday payment volume accounted for 22.2% of Recurly transactions, outpacing all other days during the period. Recurly examined transactions at more than 450 business-to-consumer merchants, but would not provide total dollar amounts
It’s a combination of factors—involving consumers and merchants—that contributed to this increase, says Frederick Felman, Recurly’s chief marketing officer. “People’s buying patterns are changing,” Felman tells Digital Transactions News. “Products are crafted to generate loyalty and breed that loyalty.”
Another factor is that the payments industry is making it easier for consumers, and merchants, to use subscription-billing services, he says. Though subscription billing is not new, more merchants that might not have used the service in the past now are. Recurly, for example, counts Groupon Inc. and AccuWeather Inc. among its customers.
“When you look at the products themselves and how merchants are creating a curated experience for consumers, they create excitement about the delivery of those products,” Felman says.
The allure of subscription billing has one independent sales organization, Orlando, Fla.-based Fattmerchant, vying for merchant attention by touting the payment model for merchant services.
Paying a monthly fee for merchant services is an age-old model, but Fattmerchant chief executive Suneera Madhani says her company’s plan differs in that all fees are wrapped into one amount. Monthly fees start at $69 a month, with interchange and a 25-cent per transaction fee. Merchants have no contract beyond the month of service.
Other merchant-services companies charge a monthly fee, but do not provide direct access to interchange, Madhani tells Digital Transactions News. “They do interchange plus basis points,” Madhini says. Fattmerchant does not add any basis points to the interchange rates, she says. The ISO also provides VeriFone Systems Inc. or Ingenico Group point-of-sale devices, or access to Authorize.net’s gateway, as part of its monthly fee. Fattmerchant is processor-agnostic, and merchants can use other gateways, she says.
Fattmerchant had $5 million in transaction volume in 2014, but grew that to $110 million in 2015, Madhani says. The ISO’s growth is attributable, in part, to its sales model—direct marketing with a heavy reliance on online—and specialization. “It’s tough to market for all types of businesses,” she says. Recurring billing services are the ISO’s fastest-growing, she adds.
