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for the Subscription Economy

The moment of truth

Changing commerce
with subscription businesses
How payments increases customer lifetime value

Maximizing the signup process

1. Offer local and prepaid payment methods

2. Combat card testing and reseller fraud

Increasing customer retention

Thanks to 3. Deliver uninterrupted service with Account Updater

Federico Pezzotti of Spotify, 4. Take a data-driven approach to retries
Thierry Locard of Netflix,
Nastassja Gilmartin of Jagex, 5. Fine-tune your billing intervals
and David Francesconi of DAZN
for contributing their insights to this research About Adyen

5 Payments Insights for the Subscription Economy 5 Payments Insights for the Subscription Economy
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The moment of truth

The payment is the moment of truth in the customer

relationship, where the costs of customer acquisition
are converted into revenue. Yet, up to a few years
ago, payments was widely regarded as a commod-
ity - something that businesses would plug in when
they needed, and look for ways to drive down its
costs in order to save money. But recently, some-
thing interesting has happened. Partnering in many
cases with Adyen, the world’s most innovative com-
panies have begun to rethink payments as a stra-
tegic driver of improved customer experience and
increased revenue.
In practice, this means taking a granular approach
to improving the payment flow. Instead of focusing
only on obvious areas like the design of the check-
out, these companies are making gains of 1% here,
0.5% there, in areas in which many businesses do not
consider, such as taking a data-driven approach to
retrying failed transactions.
For the world’s most well-known recurring and
subscription businesses, Netflix, Spotify, and Linke-
dIn among them, the results have been twofold. On
the one hand, the emphasis on getting payments
right is improving the customer experience, as sig-
nup becomes easier and fewer transactions fail with-
out warning. And the other side is the business ben-
efit, with better approval rates leading to millions in
additional revenue.
This guide is a selection of insights from some
of these businesses, combined with data and insights
Pieter van der Does from Adyen, that will give you the right areas to focus
on in order to improve the customer experience, and
CEO, Adyen grow revenue for your business too.

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Changing commerce Whether in transport, food delivery, music, movies, or
even shaving, there is a vast change sweeping the world of

with subscription
commerce. Disrupting all industries it touches, from
retail to digital content, and everything in between, the rise
of the subscription and recurring economy is a major,

businesses and seemingly unstoppable, shift in the way we buy.

The examples are numerous. In In this new world of commerce,

transport, this new economy is a key touchpoint of the customer
giving access to ride services at relationship is payments. In fact,
the tap of a button, led by a new payments is a cornerstone of the
range of companies such as Uber, customer relationship in two
BlaBlaCar, Grab, and Lyft. In key areas:
food delivery, companies such as 1. Providing a fast, easy sig-
Foodora, Just Eat, Delivery Hero, nup process. Leading busi-
HelloFresh, and more, mean that nesses maximize success at
we can outsource our grocery the checkout by removing all
shopping or get local meals deliv- possible points of failure in
ered to our door at our conve- the signup process, not just
nience. And in the cosmetics and through checkout design, but
grooming industries, the success also a number of back-end
of companies such as The Dollar tools.
Shave Club, Althea, and Birch- 2. Delivering uninterrupted ac-
box are disrupting traditional cess for as long as your cus-
business models that have been tomer wishes. That is to say,
around for decades. Such is the ensuring no disruption for
pace of change that, since 2012, reasons related to payments,
sales in subscription businesses regardless of whether it is a
have been growing an estimated technical reason, or an issue
nine times faster than sales of on the customer side, such as
companies in the S&P 500. temporary insufficient funds.

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How payments increases customer
lifetime value

For your business to be successful, customer “At Spotify, we have moved

acquisition costs need to be exceeded by customer away from a standard view
lifetime value within as short an amount of time as of payments as a cost-base
possible. In order to make this happen, subscription only. In fact, payments
businesses normally ensure their product is sticky sit within the growth and
and user engagement is strong. However, one conversion team, as we see it
often under-invested in area in which subscription as a key driver of Customer
businesses can make significant gains is payments. Lifetime Value.”
The graph below shows how payments fits in to
customer lifetime value for subscription businesses. Federico Pezzotti Spotify

How payments fit in to the recurring and subscription

customer lifecycle*
*and where you can make gains

Lifetime value
Lifetime value exceeds
customer acquisition cost

Each repeat transaction will increase the LTV
Customer acquisition cost


Account Updater
Transaction 8-9% saved
Billing cycles
Retry logic

10% failed*


Intent to purchase Signup & validation Bad user experience

Failed Missing payment options
*Global average
Non-optimal fraud settings

On average globally, two thirds of shopping carts are tions fail for reasons ranging from insufficient funds,
abandoned at the checkout - a figure that has been to lost or stolen cards or technical failure.
increasing over the past few years a m-commerce has However, of that 10 percent, 8-9 percent can be
become more popular. Therefore, seamlessly con- saved with the right techniques and tools - resulting
verting your prospect at this step is essential. In addi- in up to millions in increased revenue for large busi-
tion, uninterrupted payments are crucial to customer nesses, happier customers, and increased LTV. This
retention. On a global average across industries and guide will walk you through tools and techniques to
geographies, approximately 10 percent of transac- optimize both of these areas.

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Maximizing the signup The goal of signup is to give your customer access to your
product or service as quickly as possible. Making the payment

process step flawless is a key part of this proposition.

When optimizing the signup, most businesses think process, what goes on under the hood also delivers
about how to minimize its steps – asking as little significant gains. This section will take a look at two
information as possible from a customer in order to areas in which you can make measurable improve-
make the process as easy as possible. ments­– by adding subscription-enabled payment
While this is a crucial part of optimizing the methods, and optimizing risk management.

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Offer local and prepaid Prepaid methods Austria, and the Netherlands, to
payment methods For markets in which 3D Secure make the initial transaction with
is mandated, or popular payment their preferred local payment
If you are in North methods do not support recur- method, with subsequent transac-
1 America, the U.K., or ring functionality, some subscrip- tions occurring with SEPA Direct
Australia, the major- tion businesses are tweaking their Debit. Furthermore, Adyen sup-
ity of transaction volume will be models to create prepaid options. ports all key payment methods
cards. However, many of your Typically, this involves a longer globally, from Boletos in Brazil to
customers on a global level do not period of access than a regular cash-based payment methods in
use cards as their primary way to monthly subscription – where Southeast Asia, giving your busi-
pay. Furthermore, in some mar- businesses need to optimize the ness enormous flexibility to offer
kets, regulations mandating 3D balance between the length of prepaid options in the manner
Secure make recurring payments time and a transaction amount your customers prefer.
unfeasible, as this creates an extra that is reasonable for the maxi-
step in the payment flow. mum number of subscribers.
In order to capture these
enormous untapped markets, it is “Merchants should question
crucial to offer local and prepaid whether the notion of “one
payment methods. payment equals one month
of product” works for all
Local payment methods customers. For example,
In many key markets around the some customers prefer to
world, China, Germany, and pay for a full year of service,
Russia among them, credit cards while others may part-pay
are not the most popular payment throughout the month.”
method. However, a number of
key local payment methods such Federico Pezzotti Spotify
as QIWI in Russia, Alipay in
China, and SEPA Direct Debit in What Adyen offers - local
Europe, both support recurring payment methods
and subscription payments, and In Europe, Adyen has built func-
are used by significant numbers tionality that enables customers
of your potential customers. in markets including Germany,

Payment method Market opportunity Functionality

“We have found SEPA

Direct Debit to be extremely SOFORT / Giropay / SEPA 50% share of online payments The shopper makes the initial
popular in Germany and Direct Debit in Germany transaction with the payment
Austria and it is the payment method of their choice,
method favored by our local with subsequent transactions
customers when signing up EPS / SEPA DD 60% share in Austria happening with SEPA Direct
to DAZN. This is a good Debit.
reminder that payment
methods that might seem iDEAL / SEPA DD 80% share in the Netherlands
alternative to us are actually
the norm in local markets.”

David Francesconi DAZN

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Recurring payments with “Traditional KYC
wallets on-boarding requirements
Adyen enables you to support can act as barriers to
recurring and subscription pay- conversion and can frustrate
ments for a number of wallets, customers. Subscription
including Qiwi, Alipay, and Pay- businesses can get smarter
Pal, with others to follow. on metrics used to identify
customers during checkout
and normal customer
interactions, with subtle
Payment method Market opportunity Functionality transactional and
device identifiers providing
confidence on customer
QIWI 16 million+ users in Russia identity.”

The customer authorizes the Federico Pezzotti Spotify

Alipay 400 million users in China wallet to make transactions on
a repeat basis.

PayPal 192 million active customer

accounts globally

Combat card testing Card testers can be identified by and damages brand perception
and reseller fraud the following characteristics: in the process.
1. On page behavior that is too
Subscription-based busi- rapid to be humanly possible Be careful what you block
2 nesses are particularly (such as going through the The traditional approach to min-
susceptible to two broad checkout and entering strings imizing fraud is stopping suspi-
types of fraud – card testing and of credit card numbers in cious transactions. But the con-
reseller fraud. seconds). sequences of simply blocking all
2. A high number of unique suspicious transactions is an issue
Card testers credit cards per shopper en- that should not be underesti-
Card testing is where fraudsters tity, which are often con- mated, as you will also block good
test stolen card details to see if nected by multiple data points customers. In the U.S. alone, risk
they can be used to make subse- such as IP address, machine, checks prevent an estimated $4
quent transactions. Subscription email address, or other defin- billion fraud, while simultane-
businesses are popular with this ing characteristic. ously blocking legitimate transac-
kind of fraudster because they 3. Leveraging virtual machines, tions worth $8.6 billion.
often offer easy signup processes proxies, TOR nodes, or other
and low transaction values to tools to obscure identity that
test the cards of new subscrib- normal customers don’t use.
ers. These factors make it easy
for organized criminals to set Resellers
up servers and scripts to take a Reseller fraud is where fraud-
mass-produced approach to card sters sign up for trial periods
testing – finding out whether (up and then sell them on to unsus-
to millions) of stolen card details pecting consumers for small
can be used to make subsequent amounts of money. This delivers
physical goods purchases online. a negative customer experience

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The below table lays out a number of risk tools and techniques used by “Do not underestimate this
subscription and recurring businesses area – constantly analyze,
adjust, revise and iterate your
fraud strategy. We review
Tool or technique What it does Use case results of fraud filters on a
weekly basis, and we also
listen to customer support
Device These techniques: Useful to spot fraudsters who feedback to formulate our
fingerprinting a) Collect unique attributes from a device, attempt to change their profile hypotheses and adjust our
and relational which are logged and analyzed during repeat or card details while using the approaches.”
mapping visits. same device, and/or identify in-
b) Combine this with multiple attributes dividual shopper entities behind David Francesconi DAZN
including device data to create a relational seemingly unrelated transac-
map of attributes behind seemingly unrelated tions.

Behavioral Spots behavior that is not humanly possible, Relevant to identify which pur-
analytics such as (multiple) shoppers going from front- chase attempts to add extra secu-
page to checkout in seconds, or entering 16 rity filters, such as CVV/AVS, 3D
digits individually in a half a second. Secure, and so on.

CVV/AVS AVS Useful as an extra layer of securi-

(Address Verification System) is a system ty at the checkout. It is worth not-
used to verify the address of the cardholder. ing that AVS is supported mainly
The system checks the card billing address in the U.S., Canada and the U.K.
provided by the cardholder, with the address
on file at the card company.
Automated account creation sters use a multitude of tech- checks, combined with advanced
CVV Previously the domain of niques to circumvent these kinds features such as device finger-
(Card Verification Value) is the security code advanced professional fraudsters, of clusters, usually by using new printing, relationship mapping
printed on the back of the card, which is not readily available software means compromised credit card num- logic, behavioral analytics, geolo-
encoded on the magnetic stripe and therefore relative amateurs can automate bers and changing devices and cational heuristics, Dynamic 3D
can’t generally be stolen through skimming. the creation of thousands of login identities. Secure, and built-in Case Man-
emails and user accounts. This agement.
makes card testing even easier, What Adyen offers:
as each attempt will come from RevenueProtect By using linkable attributes that
Velocity checks Checks historical shopping patterns of a cus- Useful to spot sudden changes in a unique account, made from a RevenueProtect is Adyen’s are difficult for fraudsters to
tomer to spot unusual purchase behavior. transaction volume or value that unique email, seemingly coming built-in risk management system, refresh, such as device finger-
may be an indication of fraud. from a separate IP address. created to handle the high-ve- printing and delivery addresses,
locity, automated fraud that sub- RevenueProtect is able to track
Many risk mitigation plat- scription businesses commonly fraudsters even as they change
Analyzing user Quantify how much of your fraud is card test- Consider your approach to the forms work under the assump- experience. devices, networks, and identities.
behavior after ing and how much is reseller (through identi- potential subscriber who has pur- tion that a transaction exists in
signup fying whether the account is being used). chased the free trial. For example, isolation, and therefore lack any Designed to maintain the optimal
is there a way to convert to a gen- way to identify this kind of fraud. balance between fraud defense
uine customer? More advanced risk systems clus- and conversions, RevenuePro-
ter transactions based on the tect employs a range of standard
user’s login credentials or credit tools such as velocity, referral
card number. However, fraud- and other transactional fraud

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Increasing customer retention Once your customer is signed up and validated, delivering
an uninterrupted service for as long as they wish is crucial.
And increasing customer retention by minimizing payment
failure is a key part of this effort.

Involuntary churn - where customers unintention- up to half of these failed transactions. But besides
ally have their subscription canceled due to pay- dunning, under the hood there are a number of other
ment failure - is a hidden, yet essential, component tools and strategies that you can use to save the other
to optimizing growth. The first step toward saving 5 percent, including the following:
these customer relationships is dunning – commu- • Account Updater
nicating to your customers to ensure the collection • Retrying failed transactions
of payments. In fact, if 10 percent of transactions • Fine-tuning your billing intervals
fail, a sophisticated approach to dunning may save

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Deliver uninterrupted service “Once they have entrusted us
with Account Updater with their payment method,
we don’t want our customers
A key cause of subscription payment failure to be making a purchase
3 is when cards expire, are lost, or changed decision every month, or
for other unforeseen reasons. When this even at other intervals
happens, they are often reissued with different expi- such as when they change
ration dates, CVV, or card numbers. This can trig- cards. We want to provide
ger a decline in the next payment, often without the uninterrupted service where
business or customer immediately realizing it. payments run smoothly in the
Fortunately, there are tools to help. The card background, and that is where
networks offer services – Account Updater for Visa, tools such as Account Updater
Automatic Billing Updater for Mastercard, and Card come in.”
Refresher for Amex – that enable you to maintain
an uninterrupted service by updating card-on-file Thierry Locard Netflix
account information.
With these services, card update requests are sent
to the card networks, which gather relevant updates
from participating issuers daily. The updated card
details are then sent back.
These tools provide three key benefits:
• They ensure unbroken access to a shopper’s pay-
ment data, which translates into an uninterrupted
revenue flow and increased authorization rates.
• By minimizing disruptions to recurring and sub-
scription payments, they provide a smooth pay-
ment experience, and reduce the chance of ser-
vice cancelation.
• Normally when an on-file card stops working,
you will need to reach out to the cardholder for
card information. Account Updater decreases
costs associated with customer service.
Of the 10 percent average, implementing Account
Updater can reduce involuntary churn by 2-3 per-
cent. However, issuers are not always consistent in
their implementations of Visa and Mastercard pro-
grams and businesses should take steps to protect
themselves against any inconsistency. For instance,
when a card number is changed, you should continue
to use the previous card number until you begin to
see declines.

What Adyen offers: Adyen Account Updater

Adyen offers the Account Updater service in all
the regions where the service is available - Canada,
the U.K., Ireland, Italy, Greece and the U.S. This
includes several integration options such as single
and bulk update requests triggered by the merchant.
We also offer lightweight integration with automated
update logic based on lifecycle events, such as pay-
ment refusal, upcoming card expiry date, and so on.

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Take a data-driven approach to
In addition to card expiration, transactions “We monitor retry
4 fail for a number of technical and non-tech- effectiveness and optimize
nical reasons that will not be picked up by per market, according to
Account Updater. For these situations, a percentage information such as the pay
can be saved through retrying the transaction. cycle of that market. We see
that we are optimizing when
Technical versus non-technical retries the first retry is much more
Retrying failed transactions should be approached effective.”
according to the reason for the failure. For exam-
ple, if a transaction fails due to technical reasons, Thierry Locard Netflix
Adyen data shows that the best practice is to retry
However, if a transaction fails due to non-technical
reasons, such as insufficient funds, it may be better to
retry over a longer-term period – or better yet, to look
at the pay cycles of the market, and retry immediately
after the date that people receive their salary. Under-
standing and optimizing these factors on a per market
basis is crucial to your success.
The below list outlines some of the key reasons pro-
vided by the issuing banks that transactions fail, and
how to approach your retry strategy.

Reason Advice Observation

Do not honor Retry on short and long term Around 5-7% success rate when
retried immediately

Insufficient Retry on long term Time your strategy according to

funds pay cycles in the market

Incorrect Prompt customers for correct Zero success without prompting

details information for correct details

Expired/Lost Use Account Updater A simple fix to save lost revenue

Technical Retry immediately Up to 70% success rate on retry


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It should be further noted that excessively retrying
failed transaction attempts can lead to issues with
the card networks. Furthermore, while you may be
able to continue to make incremental gains by retry-
ing over long periods of time, the success rate inevi-
tably decreases.
Therefore a smart approach is to test to see what
you can save while staying compliant with the card
networks, and continuously fine-tune. The below
graph shows retry success rates against the amount of
retries made with a selection of data from the Adyen
platform. It is important to note that for most busi-
nesses the vast majority of successful retries occur in
the first few attempts.

Retry success versus number of retries

Authorization rate




1 2 3 4 5 6 7 8 9 10
Number of retry attempts on the same transaction

What Adyen offers: Auto Retries

For technical failures caused by occurrences such as
bank outages, Adyen selectively retries transactions
through alternative connections in the same region.
Our raw data helps businesses target retries that are
technically focused, and our inferred refusal reasons
also establish logic for non-immediate retries.

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Fine-tune your billing intervals
Simply billing your subscriber at regular
5 intervals after the day of signup may be
tempting, as it is the easiest thing to do, but
it will cost you in conversion.
Factors such as market, time of day, day of week,
and day of month can have a significant impact on
transaction success rates. In the U.S. for example,
the majority of customers are paid bi-weekly, result-
ing in an uplift of successful payments at both the
beginning and the middle of each month. Whereas “Retention is obviously our
in the U.K. players tend to be paid monthly, and primary goal and equally
there is only one spike at the beginning of the month. the optimum outcome for
By analyzing transaction success rates across that would be a successful
individual markets, you can make data-driven deci- authorization on the first
sions about the optimal time to bill subscribers. Also, rebill attempt. But if you’re
you may consider asking your customers at what looking for one key metric
intervals and what time of the week or month they to base your rebill strategy
prefer to be billed. around, country is definitely
As an example, the following data from the Adyen the most important and where
platform shows the percentage of refusals due to you’ll find the most consistent
insufficient funds across multiple markets. In addi- trends in behavior.”
tion, specific times of the day or day of week/month
can also lead to higher retry success rate. Alastair Morris Jagex

Refusals due to insufficient funds

Percentage of refusals due to inssuficient funds
Austria Denmark France Netherlands
60% of refusals due to inssuficient
funds 48% 0.38%

Austria Denmark France Netherlands

avg 60%
54% 38%
9% 48% 0.38%
avg 54% 38%

7% 0.21%
41% 5% 19% 0.14%

41% Poland 5% Sweden 19% United Kingdom 0.14% United States
67% 66% 42% 67%

Poland Sweden United Kingdom United States

67% 66% 42% 67%
60% 44% 36%

60% 44%
29% 36%
53% 32% 56%
3 10 17 24 31 3 10 17 24 31 3 10 17 24 31 3 10 17 24 31
53% Day of the
32% month 56%
3 10 17 24 31 3 10 17 24 31 3 10 17 24 31 3 10 17 24 31

Day of the month

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Also the time of the billing requires attention. For
example, globally, we have found that nighttime
hours have a lower success rate by 2% due to issuing
banks tightening their risk system. And you should
always be aware of specific local situations – for
example Mexico does not process overnight. Below
shows that in the U.S., issuing banks are most likely
to authorize retries in the morning, and less likely
after midnight.

The time of day may impact authorization rates

Authorization rate


Separate days
of the week
Average over
the week



00:00 04:00 08:00 12:00 16:00 20:00

Hour of the day

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About Adyen Subscription management partners
Adyen offers integrations to key subscription
Adyen is a technology company that provides busi- management systems worldwide, including Aria,
nesses with a single solution to accept payments any- Demandware, Magento, and Zuora. Businesses
where in the world. The only provider of a modern using these platforms with Adyen can benefit from
end-to-end infrastructure connecting merchants a wide range of Adyen functionality including Rev-
directly to Visa, Mastercard, and all key payment enueProtect, our built-in risk management system,
methods globally, Adyen delivers frictionless pay- and RevenueAccelerate, a suite of data-driven opti-
ments across online, mobile, and in-store. Headquar- mization tools including Dynamic Card Validation,
tered in Amsterdam and San Francisco, with offices Account Updater, and Auto Retries.
across North America, South America, Europe,
Asia and Australia, Adyen serves more than 4,500
businesses, including 7 of the 10 largest U.S. Inter-
net companies. Customers include Facebook, Uber,
Airbnb, Netflix, Spotify, Dropbox, Evernote, Book-, Yelp, Vodafone, Superdry, Mango, Crocs,
O’Neill, SoundCloud, KLM and JustFab.

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