On the face of it, subscription services are booming — with consumers making regular, recurring payments for a wide variety of services and products. However, as results and news stories indicate, there are real opportunities for operators to better serve customers and optimise business performance by adopting new solutions.
For businesses, subscription services are a source of regular income — a model that helps in predicting cashflow through to valuations. From its humble origins in milk deliveries, Sky’s inception of the Premier League in 1992 literally changed the game for the subscription market. An unprecedented innovation, it created increased excitement around a football experience that could only be accessed via a subscription TV package.
Prior to and especially during the pandemic, subscription services evolved to entertain at home, delight on the doorstep, empower us at work, and even help us find love with a simple swipe. Brands like Microsoft, Amazon Prime, Spotify and Netflix have disrupted the traditional way of doing business with digital services available via subscription. Niche operators, meanwhile, have harnessed the potential of ecommerce to grow sprawling customer bases for everything from seasonal veg boxes to monthly drops of random magazines.
Changing consumer behaviour during the COVID-19 crisis has further boosted and diversified the subscription services market as the population sought ways to escape and educate. Entertainment services, fandom, news or retail grew customers: YouGov shows 37% of British adults signed up to at least one new subscription service during the first lockdown in 2020; and the subscription box sector is due to reach £1bn in 2022, a 77% rise in five years.
But rapid growth does come with some bumps in the road: Netflix reported a dramatic slowdown in subscribers the first three months of 2021, ending a record run in growth during the coronavirus pandemic. Reduced demand could stem from consumers feeling they no longer need a service as lockdown restrictions ease, or increased competition between providers encouraging a switch. When a slowdown happens, improving operational performance and differentiation is critical.
Entertainment subscription services are creating new benchmarks for content curation, personalisation and convenience. In the Media Nations 2020: UK, the regulator report, Ofcom found the pandemic had accelerated views of online videos. For instance, Disney+ passed the 100 million subscribers mark within 16 months. However, security checks around these services are arguably playing catch up — to the detriment of users and business performance.
For example, research firm Magid found nearly half of customers streaming video on demand share their login credentials for at least one of their subscriptions. This means businesses are missing out on new subscribers and potentially £millions in revenue. Of greater concern, consumers are unknowingly putting themselves at risk by sharing personal data, such as passwords, which increases their vulnerability to identity theft and account takeover fraud (ATO). Adam Hancox, Director of Ecommerce, TransUnion in the UK notes: "Retailers have consistently told us high-profile data breaches lead to an influx of attempted account takeovers as fraudsters try to use stolen credentials across multiple websites".
“We’ve seen consumers and digital platforms targeted by fraudsters during the pandemic. Whilst streaming services may accept that logins are shared, they should be wary this could be contributing to fraudulent activities that are costing consumers billions.” - Adam Hancox, Director of Ecommerce, TransUnion in the UK
By carrying an ATO, a fraudster will access an online customer profile to make purchases, alter personal details or leverage loyalty schemes. They’ll also exploit links between online accounts and a consumer’s wider digital profile. Consumers who log in to retail services through social media or reuse passwords for multiple profiles are susceptible to these attacks. ATOs are expensive for businesses, chipping away at the bottom line through card chargebacks, or reducing the lifetime value of a customer through a loss of trust.
Service providers should reevaluate their approach to password sharing — to strengthen revenue and counter fraud threats — by testing device-based authentication solutions using geo-tagging technology alongside device characteristics to verify users. Comprehensive verification and authentication solutions provide greater accuracy in proving consumers are who they say they are — without impacting the customer experience (CX).
According to McKinsey, companies in the ecommerce subscription space must develop great end-to-end CX experiences (as opposed to just great subscription offers) to avoid high churn rates and accelerate growth and profitability. This observation arguably applies to all subscription services.
Delivering a smooth, friction-right sign-up and customer management experience requires solutions that seamlessly verify identities whilst mitigating risk. When the process is optimised, fraud can be better spotted and sign-up dropouts minimised.
Whilst many subscription services charge minimal monthly fees, over the course of the customer lifecycle they can add up significantly. As well, these amounts may have a financial and emotional cost on an unknowing consumer. As such, and with many paying by monthly direct debit, it’s important fraudulent payments are detected.
Businesses should have confidence in the validity of bank details provided — ensuring they’re associated with the names on file to build trust and support compliance efforts. Using extensive datasets in real time is a non-intrusive way of making sure the subscription model is working for businesses and consumers alike.
The pandemic has got consumers accustomed to having fresh content on demand and food packages (amongst others) arriving on our doorsteps. With growth expected past 2022, convenience and personalisation will be key to driving incremental gains in a competitive market. An edge can be gained by:
With the subscription market continuing to expand, now could be a good time to capitalise and focus on driving growth. That entails strengthening your CX with market-leading data and analytics solutions that better detect and prevent fraud, streamline identity verification to optimise conversion rates, and offer new opportunities for personalization. Contact us to learn how our deep expertise in ecommerce, fraud and CX can help your service stand out in this highly competitive market.