COVID19 and the ensuing recession is reshaping the way we think about spending habits and payments, accelerating a shift already underway to subscription models. 

This creates a new set of challenges for businesses, such as the rapid shift towards a cashless economy. 

At the peak of Australia’s first nationwide lockdown, consumers almost halved the amount of cash they were withdrawing from ATMs. As a result, one third of Australian businesses told Square they're effectively cashless, meaning 95 percent or more transactions are non-cash.

Debt is another area that is evolving fast as consumers paid down debts at a rapid pace.

The Reserve Bank of Australia figures show since March Australians have paid off $4.2 billion from loans and closed almost 400,000 credit card accounts. As an alternative, 5.4 million Australians subscribed to buy now, pay later (BNPL) services for no-interest payment instalments. 

Debt has long been a dirty word with millennials who had already shunned the idea of buying big-ticket items on credit cards with sky-high-interest rates before the pandemic arrived. But particularly now, more consumers want choices and greater control of their finances. 

Additionally, there has been a huge shift away from 'ownership', with consumers opting for usership and consumption-based buying. A basic example of this would be the transition away from owning DVDs, records and other media to subscriptions like Spotify, Apple Music, Binge and Netflix. We have also seen a spike in the adoption of subscription cars, such as CarBar, with some luxury automotive manufacturers like Lexus following the trend. 

One way to achieve this is through subscription models. 

It's a method that has been adapted to men's razors, flowers, toilet paper, home delivered food boxes, and even cars. 

In Australia, 70 per cent of the population, or 18 million people, count themselves as subscribers, spending an average of $660 per month on recurring goods and services. Naturally, 70 per cent of businesses in Australia and New Zealand plan to shift to a subscription model within the next two to three years. 

Pivoting to subscriptions is but one piece of the puzzle. To evolve alongside consumer spending habits, companies must consider how they can apply these trends to payment options. 

Meet today’s savvy shopper

Since the rise of ecommerce, consumers have been drowning in choice, enabled by accessible online market comparisons. It’s no longer enough to have the lowest price or the best product; consumers want smooth end-to-end shopping experiences at every touchpoint, ensuring everything from Google ads to the checkout is personalised, multimedia-friendly, and seamless. 

Payments, in particular, are crucial to the customer experience, as they are the last touchpoint to make or break conversion. 

In a survey of 1,200 consumers in Asia-Pacific, 51 per cent admitted to abandoning their cart because their preferred payment method was not on offer. That equates to $7 billion in annual abandoned sales. 

No two customers are the same so you need to know the payment preferences of each of your market segments. The modern consumer is brand agnostic: if you’re not offering their preferred way to pay, be it direct debit, BNPL or Bitcoin, they will find a competitor who does. 

A new phase of customer relationships

Subscription-based business models are a mutually beneficial trust agreement between a company and its customer.

To consumers, subscriptions feed a desire for usership over ownership. Research by Zuora indicates that 70 per cent of people believe subscriptions free them from the burden of ownership, with 57 per cent wanting to own less ‘stuff.’ Subscriptions also eliminate lock-in contracts, boosting affordability through regular small or micro payments. For brands, subscriptions lead to earned loyalty through consistent delivery of convenient and personalised consumption-based consumerism. 

Before committing to subscription models, however, companies must make sure their back-end payment systems are able to accept recurring payments seamlessly for both business and the customer. 

The right payment infrastructure will enable other benefits, including improved cash flow, accurate forecasting, higher rates of customer retention, subscription growth and less involuntary churn.

Forever flexible

Choosing the right payment options to boost subscription growth comes down to knowing your customers’ preferences, achieved by being aware of how consumer payment trends are evolving. 

Avoid investing too heavily in one payment option. As the payment market evolves, so should your offerings, meaning you need to stay agile and ready to facilitate emerging trends. Keep your finger on the pulse of payment behaviours and consider how they could be relevant to your target audiences. 

Adopting best-in-class fintech solution providers is often the best and most affordable way to maintain flexible payment options. Better yet, quality providers will have the capability to integrate with varied billing platforms, minimising investment while maintaining high functionality. 

Flexible payment options are not a ‘set and forget’ solution. To future-proof your business and reap the rewards of subscription models, you must be willing to adapt to the evolving needs of your audience.