SUBSCRIPTION AND RECURRING PAYMENT MARKET ANALYSIS

Global subscription and recurring payment market is expected to reach US$ 225.41 Bn by 2030, from US$ 137.96 Bn in 2023, exhibiting a CAGR of 7.2% during the forecast period. Subscription and recurring payments refer to automated billing cycles where payments for products or services are deducted directly by a merchant on a preset scheduled basis. It provides predictable recurring revenue streams for merchants. Global subscription and recurring payment market is segmented by type, component and end-user. By component, the market is segmented into services and payment platform. Payment platform remain the most widely used payment method, owing to the high adoption of debit and credit cards globally.

Global Subscription and Recurring Payment Market- Regional Insights

- North America is expected to be the largest market for subscription and recurring payment during the forecast period, and accounted for over 40% of the market share in 2022. The growth of the market in North America is attributed to the high penetration of digital payments and subscription models.

- Europe is expected to be the second-largest market for subscription and recurring payment, and accounted for over 25% of the market share in 2022. The growth of the market in Europe is attributed to rising e-commerce sales and adoption of recurring payments among SMEs.

Asia Pacific market is expected to be the fastest-growing market for subscription and recurring payment, with a CAGR of over 20% during the forecast period. The growth of the market in Asia Pacific is attributed to increasing smartphone penetration and digital payment adoption.

Figure 1. Global Subscription and Recurring Payment Market Share (%), By Region, 2022

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Analyst View-

The global subscription and recurring payment market is expected see strong growth over the next five years. Driven by the shift of businesses towards recurring revenue models along with increased adoption of digitization. The shift towards subscription and recurring billing will be further accelerated as consumers prefer the convenience of automated payments for digital content across streaming services, software-as-a-service, online newspapers/magazines and other subscription services. North America currently dominates the market however Asia Pacific is projected to be the fastest growing region supported by expanding middle class and rising internet and smartphone penetration in countries like India and China.

Overall, the ubiquity of digital platforms and devices along with enriching subscription content continues to drive recurring payment adoption. Market players should focus on enhancing security, consolidation and standardization to further expand recurring billing acceptance and lower transactional friction for greater consumer convenience over the long term.

Global Subscription and Recurring Payment Market- Drivers

- Scalable pricing and promotions- The subscription and recurring payment model is gaining significant traction in today's digital economy, and is driven primarily by scalable pricing and targeted marketing promotions adopted by businesses. By offering flexible price points and payment packages catered for different consumer needs and budgets, companies are able to acquire more customers and build strong engagement over the long run. Such as, many online streaming platforms now provide very affordable monthly plans for single users alongside higher-priced family bundles, annual subscriptions with discounts, and bundled services. Such differentiated pricing, combined with attractive introductory offers, helps to drive traffic and increase the average amount of revenue per user over time. For instance, in November 2021, Netflix subscription video on-demand over-the-top streaming service had over 200 million paid subscription worldwide, demonstrating the power of scalable pricing and promotions in driving growth in the subscription and recurring payment market.

- Flexible payment options - Flexible payment options have allowed businesses to provide more choices to customers, fueling the expansion of the subscription and recurring payment market. By offering options like pay-as-you-go plans, monthly subscriptions, and others, companies are making their services more accessible to price-sensitive customers. This increase in affordability and convenience brings in more subscribers, driving higher revenues through longer customer retention and repeat purchases. For instance, Amazon Prime subscription video on-demand over-the-top streaming and rental service offers monthly and annual subscription options, providing customers the flexibility to choose based on their usage and budget. It also offer a discounted rate for students, catering to a specific demographic with different financial constraints. These instances clearly show how flexible payment options are significant driving factors in the subscription and recurring payment market.

Global Subscription and Recurring Payment Market- Opportunities

- B2B digital transformation - B2B digital transformation is poised to witness significant growth in the subscription and recurring payment market over the coming years. As business models continue shifting to deliver as a service offerings like SaaS, database services and more, the need for recurring billing and payments increases. This presents a huge opportunity for payment providers to partner with businesses and offer digital-first subscription management solutions. According to the data from the UN Conference on Trade and Development, global digital commerce reached US$ 26.7 trillion in 2020, and is forecast to grow at 15% annually through 2025. As more business transactions and customer interactions move online across industries, establishing recurring digital payment connections will be paramount for continuous service delivery and revenue streams. This growing digitalization of B2B commerce and services sets the stage for payment providers to develop capabilities around automated contract management, subscription billing administration and streamlined payment collection in order to meet demanding client needs.

- Emerging markets expansion- Emerging markets provide immense scope for expansion in the subscription and recurring payment industry. With rising internet penetration and adoption of digital payments in developing economies, more people now have access to subscription services. This untapped customer base can be a driver of future growth. Some factors that make emerging markets attractive include growing middle class populations with rising disposable incomes. For instance, according to World Data Lab, household spending in Indonesia is forecast to reach US$ 3.2 trillion by 2030, indicating higher affordability for paid subscriptions.

Global Subscription and Recurring Payment Market- Trends

- Integration of Recurring Payments with ERP Systems - The integration of recurring payments with Enterprise Resource Planning (ERP) systems is a growing trend in the subscription and recurring payment market. This integration allows businesses to automate their billing processes, reduce manual errors, and improve cash flow management. ERP systems are business process management tools that can be used to manage information across an organization. When integrated with recurring payment systems, they can help to streamline and automate the billing process. This can be particularly beneficial for businesses with a large number of subscribers or those that offer a variety of subscription options. For instance, DCKAP Inc., a digital commerce solution provider, offer ERP system that help to integrate recurring payments with ERP Systems.

- Adjacent products and services upselling - Adjacent upselling through subscriptions has strong potential in many industries. For subscription services like video or music streaming, upselling additional related content or experiences can boost lifetime customer value. For example, a streaming service could offer live concerts, behind-the-scenes documentaries, or exclusive merchandise to their subscribers. Bundling multiple services together into one subscription package makes it easier for customers while generating more recurring revenue per customer. International development data underscores substantial opportunity in this area. According to UN projections, over half the world's population will live in urban environments by 2050, with mass migration to cities ongoing across Africa, Asia and Latin America. As populations concentrate in large metropolitan areas, on-demand and subscription-based services are filling critical needs around transport, housing, healthcare and education. Integrating related products and services via a unified subscription model provides immense convenience value for these new urban residents. It also drives higher retention and lifetime spend for the businesses involved.

Global Subscription and Recurring Payment Market- Restraints

- Subscription fatigue - Subscription fatigue presents a huge opportunity for players in the subscription and recurring payments market. As consumers are increasingly getting tired of paying numerous monthly subscriptions for various services like entertainment, fitness, grocery, and others, they are looking for more consolidated and bundled offerings. This fatigue stems from the fact that the average household now pays for over 11 subscriptions, up from 4 subscriptions 5 years ago. Brands can bundle and bundle similar subscriptions under one cost to provide better value. This solves the problem of subscription fatigue for customers while also allowing brands to upsell and cross-sell more offerings under one package. Many media companies are already experimenting with offering bundled streaming subscriptions. In addition, fitness brands are grouping together their at home workout apps, in studio classes and nutrition programs. We're going to see a growing number of super bundled packages combining multiple recurring payments into one.

- Pricing transparency - Pricing transparency has significantly restrained the growth potential of the subscription and recurring payment market in recent times. With consumers demanding more visibility into recurring charges and fees, companies offering subscription services are finding it challenging to frequently tweak and adjust prices without facing backlash. This lack of flexibility in pricing is coming in the way of organizations testing different pricing tiers and monetization strategies through A/B testing. With prices and charges upfront for extended periods, it also leaves little room for occasional market-linked price corrections. Pricing transparency also restricts companies' ability to subsidize new consumer acquisition through occasional promotional recurring pricing. With companies unable to normalize prices post-promotion without appearing opaque, the subscriber base built through such introductory offers proves difficult to retain profitably over the long term. For instance, according to the 2021 study by U.S. PIRG, a non-profit federation of state PIRGs, streaming services doubled or tripled promotional monthly prices post the initial subscription period without adequate notice to consumers. This led to high consumer churn rates, defeating the purpose of such promotions.

Global Subscription and Recurring Payment Market- Recent Developments

New Product Launches

• On June 29, 2023, Mastercard Payment Processing Corporation has teamed with Subaio to provide a straightforward and safe method for customers to discover and unsubscribe from recurring payments using reputable bank apps and internet services.
• In October 2020, Lightspeed financial software company launched a new subscription-based offering that allows retailers using Lightspeed Payments in North America to collect recurring revenue through their point-of-sale system.
• In July 2022, Brite Payments a payments platform launched a new recurring payments service designed to improve how consumers pay subscription-based online businesses.

Acquisition and Partnerships

• In January 2022, Mollie, a payment service provider, has joined forces with Chargebee, a subscription management platform, in order to drive growth for its customers.
• In May 2022, Chargebee revenue management platform partnered with Metomic, a company that  provides deeper payment insights to merchants by combining subscription analytics from Chargebee with Metomic's financial data intelligence
• On August 29, 2023, Trustly  fintech company acquired SlimPay to build pan-european recurring payments service. This acquistion will facilitate error-free payment registration, improve conversion rates and offer greater flexibility for consumers.

Figure 2. Global Subscription and Recurring Payment Market Share (%), By Component, 2022

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Top companies in Global Subscription and Recurring Payment Market

• PayPal
• Stripe
• Square
• Recurly
• Chargify
• Zuora
• FattMerchant
• Payment Depot
• PaymentEvolution
• FastSpring
• Chargebee
• Spreedly
• ChargeOver
• Chargent
• Vindicia
• Razorpay
• Cashfree
• CCAvenue
• BillDesk

Definition: Global subscription and recurring payment market refers to the solutions, services, and technologies that enable merchants and businesses to accept automated recurring payments from customers for continued access to products or services. It includes online payment gateways, billing and invoicing software, subscription management platforms, payment analytics tools, and other systems that facilitate recurring billing and payments on a scheduled basis.