Stripe report: booming subscription economy faces key challenges

A recent report released by Stripe, a financial infrastructure platform for businesses, has highlighted notable trends and challenges within the subscription economy. The report, developed from a survey of over 2,000 decision-makers in subscription businesses across nine countries, reveals significant insights into these businesses' current state and future aspirations.

The subscription economy continues to experience robust growth, with nearly half (46%) of the surveyed Australian businesses planning to invest in global expansion over the next twelve months. This international reach is seen as a critical component for accessing new customer bases. However, the survey also indicates that a significant proportion of business leaders (73%) harbour doubts about their existing billing systems' capability to support such international growth effectively. This concern prompts many to consider reassessing their billing software to ensure global scalability.

Another focal point for these businesses is the flexibility in subscription plans. According to the report, 78% of local subscription businesses plan to experiment with more adaptable subscription models, such as usage-based billing. Despite this intention, existing billing systems often lack the flexibility required to support these innovative pricing strategies, creating an additional hurdle for businesses aiming to adapt quickly to market demands.

Involuntary churn remains a pressing issue for the subscription industry. Involuntary churn occurs when subscriptions are terminated involuntarily due to issues like expired credit cards. The report notes that 47% of Australian businesses have observed an increase in involuntary churn over the past year. Compounding this issue, 42% of businesses lack comprehensive data to quantify the revenue impact from churn or payment failures. This data gap makes it challenging for businesses to develop effective strategies to combat revenue loss associated with involuntary churn.

"Reducing customer churn should be on every business leader's agenda: it's cheaper than acquiring new customers and an effective way to maximise revenue and increase customer lifetime value," remarked Karl Durrance, managing director for ANZ at Stripe. He added, "We hope businesses find this report and Stripe's revenue recovery features a useful foundation."

Launched in 2018, Stripe Billing is designed to help businesses of all sizes accelerate revenue growth, reduce churn, and facilitate global expansion. It assists over 300,000 companies by making it straightforward to set up billing plans, customise pricing logic, calculate amounts owed, preview upcoming invoices, apply discounts, send payment reminders, and track payments. The software supports a variety of pricing models, including one-off transactions, sales-based contracts, tiered pricing, and usage-based pricing.

Several prominent startups and large companies worldwide, including Atlassian and OpenAI, utilise Stripe Billing to manage their billing relationships. The market has recognised the product's efficacy, with Stripe recently being categorised as a leader in Gartner's Magic Quadrant for Recurring Billing Applications.

The findings from Stripe's new Billing report underline the importance of robust and flexible billing systems in the subscription economy. As businesses pursue global expansion and implement more dynamic subscription plans, adapting to evolving market needs remains crucial for sustained growth.