What Subscription Businesses Are Driving Recurring Payments in 2023?

April 2023

Fintech & Payments

Nick Maynard

VP of Fintech Market Research

There are many forms of recurring payments, ranging from everything from utility bills and phone contracts to SVOD services.
 
However, following the rise of the subscription economy, the majority of recurring payments fall within this segment of the market. Subscription services have grown significantly in the past few years, with many businesses now running a subscription-based business model due to its many financial benefits.
 
In this blog, based upon our latest recurring payments research, we outline the core subscription-based businesses driving the recurring payments market:

Digital Music

Some of the key players operating in the digital music market include Spotify, Amazon Music, Deezer, Apple Music and Tidal.
 
Although these streaming services have been around for some time, their business models have since been revolutionised to change the way consumers discover and listen to their music. They are no longer operating through a pay-by-song model; instead, they are almost exclusively operating using subscription-based business models.
 
These subscription models often include a tier-based system whereby consumers have access to more content. Having a higher-tiered subscription often implies a higher monthly fee, but results in better audio quality or access to a larger catalogue of songs.

Digital Spoken Word

One of the most prominent avenues of digital spoken word markets is podcasting. Like digital music subscriptions, podcasts also operate on a freemium basis, with subscribers having the ability to access additional features, exclusive content, and ad free episodes by paying a fee.
 
While subscribers have access to a wide variety of podcast genres to suit all personalities, although uncommon, there is an element of curation, with Castbox being the only podcast provider to offer specific in-app curation tools as part of its subscription, even without owning all the content it promotes.

Digital Video

Since the start of the pandemic, consumers who subscribe to paid streaming video services now hold an average of five subscriptions, as opposed to only three subscriptions prior to the advent of COVID-19. 
 
One of the most popular streaming services is Netflix. However, if a user is subscribed to Netflix then they are only seeing some of the available entertainment in their region right now. Therefore, it may be that the consumer feels the need to have multiple subscriptions in order to have access to everything that they believe is worth watching. This is where the consumer may feel the need to subscribe to further services, such as Amazon Prime Video, Now and Disney+.

Fitness & Wellbeing

The fitness and wellness space has been providing software-only subscriptions for some time.
 
Like other services previously spoken about, these fitness and wellness services offer freemium models, whereby consumer will pay a subscription fee which will then give them access to additional features.
 
For example, there are many calorie-counting apps which offer a freemium package that may only include a small variety of products in their catalogue that can be scanned and tracked. Consumers will have to pay a premium subscription fee to have access to other features, such as tracking their water intake, exercise, and weight.

MaaS (Mobility-as-a-Service)

Although still in its earliest stages, MaaS is one of the most progressive types of services and subscriptions.
 
At present, commuters frequently purchase season tickets for buses or trains, and these can be offered in bundled prices. However, these season tickets are line specific and do not integrate different modes of transport. MaaS allows for multimodal subscription packages that often start with public transport and can develop to include methods such as taxi rides and car hire.

Multiservice Subscription

The multiservice subscription comprises multiple services combined into a single subscription, whereby the profit made in one service can cover the potential losses associated to another.
 
An example of having a multiservice is Amazon Prime. It offers Prime Video which is a video streaming service bundled in with their next-day delivery service. Consequently, the price for Prime is made higher than for just Prime Video alone because it encompasses the next-day delivery service. Moreover, because not all users utilise the multiservice nature to its fullest extent, it allows the service to become profitable.

Delivery Services

Delivery services are where vendors are paid to a provider in order to receive preferential delivery services on demand.
 
Unlike digital goods services, delivery service subscriptions are just catered to the delivery itself and not for any of the items that are being received. For example, some supermarkets offer a faster delivery slot for customers who pay a recurring fee for that service. Moreover, many online retailers such as Boohoo and ASOS offer customers free next-day delivery if they pay a monthly or annual recurring fee. 

Physical Goods

Physical goods subscriptions are arguably becoming one of the most successful subscription types, with the biggest success in this area being for general product delivery rather than in specific categories only.
 
Some of the key players in this area are Walmart and Amazon, with next-day delivery being an option for subscribers from both of these providers. The two most common forms of physical good subscriptions include physical good boxes and physical good items. Examples of the former include food boxes such as those provided by HelloFresh and Gousto, whilst examples of the latter include recurring purchases of groceries and household goods. 

Video Games

Video games, including AAA-rated games, are migrating to subscription-based monetisation models. For example, a subscription to World of Warcraft gives subscribers access to the game for a set monthly fee.
 
However, in general, individual game subscriptions have become less common, as free-to-play models and microtransactions have increased in popularity as a monetisation strategy. Yet the video games industry is moving towards more platform-based subscription services.
 
In recent years, there has been a growing trend from publishers and platform providers to move to a subscription model where players are charged a monthly fee to be able to access a catalogue of games, upcoming games, regular store discounts and beta trials, with services such as EA Play, which offers subscribers access to selected games published by Electronic Arts for the Xbox One s/x and Sony PlayStation 5 as well as PC. 

Utilities

While not considered part of the subscription economy, utility bills are an important source of recurring payments.
 
Utilities, such as electricity, gas, telephone, TV packages, etc are typically paid for using a recurring billing system. While many of these systems have been manually set up in the past, this is not necessarily true now, with increasing digital management and access to these services.
 
As such, recurring payments platforms will increasingly need to service these more traditional markets, which will not be as advanced as some of the subscription economy use cases. 

Mortgages & Rent

In a similar way to utility payments, accommodation costs are frequently made as a recurring payment.
 
Alongside other financial arrangements, such as loan or credit repayments. These are also being increasingly digitally managed, meaning that vendors need to cater to these markets.

Related Reading

 
Our complimentary whitepaper, 3 Key Trends in Recurring Payments, examines the key trends shaping the way recurring payments are processed and made.
  
“Juniper Research’s new Recurring Payments research report provides an independent analysis of the future trajectory of this dynamic market, with the subscription economy and digital transformation within traditional recurring payments driving change. It analyses how the way these subscription payments and other recurring payments are made and handled is changing, including how billing platforms are increasingly using API (Application Programming Interface)‑driven digital platforms and changing payment models. It also examines how these models will change over time; influencing the way payment processors operate.”