While subscription services have been a common trend with SaaS and eCommerce businesses, recent years have seen a wide adoption of recurring revenue streams by diverse industries. Innovative companies are disrupting the digital landscape, gaining competitive advantage and reaching wider audiences with the help of new business models, built on recurring revenues.
The dynamic business environment and evolving consumer demands in the face of this pandemic, have accelerated the pace with which organizations are embracing digital transformation and moving further in that journey. However, when new revenue models take shape, they bring along a barrage of challenges for the organization, such as, increased operational complexity and the need to re-structure business processes. It’s the billing systems that are often most affected by an increase in these complexities and thus, streamlining the order-to-cash process is becoming critical for organizations.
In this blog, we highlight some top trends in billing and payments that have been and will continue to impact business landscapes significantly.
1. Rapid Adoption of Recurring Revenue Models
Recent reports have predicted that 53% of all software revenue will be generated from subscription models by 2022. It is no surprise that consumer preferences for cloud services is shaping the software industry. The recurring business models not only help organizations predict revenue streams but also help reduce customer acquisition cost by optimizing the ROI and ensuring higher customer retention. Businesses are able to scale quickly and suitably in response to the hyper-dynamic and changing market conditions. Thus, making this model the go-to-business-model for XaaS (Anything-as-a-Service) companies.
2. 71% growth in Car Subscription Market by 2022
According to PYMNTS.com, luxury car market is gearing up for subscription offerings to their customers including delivery and pick-up on demand, using smart devices. These services are a turning point for the automobile market and a key step for automakers to attract younger customers.
3. Building Real-Time Billing and Payment Capabilities
Financial services are building real-time billing and payment capabilities at an accelerated rate to deliver speed and convenience. These payment systems not only provide faster service but also help generate precise customer profiles to prevent frauds. Businesses are gaining momentum to become compliant with all modern billing methods to provide a seamless customer experience. Real-time billing capabilities can help companies explore new revenue creation possibilities too. With recurring or usage-based pricing models, the real-time billing systems can allow customers to assess their cost per usage, empowering them to be in control. Moreover, a cloud-based solution can also facilitate an error-free management of huge usage-data in real-time and help automate the billing process. This real-time data can also help eliminate revenue leakage and facilitate a deeper visibility into the system. Thereby, significantly impacting customer satisfaction and the bottom-line. Technology and finance leaders agree that in coming years, companies that invest in real-time billing systems will gain competitive advantage and a wider market share.
4. Accelerated Rate of Cloud Migration
To respond to the dynamic and changing business landscape in the face of the Covid-19 crisis, organizations are embracing digital transformation and cloud migration at a far accelerated pace than predicted. Data security, privacy concerns, compliance mandates, need for agility, etc. are some of the key reasons driving this digital revolution forward. In addition to cost and time savings, the cloud enables a faster and more efficient go-to-market approach. A recent research reports that over 65% of new product initiatives face delay or narrowed scope due to outdated and inflexible legacy systems. Cloud-based billing not only helps companies save time and cost, significantly but also helps leverage economies of scale.
5. Mismanaged Recurring Models Face Accounting and Reporting Challenges
According to a CFO.com report, 48% of businesses with a recurring revenue model struggle to meet accounting and reporting challenges. Subscription revenue, if not properly managed can face audits and compliance issues around revenue recognition. With regulatory standards getting tougher, a well-managed, modern billing system is a pre-requisite for businesses wanting to run a successful recurring revenue business.
6. Agile Monetization Platforms are Becoming Investment Priorities
According to a report by The Paypers, the average subscription billing vendor is growing 30% – 50% annually, an indicator of underlying demand. The rise of the subscription business model has led to a corresponding increase in the necessity for subscription billing management platforms. The subscription and billing management market was valued at $3.8 billion in 2018 and is expected to reach $10.5 billion by 2025.
7. Adoption of Intelligent Technologies Continues at a Fast Pace
IDC predicts that 70% of new enterprise applications will be developed as cloud-native with investment focus on intelligent technologies, such as, cognitive and artificial intelligence systems. Technology reports have forecasted that spends on intelligent technologies will reach US $57.6 billion by 2021.
8. Boom in eCommerce Retail to Fuel Subscription Market
The increasing adoption of subscription and billing management solutions in the retail sector are likely to fuel the subscription and billing management market growth in the future. The demand for these solutions will continue to rise due to the massive e-commerce sales. With increasing online retailing, the need for adopting modern billing solutions to automate bills is on the rise. According to a report, the global subscription and billing management market was valued at US $3.8 billion in 2018 and is expected to reach US $10.5 billion by 2025.
In sum, the adoption of new business models and revenue streams is possible when the underlying monetization capabilities of the enterprise are brought into the cloud-first agile era. Not only does it require across-the-board investments, but also sustained organizational commitment to embark on a transformational journey.
As companies expand their reliance on these agile business models, they need to modernize their order-to-cash process that can empower the enterprise with a scalable and predictable revenue engine for improved financial management and sustained profits. Though digitization has driven the transaction costs down significantly, many businesses still operate in silos, creating accounting discrepancies that need to be aligned. Typically, organizations embarking on their digital transformation journey transition to a recurring revenue model. However, they are still reliant on their existing customer relationship management and ERP systems. Since most ERP systems are designed for transactional business, it can be difficult for them to handle sales spanning across multiple periods, currency or usages. To address these issues RecVue’s founders built the only enterprise monetization platform powered by big data and Oracle’s cloud infrastructure that helps enterprises adopt and manage innovative business models to drive recurring revenue growth. Our customers are mastering hybrid subscription and high-volume usage-based models with sophisticated pricing and rating scenarios, while gaining operational efficiencies, expanding their business footprint, and exceeding customer expectations. RecVue’s unified platform integrates with any ERP, CRM and front-end order processing systems, enabling customers to improve efficiencies across order-to-cash, revenue and general accounting, while gaining real-time access to data. RecVue’s monetization platform includes a 360-degree view into the entire contract lifecycle, rules-based attribute pricing, complete order-to-invoice capabilities, pay-side management for third party obligations, and robust analytics and reporting.
Contact us today to learn how RecVue’s order-to-cash platform can meet your company’s revenue and monetization needs and make your business cloud-economy ready.