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Recurring payments: the crucial role of fintech in evolving the user experience

Recurring payments: the crucial role of fintech in evolving the user experience

Recurring payments, that is, those automated and regular transactions in which users exchange goods or services according to a predetermined schedule, have experienced an unprecedented boom in recent years. This growth was largely driven by the development of subscription-based business models, as well as the growing preference for convenient and seamless payment methods.

Today, consumers make various types of recurring payments on a weekly, monthly, annual or other basis. According to a recent study carried out by the European Central Bank (ECB) called “Study on the payment attitudes of consumers in the euro area”, which investigates payment methods and habits by gathering information from the countries of the In the European Union, recurring payments were most frequently used for phone and internet bills (78%), followed by utility bills (70%) and insurance (51%). Additionally, around 20% of consumers repaid consumer loans and 14% purchased season tickets for public transportation.

In line with this evolution, the recurring payments market analysis report carried out by Fact.MR – a global market researcher – reveals that the global value of these payments reached $130.2 billion in 2022. In this sense, it is projected further growth of 6.9% over the period 2023-2033, taking the market to an estimated valuation of $268.7 billion by the end of the period. In turn, fixed recurring payments, those that remain constant on a predefined schedule, are expected to experience especially rapid growth, with a CAGR of 4.9% between 2023 and 2033.

The challenge of recurring payments in fintech

In the fintech ecosystem, recurrence is more than just a strategy, it is the backbone that sustains long-term success and viability. In a highly competitive scenario, the challenge lies in how to get users to consistently adopt and use the financial products offered by fintech companies.

This is where behavioral psychology comes into play, which can be analyzed through behavioral cycles. Every action we take is preceded by a stimulus or “trigger”, which arises from a need. This trigger in turn prompts us to perform a specific action and, as a result, we obtain a reward. Habits are formed from these cycles of behavior, which are guided precisely by these triggers, actions and rewards. In the context of fintech, these cycles are essential to encourage recurrence in the use of financial products.

Reward quality plays a crucial role in habit formation. When the reward is genuine and rewarding, users are more inclined to repeat the cycle in response to future triggers. In this regard, a study last year carried out by the consulting firm McKinsey & Company found that users are willing to pay more for a product or service if it offers them a good reward. The study also found that users are more likely to subscribe to a recurring payment service if the reward is attractive. Another study, conducted by the market research company Forrester Research, determined that 50% of users cancel their subscriptions to recurring payment services if they are not satisfied with the reward.

In the world of recurring payments, usability emerges as a primary reward. A frictionless and efficient checkout experience translates into higher user retention. eMarketer notes that 65% of online consumers consider ease of use to be a crucial factor when deciding whether they will continue purchasing from a website. In turn, according to Forrester, 70% of users abandon the payment process for an online product or service if it is not easy to use. Along the same lines, the study “How to stimulate the consumer’s mind” from Harvard University reveals that consumers who experience a more fluid and problem-free interaction with an online platform are more likely to feel satisfied and loyal to that brand. . This is especially relevant in the context of recurring payments, where each transaction is an opportunity to improve or weaken the relationship with the customer.

With this in mind, retaining those who make manual payments becomes a priority, and fintechs can use channels such as email, push notifications and messaging apps to guide users towards specific actions.

To realize these strategies, Tapi took into account studies that demonstrate how generating triggers through notifications and reminders, along with a payment journey focused on usability, can achieve exceptional retention rates. A focus on due dates and reminders has proven to be a determining factor in forming sustainable financial habits. In previous experiences we carried out, the introduction of an expiration schedule led, for example, to a retention of 75% of paying users of services during the month after the first payment, and a prolonged retention of 90% in the subsequent months.

The recurrence of payments is therefore a central piece in the evolution of fintech and banks. With a solid understanding of these principles, any company will be able to not only generate a better experience on its platforms, but also sustainable and valuable financial relationships with its customers. Without a doubt, a valuable purpose for such a relevant industry.

CBO and Co-Founder at tapi

Source: Ambito

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