Toward a better subscription-based business model.

One of the most significant privileges of modern life is our freedom of choice. And although this freedom is, in most cases, limited by the norms and rules of our society, which is quite natural, thanks to this opportunity people are making discoveries, creating inventions and achieving goals.

If the thesis of freedom or the right of choice is applied to the topic of this article, it can be noted that in modern markets there are two sides with different goals: sellers and buyers. The goal of the one side is to limit “freedoms” for buyers, and the other side is interested in complete freedom, close to anarchy.

This is especially noticeable in the market for services and sales of goods by subscription. Perhaps this caught my attention because my company provides services for monitoring and managing monthly expenses, and I can argue that the business subscription model is becoming the primary business model for sales and consumption.

But the irony is that both sides — sellers and buyers — are in two roles and on both sides simultaneously. What is even more interesting is that despite the novelty and innovative nature of the business model of sale and consumption by subscription, as it is being used today the subscription model in many cases hinders the development of business and limits opportunities for the buyer.

Let’s first see how it works today. All examples apply only to the U.S. market. OK, let’s start with some examples. If you bought a car and got a contract for a half-year or one-year car maintenance service, cancelling this service can be difficult. In most cases, the company that is responsible for payments under your contract is located in another state. Almost always you need to send a letter with a request to cancel your subscription to the service by regular mail and wait for the answer. It is good if this response will be positive.

Here’s one more example. Anyone who has migrated from one mobile carrier to another and wanted to keep his old phone number was probably faced with various inconveniences. For example, you may be asked for a SIM card ID, which you can find out only from your service provider, but there are always thousands of reasons that you do not receive it. Or, suddenly, there can be a problem with your account, and you will be notified about your case later. That is, they go to great lengths to prevent you from going to a competitor.

From banking services to the delivery of beauty products, there is almost always something that creates inconvenience when you want to cancel a paid subscription. Sometimes it’s just hard to find a link that will let you unsubscribe or delete your account. But let’s not be hypocrites; we must recognize that when we are sellers, our goal is to sell and retain by any means. And when we are buyers, we want to buy cheaper, which is quite reasonable, and of course be free from any obligations. OK, so what’s wrong with this, if it’s all such a natural relationship?

First of all, this policy builds a wall between the seller and the buyer. If you are a sales representative, you know how difficult it is to sell a service today, for which the customer must pay monthly. The decision barrier to buying today is very high. That is, people are naturally afraid of long-term relationships because then it is difficult to disengage from that relationship.

On the one hand, this forces the company to offer better services, but on the other hand, the wall of mistrust that has been built is so high that such a situation slows consumption and consequently reduces the possible profit for sellers. In the future, this is a lose-lose strategy. Can we exchange it for the famous win-win formula? I think that we can, and here are a few thoughts on this matter.

In the early ’90s, when the Internet was gaining popularity, I created a company to provide Internet access via wireless communication channels. At that time, Internet providers did not connect to each other by direct channels; that is, they were not connected in any way. If you would like to use file storage from Service Provider A, and you were a client of Provider B, even if they were located in one country or even the same city, then your requests would get to the Provider A through the global network, but not directly.

And when there was a question about connecting Internet providers directly with each other or through local traffic exchange centers, many were against it. It was believed that making it easier for customers of your competitors to access your content or resource was like selling a competitor’s products in your store. But it turned out that the truth was quite the opposite. Without direct channels, it would be impossible to provide many services and thus earn money. Similarly, buyers would be deprived of the many solutions that they need and for which they are willing to pay.

Another fear of providers was that their users would leave for another provider if they saw that there were more services offered in their network or that they were just different and better. But this is the whole point! Thanks to direct channels, we got a disruptive development of the Internet and various services, applications, and solutions. This opened up many opportunities in all spheres of human life. And so, what does the subscription business model mean for our discussion topic?

I am deeply convinced that by providing users with transparent and straightforward tools for canceling subscriptions, migrating from one seller or service provider to another, or changing tariff plans and payment methods in a simple and convenient way, ultimately we will get an increase in the number of transactions from both sides. We must remove the barrier that stands in the way of making a purchasing decision because people are afraid to be deceived to sign a contract with unexpected obligations and, in the end, no one wants to lose money.

A win-win strategy means transparent and open business models. We must stop the practice of double standards and hypocrisy. Remember that each of us is both a seller and a buyer. In the end, we deceive ourselves by reducing the possible profits of our companies and taking money away from ourselves as consumers. It’s a paradox, is it not? But this is the result of our efforts, and we have the power to change it.

With certainty, I affirm that the abolition of restrictions, transparent and open processes, simple tools for canceling paid subscriptions, free migration between service providers in one click, and the democratization of payments in the subscription-based business model will lead to increased trust and, as a result, will increase sales and customer loyalty.

by Vitalii Soldatenko, the co-founder of payments startup Melt, a member of INV Fintech Global. He is a seasoned Fintech entrepreneur, senior-level professional experienced as founder, CEO and advisor to private companies for 25 years.

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