Forrester Consulting recently shared a detailed research report focusing on recurring payment friction in the US markets.
Forrester revealed that it has surveyed 297 US payment “decision makers” in mixed B2B and B2C firms and B2B-only firms in order to gain a better understanding of the current state of recurring payments in the United States.
According to the report, the US payment landscape has been evolving, but key operational challenges “hinder progress.”
In a world of rapid tech advancements, businesses are constantly evolving to serve their customers. Recurring revenue models, like subscriptions or consumption-based models have “become key to this evolution.”
The survey has reportedly found that the B2B recurring payment landscape is becoming increasingly complex, which is said to be “resulting in lost customers, payment failures, high costs, and lower revenue impacting the wider business.”
Key findings from the US, as noted in the new report, focused on the average failure rate for US businesses; the expected churn rates and bad debt resulting from failed payments; the total cost of collecting payments.
In addition, the report highlighted the number of full-time employees needed to manage payment operations.
Here are some key points:
- Digital payment methods lead in the United States, with the use of checks decreasing. As stated in the report, the COVID-19 pandemic has amplified the urgency to modernize payments. Most (70%) B2B decision-makers are embracing bank debit (an automated, pull-based bank-to-bank transfer, known as ACH debit in the US) more than check payment, which stands at approximately 64%. With rapid technology advancements in digital payments, checks are now said to be
becoming burdensome for US base firms to use, especially as more efficient payment models exist. - Despite ongoing investment, there are certain operational challenges that do remain. For instance, slow payment intake does tend to considerably burdens US -based firms; more than half of payment decisionmakers report that time to receive payments has increased in the last 12 months. Almost 80% of respondents say it takes them more than 20 days to receive payment. Additionally, manual processes hinder productivity and increase administration costs.
- Payment failure reportedly decreases profitability for many companies. Over half of US payment decision-makers say that 7% or more of their payments have failed in the last 12 months. This results in: 1) high costs of recovery (16% to 20% of the average payment size); 2) bad debt (20% or more of failed payments for over a third of US B2B business leaders); 3) customer churn (11% or more of failed payments for two out three decision-makers); and 4) lower profitability (40% reduction),
- US payment leaders understand the role recurring payment solutions play in advancing their payment strategies. Almost 70% plan to change their business model for selling their products or services. As a result, US business decision-makers respond to their customers’ demands by looking to adopt recurring payment solutions. Leaders also realize that recurring payment solutions provide key benefits, such as increased payment acceptance; facilitation of international expansion; and improved operations, cost, and cash flow.