As of August 2024, only 4% of mobile apps worldwide use a subscription model, yet these apps account for 45.4% of the total revenue generated by apps globally.
One of the most significant challenges for subscription businesses hoping to tap into this market is payment processing. Most app developers default to in-app payments through Apple Pay or Google Pay, but these platforms take a significant cut—up to 30% of each transaction. This not only impacts revenue but also limits control over pricing, customer relationships, and payment flexibility.
More businesses are transitioning payments to the web to boost profitability and gain greater control over their subscribers. This shift can save up to 25% in revenue compared to in-app payments. In this article, we’ll break down why this trend is gaining momentum and the various ways it can benefit your business. Ready to learn more? Let’s dive in!
Apple Pay and Google Pay take up to 30% of each transaction.
In-app payments have become a critical component for subscription-based businesses, offering convenience for users and a seamless revenue stream for companies. However, navigating the complexities of in-app payment systems presents unique challenges that can impact both user experience and business operations.
Subscription businesses often struggle with the high commission fees associated with in-app payments. While Apple Pay and Google Pay enhance the user experience with seamless and convenient transactions, these benefits come at a steep cost. Both platforms charge subscription businesses a hefty 20% to 30% fee per transaction, significantly impacting revenue. Apple and Google handle payment processing and tax compliance, but their solution comes with high costs.
In contrast, web payments provide an alternative with only a 5% fee, offering a more cost-effective option.
In-app payment systems, such as Apple Pay and Google Pay, impose significant limitations on a subscription business’ ability to manage key aspects of their payment operations. By relying on these systems, businesses sacrifice critical control over essential features like payment analytics, retry mechanisms, risk management settings, and checkout customization. In essence, in-app payment platforms take complete control of the payment ecosystem, leaving businesses with little flexibility or oversight.
Here's an example of the data provided by Apple Pay. As you can see, it lacks details such as payment retries, chargeback information, decline reasons, and transaction history.
Web payments provide an alternative with only a 5% fee.
App stores enforce strict regulations on how businesses interact with their customers. While developers are now permitted to inform subscribers about alternative payment options outside the app (via email, or website), they are still prohibited from including links or buttons that direct users to these external payment methods.
This means everything, from offering promotional discounts to sharing updates about subscription plans, needs to be handled outside of the app.
Handling refunds, chargebacks, and subscriber support becomes more complicated when using in-app payment systems. Businesses have to navigate app store policies, which often prioritize the platform's rules over the company's needs or the preferences of its customers. For subscription businesses with help centers, the situation is even more challenging as they cannot resolve refunds or complaints directly. The lack of access to payment information requires them to direct end-users back to the App Store or Google Store to resolve their issues. This lack of control leads to delays, and increased frustration for subscribers, and negatively impacts customer satisfaction.
One challenge with in-app payments is the inability to intervene during the cancellation process. Since cancellations are handled through the App Store or Play Store account portals, not within the app itself, there's no opportunity to retain customers. Unlike on the web, in-app cancellation flows lack the flexibility to present tailored offers or incentives, often resulting in higher voluntary churn.
Now that we’ve covered the challenges of in-app payments, let’s take a look at why web payments are a fantastic alternative for subscription businesses. From increased flexibility to lower fees, web payments offer several advantages that can help streamline operations and enhance the customer experience.
Subscription web payments allow businesses to maximize profits by keeping up to 25% more per transaction. Unlike traditional Apple Pay or Google Pay fees, web payments provide better margins by reducing fees, allowing more of your hard-earned revenue to stay in your hands. This means greater financial flexibility to reinvest in your business, enhance your offerings, and ultimately grow your subscriber base.
With web payments, you have the flexibility to set custom pricing that aligns with your audience's expectations, create special discounts to attract and retain customers, and adjust billing cycles to suit their preferences. These tools not only help optimize your cash flow but also enhance customer satisfaction by providing a seamless and personalized subscription experience. Additionally, by gaining access to payment analytics, you can spot churn patterns, allowing you to prevent churn before it even happens.
Unlike in-app payments, subscription web transactions allow you to take full control of your customer interactions, simplifying direct communication with subscribers, and empowering you to implement retention strategies, personalized messaging, and cross-sell relevant products or services. Plus, as opposed to in-app payments, you can provide direct support to customers regarding their subscriptions and payments, ensuring a seamless experience and boosting customer satisfaction.
Detailed information on customer transactions, Cleeng.
Thanks to web payments for subscriptions, you can provide customers with a straightforward checkout process. Web payments support local payment methods, multiple currencies, and alternative gateways, making it easier for subscribers worldwide to join and stay with your service. Additionally, web checkouts allow users to introduce discount coupons and codes, which tap into customer loyalty and trust, while also boosting retention.
A Merchant of Record (MoR) plays a crucial role in streamlining web payments by taking on essential responsibilities such as tax compliance, fraud protection, and chargeback management. By handling these complex tasks, a MoR ensures businesses can focus on growth without getting bogged down by payment-related challenges.
Additionally, a MoR makes it easier to manage recurring payments across multiple markets. This is particularly important for subscription-based businesses operating globally, as it eliminates the hassle of navigating different payment regulations and systems in various regions.
What’s more, MoR fees are significantly lower than those of Apple Pay or Google Pay, averaging around 5% compared to the steep rates of in-app payment platforms. On top of lower fees, a MoR provides full access to payment information, comprehensive statistics, and an intuitive dashboard, giving businesses great control and insights into their payment processes. From an end-user perspective, a Merchant of Record delivers a smooth and localized payment experience for customers. By reducing friction at the checkout, businesses can provide a seamless user experience, fostering customer satisfaction and loyalty.
Seamless checkout experience provided by Cleeng
Learn more about the Merchant of Record solution and learn how it simplifies subscription payments and global expansion.
You now understand that switching subscribers from in-app to web payments can significantly help you save on fees and give you more control over transactions. So now the tricky part–how to encourage subscribers to opt for web payments rather than in-app payments?
Customers–and subscribers–are always on the lookout for a bargain, and a little extra nudge can go a long way in driving subscribers to web signups instead of in-app registration. Offering incentives like discounts, extended free trials, or exclusive bonuses for web payments can create urgency and FOMO (fear of missing out), increasing the number of subscribers opting for web payments.
So what’s the best way to spread the word about these offers?
Maximize the potential of your communication channels! Begin with social media by consistently sharing updates, exclusive perks, special discounts, and offers with your followers. Enhance your strategy with targeted ads, along with eye-catching pop-ups and banners on your website. If you have a list of email addresses for subscribers who chose in-app payments, consider using email marketing to your advantage. Promote exclusive discounts or showcase special web-only deals to encourage engagement and drive conversions.
With Cleeng Core, you can create a variety of coupons and codes for users to redeem at checkout, with options to make them location-based and time-limited.
Here’s an example of a popular yoga app offering a 33% discount for subscribers who sign up via the web.
Make sure your incentives align with your business goals and audience needs. Use clear, enticing language to communicate these offers, and ensure they’re easy to redeem. Well-crafted incentives not only drive engagement but also build goodwill and long-term customer satisfaction.
Clear communication is key to helping subscribers understand the value of your offerings. Highlight the benefits they’ll receive, such as lower prices, improved customer support, or exclusive features. For example, web payments often enable better customer support because in-app purchases restrict access to important user information.
To reinforce this message, use multiple touchpoints like in-app notifications and email campaigns. In-app notifications can grab attention at the right moment while users are engaging with your platform, while email campaigns allow for more detailed explanations and personalized messaging. Together, these tools create a consistent and compelling narrative about the value you bring.
Creating a smooth and efficient web payment experience is crucial for maximizing conversions and ensuring customer satisfaction. An optimized checkout process can make all the difference. Features like one-click payments and mobile-friendly designs simplify the purchasing journey, reducing friction and encouraging users to complete their transactions quickly. By eliminating unnecessary steps, businesses can retain more customers and enhance their overall experience.
Another key aspect is supporting the most popular payment methods in each region. Customers are more likely to trust and complete payments when familiar options are available. Whether it’s credit cards, PayPal, or region-specific methods like, for example, the Swedish Autogiro, offering a variety of choices ensures a seamless and inclusive experience for a global audience.
Navigating App Store and Google Play policies is a critical step for any business directing users from apps to the web. Apple and Google both enforce strict guidelines, especially around payment processing and subscriptions. Understanding these policies is essential to avoid rejection or penalties while maintaining a compliant app experience. By aligning your app with these requirements, you can ensure smooth operations and avoid disruptions to your customer journey.
For subscription businesses aiming to grow and retain their customer base, managing revenue streams effectively is essential. Integrating web payments alongside in-app payments can be a game-changer, offering greater flexibility, efficiency, and control. However, eliminating in-app payments entirely is unlikely to be a wise move, as it risks alienating subscribers who prefer using Apple or Google Pay. The key to success lies in offering a diverse range of payment options, ensuring you meet the varied preferences and needs of your audience.
That’s where Cleeng’s MoR solution comes in. Designed for subscription-based companies, it provides the tools to scale globally while boosting revenue. With Cleeng's advanced platform, payment processes become seamless, allowing businesses to focus on what matters most: growing and thriving without compromising profitability.
Learn more about how Cleeng can help you transition to web payments. Contact us or test our Merchant demo.