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The Subscription Economy – New opportunities bring new challenges!

Subscription-based commerce is entering into the daily life of European consumers. Consumers are moving from an “Own” model to a “Use” model. Probably, many consumers don’t even realise how deeply recurring and subscription-based purchases have penetrated into their daily life, but, then just think about:

  • monthly contact lenses renewal, 

  • weekly refuel of the car, 

  • daily fruit basket delivery, 

  • daily coffee or meal, 

  • monthly Nespresso resupply, 

  • car sharing, 

  • media streaming, 

  • mobile subscription, 

  • Netflix, Uber, ….

This opens significant new opportunities for merchants, who want to engage in this so-called Subscription Economy. They can steer the relationship with their customers from “One-time transaction” to “Long-term subscription”. 


But, new opportunities bring new challenges. The payment method should be adapted to recurring purchases, safe, simple to use, balancing the interests of the payer and payee, inexpensive. Furthermore, subscription scenario’s will often happen in an online, “payer not present” environment, increasingly cross-border, introducing challenges such as identifying the consumer, checking the quality of the payer, managing the risk of the transaction, while still preserving the smoothness of the onboarding and check-out experience.

A merchant is now facing choices – a few of them :

  • Choice of payment method, suitable for recurring payments
Amongst the various payment methods – Debit/Credit Card, eWallets, PayPal, Credit Transfers, Direct Debit – Direct Debit is coming forward, as best adapted for recurring payments in a Subscription Economy.
That is logical – the consumer doesn’t need to worry about doing the payment, the direct debit is initiated by the creditor, but is still well protected through his refund right.
  • 
The merchant is in control of his cash flow and, after the recent Rulebook change, can get his money, already, the next day, a not un-important advantage!
Choice of a partner, who can offer a comprehensive solution
A partner, who can assist, not just with the payment method itself, but with all aspects of engaging with a customer, identification, strong authentication, risk management, electronic mandate management, both at onboarding and at payment time.

Sentenial has set out to build a vision and set of solutions, that aim to address these challenges.

Let’s start, in this article, with the onboarding of a new customer. In that process, as a merchant, probably, you want to find out:

  • who is the Person?
  • 
does he or she – or the company, in B2B scenario – have a record of being a good Payer?

  • if I want to offer Direct Debit as the preferred payment method, can I get a valid Mandate?

The Person : you want (or need) to find out about the Identity of the customer. In some cases, you’ll be obliged, legally, to be sure about the Identity – think about running an online Lottery, Gaming, Betting business, in most countries, for these applications, it is mandatory to check that the customer is 18+.

Identity of a Person can determined in many ways, e.g. based on Eid (on card or in cloud), based on biometrics (fingerprint, voice, …).

Sentenial has set out to build a vision and set of solutions, that aim to address these challenges.

Sentenial is partnering with leading companies in the space of Identity, Strong Authentication, so to offer seamless integration of this important aspect of the onboarding process. An example, below, in the “Most Read” section – in a next issue of Newsletter, we’ll bring an example of using biometrics. The Payer – it is good to be sure about the Identity of the customer, but it is even better to be sure that

Sentenial has set out to provide an easy to use service, Debitsafe, that forecasts the Direct Debit payment behaviour of potential customers. For that purpose, the service uses Sentenial’s Direct Debit transactional data history to risk score the IBAN, that the customer plans to use.

As such, it allows to assess problem payers at an early stage and mitigate risk by determining the level of customer authentication and e-Mandate signing that fits the degree of payer risk.
REST APIs enable tight integration with the merchant’s application.

The Mandate – to use a Direct Debit, the customer (debtor) must sign a mandate which technically gives the merchant (creditor) the permission to request the money from the debtor’s bank and also gives the debtor’s bank permission to transfer the requested money to the creditor.

Historically, mandates were paper-based. it is not hard to imagine that in Subscription Economy scenario’s – e-Commerce, m-Commerce – paper-based mandates are not very practical. Hence, an evolution to Paperless Mandates, also called Electronic Mandates or e-Mandates.

The expectation was that the introduction of SEPA should have created a common process for dealing with e-Mandates, in all Eurozone countries. Unfortunately, this objective has not been realised. Though the European payments market is becoming standardised through SEPA, the specific commercial laws and rules, regulating Electronic (paperless) Mandates have yet to become pan-European, resulting in a too high level of uncertainty and a too large number of country specific processes and practices having been developed.

To meet these challenges, Sentenial has developed a framework solution for processing e-Mandates, called Origix e-Mandates – the most recent version, Origix e-Mandates V1.6, has just been released, see “Most Read” section for more details.

At the core of the product:

  • an intelligent Routing Engine,
used to select, from a rich set of signing methods, the most appropriate mechanism for signing the e-Mandate, based on the payer’s country, the capability of the payer’s bank, business considerations and feedback from the Risk Management service.
  • 
a Risk Management module,
allowing to take account of the perceived risk presented by the payer.
  • a Safe Storage,
    allowing safe storage and retrieval of evidence of e-Mandate signing.

  • an extensible set of Signing methods, that can be provided both by Sentenial or by partners.
  • a Rules-driven Workflow, that allows to model the e-Mandates process to customer’s requirements.

Most Read