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stallments, an installment payment option for small why beauty subscription services work is because of the
merchants. It's now available in 22 states. Square said its perception of time being saved," the company wrote, not-
research found 68 percent of consumers would be more ing that this is "especially true with services that replen-
likely to purchase from a small or local business if it of- ish, [as] consumers subscribe to certain services in order
fered financing options like installment payments. to avoid the monotonous act of remembering to purchase
razor heads or skincare products."
Affirm, a fintech launched by PayPal co-founder Max
Levchin, disclosed in February 2019 that Walmart had Subscription services also make sense in business-to-
tapped it to support POS installment loans at nearly 4,000 business sales, like software and cloud services. Software
Walmart Supercenters. Approved shoppers can select re- as a service, subscription and recurring revenue business
payment terms of three, six or 12 months, "with interest models have become a major force for economic growth
displayed in simple dollars," Walmart stated. on the Internet, Jordan McKee, research director at 451 Re-
search, pointed out.
Affirm reported that it processed more than $2 billion
in POS installment loans for customers of 128 stores and Subscription billing for cloud-based services, alone,
ecommerce sites in 2018. Mastercard estimated POS in- reached $1 billion in 2017 and is projected to grow at a
stallment loans represent a $1.8 trillion market opportu- compound annual rate of 15.5 percent through 2020, ac-
nity. Mastercard, along with American Express Co., has cording to Gartner Research.
a financial investment in Divido, a New York-based de- "It's hard to imagine selling any form of credit card pro-
veloper of software that lets retailers offer interest-free in- cessing that has less attrition," Shepherd said. Much of the
stallment payments. payment processing for subscription businesses today is
dominated by fintech giants, like Stripe and PayPal, Shep-
In April 2019, Mastercard acquired Vyze, a fintech that herd noted. That is not to suggest they have the market
supports various consumer financing options, including cornered. ISOs and MLSs pursuing this opportunity, how-
POS installment loans. Vyze works with several major re- ever, will need to rethink who within a business organiza-
tailers and brands, including Home Depot and Microsoft, tion they need to pitch.
connecting them and their customers with a pool of po-
tential lenders. "Our industry is designed to target the business owner.
But when it comes to selling subscription payment ser-
And in June, Visa revealed plans to pilot a suite of POS vices the person you need to sell to is rarely the owner,"
installment loan solution APIs with a select group of card Shepherd said. It's usually someone in IT, and the time to
issuers and merchants. Visa said it hopes the APIs will sell them is when they're setting up a subscription service.
become widely available early next year. "We expect in- "It's a challenge because of that," Shepherd added.
stallments to become a foundational method of payment
at checkout for both domestic and cross-border commerce Shepherd recommended that ISOs and MLSs seeking to
payment transactions," said Sam Shrauger, senior vice tap into the market for subscription payment processing
president, and global head of issuer and consumer solu- invest time and money in content marketing. Think in
tions at Visa. terms of setting up a YouTube channel and posting edu-
cational videos on subscription billing and payment pro-
Subscribe to this cessing solutions that can help.

Companies large and small are turning to subscription
services as a way to cut costs and generate predictable rev- "If I were pursuing this market opportunity, I'd invest $30
enue streams. In ecommerce, alone, subscriptions are now in a decent webcam [to record videos] and $400 a month in
generating in excess of $10 billion a year in revenues, ac- Facebook advertising, and I bet you I'd be dominating this
cording to McKinsey. Adding Amazon Prime to the mix market in about six months," he said.
doubles that total, to $20 billion, McKinsey reported. CBD: an opportunity on shaky ground

CCSalesPro has come to rely on the subscription model Merchants selling cannabidiol (abbreviated as CBD) prod-
for selling its training services. "We bring in a lot of mon- ucts represent a huge market opportunity, but ISOs and
ey with our subscription services," Shepherd said. It's a MLSs pursuing this sector may find themselves on shaky
sticky product, as businesses receiving regular payments ground. "How you approach this market is mission criti-
through a subscription service are reluctant to change cal," said Max Miller, founder and CEO of Paybotic. Head-
processors, he noted. Plus there are any number of verti- quartered in West Palm Beach, Fla., Paybotic specializes in
cals where subscription-based sales hold promise. high-risk markets, like cannabis and CBD merchants CBD
is a non-psychoactive compound found in cannabis plants
Payment Cloud, a Sherman Oaks, Calif.-based ISO special- that has been shown to be beneficial in the treatment of
izing in high-risk merchants, pointed out in a recent blog various ailments. It is sold in a variety of forms, includ-
post that the subscription-based business model is ideally ing oils, tinctures, lotions, drinks and edibles. U.S. busi-
suited to the beauty industry, for example, which itself nesses rang up just over $1 billion in sales of CBD products
consists of a multitude of unique markets. "The reason last year and are on track to exceed $16 billion in sales by
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