Publicly traded Zuora (NYSE:ZUO), a cloud-based platform for managing subscriptions, is tacking on a new fintech offering as subscription and financial services increasingly overlap.
On Thursday, the Redwood City, California-based company introduced its new “unified monetization” feature – Zuora’s first step outside its purely subscription-based business.
Zuora offers these examples of how the new offering works:
- Telecommunications-as-a-service, unifying virtual-meeting licenses with web cameras and installation services.
- Mobility-as-a-service, unifying electric cars with charging services for electric vehicles.
- Content-as-a-service, unifying streaming video with tickets for in-person events.
“Subscriptions are essential for transforming the next generation of businesses, but they shouldn’t be the only option,” Sri Srinivasan, chief product and engineering officer at Zuora, said in a release. “To deliver the best ongoing subscriber experiences, companies are looking to combine offerings in new ways, with a mix of subscription, usage and one-time offers.”
Customers of Zuora include Acer, Bridgestone, Ford, Penske Media, Schneider Electric, Siemens and Zoom.
Trevor Owens, vice president of architecture at Zuora’s client Quench, said unified monetization will provide the flexibility to bill for all its products, subscriptions and services on a single platform, and if desired, a single invoice.
“This will eliminate tedious back-end integration and data reconciliation efforts present today — providing the immediate agility to monetize our water-as-a-service on a single platform,” Owens said.
For fiscal 2021, Zuora reported revenue of $305.4 million, up 11% from the previous year, and is now projecting $340 million to $342 million in revenue in fiscal 2022, including $280 million to $282 million in subscription revenue.
Zuora’s fintech move comes amid a pandemic-driven rise in subscription activity. A 2020 survey by lending platform LendingTree found one-third of Americans had purchased new online subscriptions as they sheltered at home and entertained children engaged in virtual learning.
Srinivasan, the Zuora executive, told FinLedger that he doesn’t view his company as a competitor in the fintech market.
“In fact, we partner with companies like Stripe,” he said. “Zuora was built to help companies transform from product-centric businesses into modern, digital subscription businesses — and that means they need to move off legacy ERP systems that were built for the old-product economy.”
“Oracle and SAP are great if your business is shipping widgets from a warehouse, one order at a time,” Srinivasan added.
Srinivasan explained to FinLedger the necessity of a subscription management system for businesses that want to not only sign up new subscribers, but have the option to experiment with subscription-pricing models, automate subscription financials, and drive subscriber renewals and upgrades.
As of late, fintechs are beginning to increasingly explore what this model could look like.
“With more people subscribing to more services and owning fewer physical goods in the future, there is a rapid increase in the demand for subscription-based fintech services,” the InvoZone blog noted. “The future of fintech looks bright as businesses will look to partner with fintech companies to help them enable the use of various financial services to improve their processes. This, and provide their customers with a guaranteed quality of service — a key facet most financial institutions today lack.”
At the same time, subscription models are wading into the financial services realm.
“In an economy that is increasingly driven by subscriptions for everything from apps to electric bikes, it’s possible that financial services could be the next hot area for subscription services,” PYMNTS.com noted in February.
A 2018 survey by Cornerstone Advisors underscores that prediction. In the survey, nearly half of 30-something millennials in the U.S. said they’d pay $5 to $10 a month for a hypothetical Amazon checking account if it were bundled with cellphone protection, ID theft protection, roadside assistance, travel insurance and product discounts.
In the same vein, a 2018 survey by Zuora itself revealed 57% of consumers in the United Kingdom indicated they’d be willing to pay an extra monthly bank fee to receive additional services, with subscription services like Netflix and Amazon Prime topping the list (45%).