PaymentsEd Session - Harmonizing Internal Teams: The Keys to Subscription Success

Hello, listeners. This is Nick Frederick, your host of the Subscription Scaled podcast. Today's very special episode was recorded on July 30th, 2024, from the Payments Ed Conference stage in Washington, D.C.

The topic for the panel was harmonizing teams for subscription success. They talked about their experiences and the different ways that businesses can organize their teams around payments. It's a very intriguing episode with some great perspectives, and I think you're going to enjoy. Welcome, everybody, to the podcast.

Today, we're going to talk about harmonizing internal teams, the key to success in subscription business. And so I have a panel of guests here who have all are either currently or have been in subscription business on the payments world. And so we will be asking a number of questions, getting their kind of history of where payments fits within their organizations and how they get the most out of payments in a subscription business. So we will do some quick introductions.

I am Josh Mathers, interim CEO at Rebar Technology. We focus on subscription solution enablement, both from a technical perspective and some consulting type of things. Fred? Hello, Fred Rodriguez.

I'm the CIO with HomeServe. I've also been part of this PaymentsEd board for the past 25 years in various roles. Lots of subscription and payments background. We'll get into that in a few minutes.

Hi, I'm Hanji Xiao, Treasurer and Head of Global Payments at SEMrush. It's my first time at PaymentsEd, so I'm not nervous at all. And SEMrush, basically, we're a search engine optimization company branching to online visibility. So probably your marketing teams use us and we have a subscription business through credit cards monthly subscription and Glad to be here Hello everyone.

How's everybody doing? Melissa Shields I am currently with Starbucks as a payment a director of payment strategy and operations Prior to that though. I spent a good portion of my career in subscription in both cable and publishing Awesome So let's dive right in so Brad, I'll start with you. Where does payments ownership fit in your organization today?

Why? And how has that maybe evolved over time? Or even if you want to zoom out to your career, how that has worked? I will say I started my payments career a while back.

Let's go there. But I honestly started in the accounting team. And the primary focus back then was, you know, reconciling cash and really understanding all the different fees and how to best manage and minimize those. But as time went on a little bit, working within that organization, you start to realize it's less of a cost group, right, focused on the fees.

And you start realizing there's a lot more to this. And it evolved into operations, at which point we started working with the various departments, because it was about what growth opportunities do you have? How do you start looking at involuntary cancels, improving your retention rate, et cetera. What really happened though is as my career path started growing and I went into the IT organization, I had so much payments experience, payments actually followed me.

So it had nothing to do with really being in IT, but once you have it, it just kind of goes with you. And that's how over several different organizations, that's how it's evolved. Antti, what's been your experience? Sure.

I'll even take a step back to my previous employer at Wish. And I think when it started, I was in Treasury and we were looking for cash forecasting. And that's what pushed us to take on more control over PSPs to see all the flows. And then as we got into it more, we realized acceptance rates, off rates affect revenue, the fees as we grow out into global emerging markets, they're going to increase.

So how does that affect our forecast? And that's how it kind of settled into treasury slash finance org. But I would also say that engineering plays a huge space here. They have to do all the integration.

So there's always a collaboration. at Wish especially. I think we had PSPs and MSPs. So we had payment service providers like the Stripe, the Add-ins, the BrainTrees, but also providers that would pay into countries that had capital controls.

And I think those would be like the PayEco or I think even Alipay, et cetera, because we had a lot of Chinese merchants. So that kind of evolved for my career into just being more of a payments expert. And payments in SEMrush, we still sit under the finance org. But the same thing, we collaborate a lot with our engineering teams.

We have an in-house payment ecosystem. So there's always back and forth, like what features are good, what integrations are good. And I really like it because I'm learning the technicals behind it, right? Like ODET, what we can integrate faster, et cetera.

So that's how it evolved. Yeah. Melissa? Melissa, how about your experience?

Well, I took a weird journey into payments. I started in advertising, actually. That's something most people don't associate with payments. But throughout my career, I also did a stint.

So I was a web producer along with television producing early on. But from there, I actually started managing accounts and then led a lot of e-commerce properties with my stint in advertising. And then later on, spent some time in cable, revamped a lot of e-commerce ordering systems there. and always with an eye on profitability, cable aging myself a little bit, it wasn't super profitable.

It started to get the streaming networks out there, so it was struggling a bit. And then I would say my deepest dive into payments was when I joined Publishing, a company that had subscription magazines. And I started actually in kind of a consultative role, managing a big corporate initiative about modeling the business and how we adjust different levers of the business for success for consumer payments. And it wasn't really focused on payments, but what came out of that was subscription auto renewal and e-commerce in support of that.

So I ended up running that piece of the business and one day asked why it costs so much to process a transaction. So it was always part of marketing because that where the subscription side sat and eventually evolved though with a pretty strong focus on payments and eventually ran B2B payments and others as we acquired other companies and diverged But then that moved into app payments and the aspects of treasury and capital and cash flow as well. So I kind of started in marketing and then bled into the other areas.

Yeah. It's really interesting. I mean, everyone has a different experience. My experience was we didn't really have anyone focused on payments.

I was in the member services, customer service group, and we had a retention issue. And as we looked into that, it was found out that, oh, we're canceling everyone because payments aren't going through. Then I became the payments guy, but it started in this member services group, then moved into operations, then was in marketing for a little bit, and then went into finance, and then product. It just grows as you were saying.

It moves with the person a little bit. I would say a similar experience because we started back in the day, mail order, telephone order. And as things started to progress, we were very focused in marketing. It was really about making that checkout process and that conversion process.

What are the options for payments? But as time moved on, you start moving into e-commerce and you start moving into real time. Now you start moving into technology. And it truly does evolve.

And it really gets down to, again, that passion within this space. It's not just minimizing the cost. I said this earlier, right? It's really about how do you help grow the business?

And what value can you add? It just starts growing from there. Yeah, yeah. And to play off of what you were talking about, Hanji, and probably we'll go back to you for this one, but who do you see as kind of your payment stakeholders in your organizations?

Yeah, I have a unique view on this because Wish and SEMrush both are very young companies. So you find the founders' footprints all over kind of the payments because they were the first ones to create the relationship. So they're already very engaged. And it's kind of like the more finance-based people that come in later that needs to be convinced of the efficacy of payments.

So that might be different from what other people get used to. So we had a lot of support from our founders. Even at SEMrush, when I first started, I would get emails from our founder CEO. It's like, how are the fees?

What are the incentives? And I was surprised of such engagement. But I think that's what you'll find in a lot of startup early IPO, post IPO. And I mean, right now we're trying to focus on being a public company, how to be mature, how to give my CFO the information that he can give to the market.

How does payments affect that? From my point of view, it's basically fees feed into cost of revenue. So that's important. And then auth rates or acceptance rates feeds into direct revenue.

So their forecasting will be affected about how related to how you forecast your authorates, your fees. So that's how we get into the visibility. And then I think for growth, not just from finance point of view, from marketing, I think it all depends on us to have a very streamlined checkout experience for the customer. So I think we're a big part of that, and we try to represent that to the SLT, to the senior leadership.

Melissa, what's been your experience? I would say anybody in the company who cares about revenue should be a stakeholder. If they're not, that might be a little bullish of a statement. But yeah, I mean, basically payments now and payments technology affects every aspect of the business, soup to nuts.

I mean, we can not only just expand margins, which is what payments traditionally did, especially if you had high volume, you're able to adjust, you know, all the levers, make some deals and be able to save on the actual cost of conducting business. But now it's about opening new channels, identifying new ways to target new customers. I mean, with Google's, what was it, in 2022, they did the cookie thing where, or 2020, they were going to eliminate third-party cookies. And now they may not, but they're still saying don't do it.

Regardless of that, I mean, transaction data is potentially the marketing engine. And so much aspect of that into the loyalty programs, how you enroll, that data bleeds through the entire company, every aspect of the business. So you can't uncouple it from any one organization, whether it's planning, whether it's finance, whether it's accounting, or whether it's relationships. Because, again, the payment methods themselves are becoming the channel.

I mean, if you think about something like Cash App, right, and Gen Z, I'll talk a little bit about this later in the session. They live their lives in certain apps. You have to go to them. They don't come to you.

So Payments is really about unlocking a lot of channels that it didn't do before. So if you care about revenue, you should care about payments, I guess So Fred, who do you see? So very similar Honestly, you are touching every department So if you just kind of break this down a little bit Again, from a subscription perspective We start with our product and marketing teams What are they selling? But how do you make that checkout process easy?

That conversion process? Because it starts right there You want to make sure you're authorizing that card or that account Before you even start the process with the consumer But if you spend a lot of time with your customer service teams, you're really focused on what is the customer saying? What do you need to hear from them? You really want to start figuring out how to avoid those chargebacks.

So that ties back into marketing. But it also ties into your refund methodologies and your whole customer experience. We spend a lot of time with our finance and accounting teams, obviously. It's all about the money.

How do you forecast it? How do you minimize those fees, like I said earlier? But what we're finding lately, it's really, if you fine-tune this, it really comes down to the technology and the options that you have. How do you do it real time?

Everything used to be batched before. Now everything is happening in real time. You've got multiple third parties. It's not just your acquirers.

And it's your fraud prevention. It's your tokenization providers. It's all the other ones that are out there. So again, I think you are touching every department.

I don't think everybody thinks payments in the forefront. So it's really your job as the payments professional to get out there and kind of articulate, again, why you're not a cost center and how you're adding that value back into the organization. There are so many facets that your strong team, the way we're kind of organized or as we continue to evolve, you want somebody to stay focused on marketing, somebody to stay focused on customer service, somebody on the transactional side of the house and the accounting side.

But really tap into your third parties because that's really where you're going to start getting some help, figuring out how to add that value. Yeah. And I think one of the important groups in order to position payments across the organization is getting your data. Right.

You've got to work with your data team to get the data to go tell the story in a way that those stakeholders understand it and it matters to them. Without that it really hard to have a seat at the table One thing I add to that is I think that it really hard nowadays to uncouple any kind of a consumer profile that you might have from the payments data So much of the profile itself is that payments data and the ability to be able to make the intersections of where that customer's activity is occurring across the whole organization.

All comes, again, back to data. I think more than a payments person now, I feel more like I'm a data person because it's all about understanding the flow of data and how you're trying to leverage that data and harness the power of that data. Whether it's looking at the new open banking where you can get data directly based on consumer preferences or if it's doing kind of more closed loop environments where you might be able to do some co-opting with others. Or look at delivery, like how much of third-party delivery is merged, the Uber Eats and the Grubhubs.

Being able to seamlessly transmit data to those and do it in a way that feels effortless to the customer is so important, whether it's a subscription or just a one-time purchase. Yeah. I would agree, though. The data is probably the most important part.

And so I didn't really mention a data team because I guess each company would have data in a different spot. But you really want to figure out how are you tying this information, especially when you tokenize all the cards. You don't have the live numbers. You're talking to a customer.

You know, how do you start taking all these various pieces from all these third parties, bringing it all together to tell that story? Right. No one really wants to know all of our details, of course. So how do you have to bring that back up?

When you're on a consumer level, you've got to get into the real load level detail in order to talk. So I would agree. I think it gives us payments. People gives us that ability to kind of learn multiple facets of the business, whether we want to or not.

Right. Like your payment, we kind of understand what marketing is a little bit because you have to worry about retention and how you get the customer back and get pulled into other things. The other one that I think in my career that I would call out initially, we did not work with very much, but legal compliance seems to become much more the last 10 years or so, where all the regulations, everything that comes in from a subscription standpoint. I mean you're starting to learn more and more about legal stuff right and and how to implement the things that you need to implement there We've experienced this with different markets.

We're going in They have like different compliance rules and different like agreements that the subscriber has to sign up to So every time we move into a new market, we have to check with legal right that so I think that's a good point with looking at the subscription economy in general I mean the subscription economy has exploded but I think that a lot of merchants need to take a step back and really look at What is it that I'm trying to achieve at this moment? And is a subscription really fit?

Not just because it's a subscription. You could say you're running a subscription. Running subscriptions is hard. It's probably one of the hardest payment functions to do when you have a recurring subscription and you have all the compliance.

And speaking of legal, I don't know how many of you were in Mark Ross' session earlier, but I got to know Mark very well through my tenure with a publisher. So it is really important to make sure that you really have objectives that you can be met and that are ROI positive to do it. But also when you're looking at subscription, I'm kind of going off, veering off here a little bit. You really need to look at what your revenue objectives are and how payments are going to affect the overall ecosystem as you go through.

One of the key factors is not just I set up a subscription, but timing of that. And looking at your payment health and what your technology can support in terms of operationalizing that to the most effective rate. So, like, for example, a lot of people look at it. I'm going to do a monthly subscription.

Monthly may not be the best. In fact, I could show you models that says even with the initial acquisition drop from a lower price point on a monthly recurring subscription, even with the card health, right? So if you don't have a healthy card ecosystem where you're doing updates and other things, you could just focus specifically in on a monthly subscription because you don't have to worry as much about card churn, especially if you have a life cycle of that customer that's typically shorter from hand raiser churn or explicit churn where they say, I no longer want this.

But when you're looking at it, I think I had modeled like an 88% retention rate on or a 90% retention rate on monthly is still beat by a 60% annual subscription revenue-wise. So the payments people are the people actually that are having to do that modeling and explain that to the organization. It's kind of circling back to how this applies. So you have to really be a jack of all trades to understand all of these aspects to be able to say, we can do this.

But based on our card hygiene capabilities, maybe we're not doing tokens and getting all the LCMs. Maybe we're not getting updates. Maybe it doesn't make as much sense for us to do an annual subscription, even though there's a revenue loss and we'll take the monthly. Because we don't have this technology available to us.

Because not all orgs or stacks are created equal. But in some cases, it makes sense to, you know, build towards what the payment optimum will be and focus on those different types of subscriptions. So I would say payments really has a seat at the table in the inception of all subscriptions within an organization as well. because that architecture could mean the difference of a subscription being successful or not.

Sorry, that was a long-winded, but... No, it's good. And I think, right, it is very complex. It can't be very complex to kind of have a seat at the table, really any one of them, right?

And so, you know, I share an experience of, you know, having free trials, right? Introducing that into our ecosystem. And, you know, I had gotten the company used to looking at my reports of our billing success rates and all of that. Well, then they started tanking when these free trials came due, right?

And they're like, what's happening with the billing system? It's broken. Like, something's wrong. So then it was digging into the data and showing, like, well, no, it's just we went a different direction with bringing in new customers.

They probably didn't want to pay us in the first place. We're struggling to get them, right? And now how do we address that, right? And so having all those different things change in your organization, right?

Hopefully you're at the table when those decisions are being made. You're not always, right? And then you have to be able to tell that story. Yeah, the communication, we should have said PR is one of our key roles as well, because being able to boil down these really complex, like interoperable things that you have to focus on, like you can choose A, B, and C, and that's going to get you D, or you can choose A, B, and F, and that's going to get you Z, right?

And be able to explain that in a way, especially to higher level executives, can be complicated in itself. So being able to also really tell the story matters in payments, I think more so than people think. We're not just data scientists. We're not just finance.

We're not just marketers. You do have to do it all, which is really fun. That's why we all love it, and that's why we all love coming here, where we can all talk to each other about all the fun, geeky things that we're working on. Because then we can get into the weeds and nobody gets it But when you at your organization you really need to learn to layer up I think when my CFO first came on board his background was more like FP accounting finance So it took me a little bit of time to get him up to speed to realize.

And then he realized, like you said, Fred, that, oh, we're not a cost center. We're actually a revenue generator. And he focused on payments a lot more, giving us a little bit more resources to kind of get that bump. So it definitely helps.

Yes. Show him the numbers. Sometimes you have to fail, too, to show them the numbers. And once it fails, you can be like, well, here you go.

That's where we could have been. But due to constraints or whatever, we ended up here. So now, next time, let's go to where we could be. Absolutely.

So how do you think your org structure in your subscription experience, how do you think the org structure and where payments fit within the company impacted the bottom line of your business? Fred, we'll start with you. I think like I mentioned earlier, it's less about the organization structure, to be honest. I'll answer your question.

But it's really about identifying the players inside your organization that have that passion for the payments and adding that value like you're talking about. In my take, just in my experiences, when I started in accounting, it was really about the cash and the settlement and the pricing. The minute you can get the attention in your company that it's more to it, I don't think it organizationally makes a difference. I will say being in IT today, you want that cooperation and that involvement with IT, but I think it might be better suited more in an operational view as you're looking at that entire lifecycle in my past experience.

What are your thoughts? Yeah, I mean, just back on IT, what I found was it's good for payments to sit in kind of a finance base because then you can view it more strategically where the engineers are more just completing a task. Like, we're kind of PMing for them on these integrations, on these connections. And I think it fits them well because their engineering org is graded on, well, how many tasks have you done?

Are you adhering to the schedule? So they may sometimes not be able to take a step back and see, oh, OK, we want to expand into LATAM, and these are the PSPs, and these are the payment methods. They only care about, well, are they going to API call me? Like, how is their code versus mine?

And so I think that conversation is beneficial for both sides. They learn kind of why it's important to the company's bottom line from a finance point of view, how it affects them. It gets them more visibility. I think from engineering, it gets them excited.

And then, as I said before, it makes us learn what their barriers are. So I like that kind of combination where payments sits in finance, but a lot of the infrastructure engineering still sits in IT under the COO or something like that. Oh, boy. This is a hard one.

I don't think I've been in an organization where payments really fit in one group or another. So it's hard because you have so much crossover with so many groups. So I would say that wherever you're sitting in your organization, it shouldn't dictate what you can accomplish. It's more about who the people are that you trust and finding naturally inquisitive people to question everything and rethink kind of what could be in the organization versus what is.

I would agree that sometimes if folks are only in finance or only in tech, sometimes it can be difficult to not just be looking at the cost of payments if you're in the finance side or not just be looking at what tech is available on the stack or would easily integrate today. You have to kind of be a bridge in between those to really look at. this would be the revenue optimal solution. So again, I go back to the data and really being good at modeling and understanding what financial opportunities there could be.

And then looking at the different levers that drive those models and how you can tease those out to identify individual opportunities. So if we executed this and we met three out of the four levers from the model that we were going after, what is the one thing that didn't work? And why didn't it work? And how do we solve for that?

And having naturally inquisitive people and partners that are in the technology side, that are in the finance side, that are in the business side, that can all work together to help solve that problem. But you really have to be looking at it from the perspective, I think, of the numbers first of what you're trying to accomplish. Because there is a lot of, it's kind of like, you know, everybody has an opinion about payments because they all have made payments, right? So it's really looking at how do you get people away from, hey, I saw Apple can do this.

It's really cool. Yeah, but that's not going to actually move the needle for us at all. So let's focus on the thing that's going to do there. So starting with the data and the numbers, you can be in any part of the organization if you do that.

And I like that point of inquisitive people and passionate people, right? Like you're starting to describe characteristics in people, right? And I think the overall kind of theme here is it doesn't really matter where payment sits, but it matters who's involved in payments, right? And how you get payments out from wherever it is in the organization to the broader company, right?

And bring in that involvement. How do you even get people to understand there is a group called payments? They exist. They're not just these weird things that happen on the back end by themselves.

So it's sometimes harder, especially depending on every, I would argue every company now is a digital company. So where previously companies definitely had different focuses, there were more retail, there were more licensee, there were more this or that. But everybody today is digital. So there's a different focus.

And depending on where those companies came from will tell you kind of where they're at in their ecosystem and life cycle, if you will, with payments. Because really large companies could be really remedial because that wasn't their focus. or really small companies could be really amazing because they started as a startup in fintech. So know where you're coming from and know where you're going, I guess, to be able to make sure that people know what the hell payments is when you walk in the door.

Yeah. Well, and I think it's sometimes payment. And while you're in payments, you kind of feel like the ugly stepkid of the company, right? Like everything kind of falls to you.

Everyone wants something goes wrong, and that's when you're getting the problems that you have to solve. But it's a really fun place in the organization to be a powerful kind of position. Right? It's kind of like payroll almost.

Right? You're invisible until something fails. Yeah. Yeah.

Absolutely. Well, great. I know I appreciate you guys joining us on the podcast. This has been great.

Definitely have learned a lot. And we appreciate your time. Thank you so much. Thank you.