Revenue recognition The Company generates revenue from two primary sources: (1) subscription and transaction fees and (2) interest on funds held for customers. The Companys customers include small and midsize businesses (SMB), accounting firms and financial institutions. Subscription and transaction fees by customer category are comprised of the following for the years ended June 30, 2018 and 2019 (in thousands): Year ended June 30, 2018 2019 SMB and accounting firm customers $ 50,138 $ 76,292 Financial institution customers 6,854 9,659 Total subscription and transaction fees $ 56,992 $ 85,951 Subscription and Transaction Fees The Company enters into contracts with SMB and accounting firm customers to provide access to the functionality of the Companys cloud-based payments platform to process transactions. These contracts are either cancelable arrangements paid monthly in arrears that can be terminated by either party without a penalty at any time or non-cancelable annual arrangements paid upfront. In July 2019, the Company updated its terms of service for cancelable contracts, whereby cancellations become effective at the end of the monthly subscription period in which the last transaction is processed. The Company charges its SMB and accounting firm customers subscription fees for access to its platform based on the number of users and level of service. The Company also charges these customers transaction fees based on actual transaction volume and the category of transaction. The contractual price for subscription and transaction activities is based on either the negotiated fees or the rates published on the Companys website. The Companys contracts with SMB and accounting firm customers are generally comprised of a single performance obligation to provide access to the functionality of the Companys platform to process transactions. The Company accounts for open-ended cancelable contracts as a daily service. Subscription revenue for such contracts is recognized ratably over the period that the customers have access to the platform. Transaction revenue is recognized on the date the transactions are processed by the Company. The Company accounts for its annual and monthly contracts as a series of distinct services satisfied over time. The Company determines the transaction price for such contracts by estimating the total consideration to be received over the contract term from subscription and transaction fees. The Company recognizes the transaction price from annual contracts as a single performance obligation based on the proportion of transactions processed to the total estimated transactions to be processed over the contract period. Arrangements with Financial Institutions The Company enters into multi-year contracts with financial institution customers that typically include fees for initial implementation services that are paid during the period the implementation services are provided as well as fees for subscription and transaction processing services, which are subject to guaranteed monthly minimum fees that are paid monthly over the contract term. These contracts enable the financial institutions to provide their customers with access to online bill pay services through the financial institutions online platforms. Implementation services are required up-front to establish an infrastructure that allows the financial institutions online platforms to communicate with the Companys online platform. A financial institutions customers cannot access online bill pay services until implementation is complete and the financial institution has provided acceptance of the implementation services. As such, initial implementation services and transaction processing services are not capable of being distinct from the subscription for online bill pay services and are combined into a single performance obligation. The consideration in these contracts varies based on the number of users and transactions processed. The Company has determined it meets the variable consideration allocation exception and therefore recognizes guaranteed monthly payments and any overages as revenue in the month they are earned. Implementation fees are recognized based on the proportion of transactions processed to the total estimated transactions to be processed over the contract period. The ability of the financial institution customers to renew their contracts without having to pay up-front implementation fees again provides them a material right. Material rights, which have not been significant to date, are treated as separate performance obligations and are recognized over the expected period of benefit. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. Remaining Performance Obligations with Financial Institutions As of June 30, 2019, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) was $34.0 million. Of this amount, the Company expects to recognize $8.7 million within one year and $25.3 million between one and five years. Deferred revenue Subscription and transaction fees from customers with which the Company has annual or multi-year contracts are generally billed in advance. These fees are initially recorded as deferred revenue and subsequently recognized as revenue as the performance obligation is satisfied. Deferred revenue is shown as current or non-current in the consolidated balance sheets. The current portion of the deferred revenue was $3.3 million and $3.5 million as of June 30, 2018 and 2019, respectively. The non-current portion of the deferred revenue was $1.9 million and $1.8 million as of June 30, 2018 and 2019, respectively. Fees for monthly subscription and transaction fees are billed in arrears on a monthly basis. During the year ended June 30, 2019, the Company recognized $3.4 million of revenue that was included in the deferred revenue balance as of June 30, 2018. Interest on Funds Held for Customers The Company also earns revenue from interest earned on funds held for customers that are initially deposited into the Companys bank accounts that are separate from the Companys operating cash accounts until remitted to the customers or their suppliers. The Company partially invests funds held for customers in highly liquid investments with maturities of three months or less and in marketable debt securities with maturities of three months to one year at the time of purchase. Interest and fees earned are recognized based on the effective interest method and also include the accretion of discounts and the amortization of premiums on marketable debt securities. Deferred costs Deferred costs consist of (i) deferred sales commissions that are incremental costs of obtaining customer contracts and (ii) deferred service costs, primarily direct payroll costs, for implementation services provided to customers prior to the launching of the Companys products for general availability (go-live) to the users. Sales commissions paid on renewals are not material and not commensurate with sales commissions paid on the initial contract. Deferred sales commissions are amortized ratably over four to six years, taking into consideration the initial contract term and expected renewal periods. Deferred service costs are amortized ratably over the estimated benefit period of the capitalized costs starting on the go-live date of the service. The current portion of the deferred sales commissions, which is included in prepaid expenses and other current assets, was $1.1 million and $1.7 million as of June 30, 2018 and 2019, respectively. The non-current portion of the deferred sales commissions, which is included in other assets, was $2.1 million and $3.1 million as of June 30, 2018 and 2019, respectively. The current portion of the deferred service costs, which is included in prepaid expenses and other current assets, was $0.8 million and $0.8 million as of June 30, 2018 and 2019, respectively. The non-current portion of the deferred service costs, which is included in other assets, was $2.3 million and $2.2 million as of June 30, 2018 and 2019, respectively. The amortization of deferred sales commissions was $1.0 million and $1.4 million during the years ended June 30, 2018 and 2019, respectively. The amortization of deferred service costs was $0.4 million and $1.1 million during the years ended June 30, 2018 and 2019, respectively. Cost of revenue Cost of revenue consists primarily of personnel-related costs, including stock-based compensation expenses, for the Companys customer success and payment operations teams, certain costs that are directly attributed to processing customers transactions (such as the cost of printing checks, postage for mailing checks, and expenses for processing payments), direct and amortized costs for implementing and integrating the Companys platform into the customers systems, costs for maintaining, optimizing, and securing the Companys cloud payments infrastructure, amortization of capitalized internal-use software, fees on the investment of customer funds, and allocation of overhead costs.