Banking Apps: The Future of Subscription Management

In recent years, more and more consumers have turned to their banks to resolve disputes, report fraud, and cancel subscriptions. This is because consumers want a one-stop shop for managing their finances, including their subscriptions. With the rise of action-enabled financial management, subscribers now want to cancel their subscriptions and memberships indirectly through their banks, rather than directly through the subscription providers.

A surge in payment blocks and indirect cancellations

Subscription companies need to be prepared for an increase in payment blocks and indirect cancellations as households tighten their belts in the current uncertain economy. However, there is good news: subscription companies can explore banks as an untapped engagement channel to defend, retain, and upsell subscribers.

Erica Katsambis, vice president at Minna Technologies, believes that banks may have more touchpoints with their customers than subscription companies realize. She suggests that subscription companies can leverage banks as a "new" channel to engage and retain subscribers, as well as upsell them on new products and services.

Katsambis also shares her perspective on the rise of new subscription personas, shaped by a new generation of buyers, adoption of post-COVID digital behavior, and a bleak economic landscape. She offers ideas on how subscription companies can engage and retain these new subscribers while recovering and growing recurring revenue.

Banking as an untapped sales channel

Erica Katsambis, vice president at Minna Technologies, believes that banks can be used as an untapped sales channel for subscription companies. She says that the pandemic has created a new generation of digital users and consumers who want self-service options, and that banking apps have been widely adopted by people of all ages. As a result, banking apps are now being seen as aggregators, or super apps, where consumers can do everything in one place. This means that people are looking to their banks to help them manage their expenses, including their subscriptions.

Digital banking trends

Consumers are increasingly banking digitally, and their behavior is changing accordingly. According to research by Minna Technologies, consumers want more control over their subscriptions through banking apps:

91% want to see an overview of their subscription spending.
81% would consider accepting an offer at the point of subscription cancellation.
80% would rather change their subscription plan than cancel.
76% would rather pause their subscription than cancel it.

The rising cost of living

The rising cost of living is causing consumers to cut back on spending, including subscription spending. In the UK, for example, consumers are struggling to keep up with the cost of living and have increased their credit card borrowing at the fastest rate since 2005. They have also seen an 80% increase in energy bills from last October, and inflation has hit a 40-year high. As a result, consumers are canceling subscriptions in large numbers.

One of the advantages of the subscription model is also a disadvantage: subscriptions give consumers flexibility in managing their monthly spending. Consumers can cancel subscriptions they don't deem essential to cut costs. This behavior is especially common among Gen-Z and millennials, who regularly cancel and resubscribe to subscriptions.

Subscription cancellation trends

Minna Technologies reports that around 20% of consumers cancel their subscriptions through their banks. This is typically the unserved segment of subscribers who have disengaged from the subscription brand. These consumers may be lost, confused, or angry with the brand. They are also the most expensive to acquire and retain, and they are usually the least digitally savvy.

Lloyds Banking Group (LBG), which represents 25% of the UK market, reported 1.2 million subscription cancellations between July 2021 and July 2022. According to Savanta, the top reasons for subscription cancellations are:

Service too expensive (30%)
Switching to a competitor's product (26%)
Subscription price increase (20%)
Poor customer service (20%)

How blocked payments affect subscription businesses

Subscription businesses are being hit hard by payment blocks, which are initiated by banks when customers request to cancel their subscriptions through their banks. These payment blocks prevent customers from resubscribing to the subscription merchant for up to 13 months.

While payment blocks are a protective measure for customers, they also cause friction and costs for both banks and subscription businesses. Banks have to maintain staff to support customer call centers and handle payment blocks, while subscription businesses lose revenue when customers are unable to resubscribe.

Erica Katsambis, vice president at Minna Technologies, believes that the surge in cancellations by consumers is actually a cry for more capabilities in managing subscriptions. She suggests that subscription companies can use banks as an untapped engagement channel to help customers manage their subscriptions and avoid payment blocks.

Not all cancellations are considered equal

Erica Katsambis, vice president at Minna Technologies, identified three different types of consumers and their cancellation behaviors:

Super switchers: These consumers cancel their subscriptions to move between different services. For example, Sarah signed up for three different streaming services during lockdown, but canceled two of them after she finished watching her favorite shows. She is likely to sign up for the services again in the future.
Savvy snackers: These consumers cancel their subscriptions when they are no longer using them. For example, Dave signed up for a sports service in August, but canceled it in May when the football season ended. Clare signed up for a streaming service to watch her favorite reality show, but canceled it after she finished watching the show.
Angry Adrians: These consumers cancel their subscriptions because of price hikes. For example, Adrian canceled his streaming subscription after the price increased.

Subspace can help subscription companies reduce churn by providing customers with more options for managing their subscriptions, such as the ability to pause or unblock subscriptions. For example, if Sarah had been able to pause her Amazon Prime subscription instead of canceling it, she would have been more likely to resubscribe in the future. Similarly, if Dave and Clare had been able to pause their subscriptions when they were not using them, they might not have canceled them at all. And if Adrian had been able to unblock his bank card after canceling his subscription, he would have been able to resubscribe without having to call his bank.

Churn and return

Minna works with banks and trusted merchants to reduce the subscription cancellation block period from 13 months to 0-32 days with its Unblock feature. This "Churn and Return" behavior is becoming increasingly common, with Experian data showing that nearly 80% of subscribers who churn and return try to do so within 3 months of canceling, but are unable to due to their card being blocked.

The recent surge in subscription cancellations is more complex than originally thought and may signal a desire by subscribers for more flexibility and personalization in managing their subscriptions, including the ability to do so through their banking app. Subscription companies can adapt to these new buying behaviors and consumption patterns by leveraging analytics from external sources like banks.

How Subspace help you to cancel the subscription?

Subspace is a failed payment recovery solution that can help companies reduce churn and increase revenue. However, Subspace can also be used to cancel subscriptions. When a customer contacts their bank to cancel a subscription, the bank can use Subspace to automatically contact the subscription provider and cancel the subscription on the customer's behalf. This makes it easier for customers to cancel subscriptions and helps banks to provide better customer service.

For example, Subspace can be used to identify customers who are likely to cancel their subscriptions based on their payment history and other factors. Once these customers have been identified, Subspace can be used to send them personalized messages and offers to help them stay subscribed. Subspace can also be used to resolve customer issues quickly and efficiently, which can help to reduce churn.

Subspace's Unblock feature can also be used to reduce the number of customers who churn and return. By allowing customers to unblock their subscriptions after canceling, Subspace can make it easier for customers to resubscribe when they are ready.

Benefits of using Subspace to cancel subscriptions

Convenience: Subspace makes it easy for customers to cancel subscriptions without having to contact the subscription provider directly.
Speed: Subspace can cancel subscriptions quickly and efficiently, reducing the amount of time that customers have to wait to cancel their subscriptions.
Accuracy: Subspace can ensure that subscriptions are canceled accurately, reducing the risk of errors.
Security: Subspace can help to protect customers' financial information by securely transmitting subscription cancellation requests to subscription providers.

Subscription merchants want to aid subscriber cancellations regardless of the channel.

According to Erica Katsambis, vice president of Minna Technologies, subscription companies believe that providing a positive cancellation experience can drive long-term loyalty by increasing Net Promoter Score (NPS) and encouraging customers to return and resubscribe. This is known as the "cancel, unblock, and resubscribe" model.

Retention offers, such as free trials, percentage discounts, or the ability to pause subscriptions, can also be helpful in preserving the business.

Katsambis believes that pausing subscriptions is a particularly good way to address the current trend of subscription switching and snacking, where consumers sign up for multiple subscriptions for a short period of time to binge-watch content or take advantage of a specific offer.

Conclusion

Subscription companies need to adapt to the changing needs of their customers. Subspace can help subscription companies to meet these needs and reduce churn by providing customers with the ability to pause or unblock their subscriptions, and by providing subscription companies with insights into customer behavior.