Few people could imagine going back to a life without binge-watching Netflix, creating Spotify playlists, or backing up files on Dropbox, Drive, or iCloud. However, there is a flipside to subscriptions and recurring payments. The explosive growth of subscription
services, people are losing track of what they have.
A 2019 study by Minna Technologies includes more than 400 000 European consumers between the ages of 18 and 75. The study shows that the average person spends €334 on at least 11 different subscription services each month. The study also found that the average
household pays for a total of 21 subscription services. Given these findings, it is understandable that people are finding it a challenge to maintain control over their recurring expenses.
Minna's findings underscore the magnitude of consumers' frustration. For instance, 1 in 3 said they had found themselves paying for subscriptions they no longer use. Without knowing it, customers found that subscription companies had been charging their cards
for months, and in some cases, years. The most common reason for this was free trials that had ended and subsequently started charging money, without notice.
74% of customers pointed out that cancellation is the most frustrating part about subscriptions, and described the experience of cancelling a subscription over the phone as "extremely painful". The bare realisation that there might be a salesperson on the other
end of the phone, trying to convince them not to cancel, caused many not to go through with the cancellation in the first place. 33% of consumers are aware that better subscription alternatives exist (such as cheaper telco- or utility deals), but did not change
them as they did neither have time or energy to compare and switch provider.
For many years, the general notion of a subscription was to a newspaper, digital streaming service and perhaps subscription boxes. However, given its original definition, subscriptions include far more products and services than most people think. According
to Merriam-Webster, the definition of a subscription is "an arrangement to receive something, typically a publication, regularly by paying in advance". A more distinct and contemporary way of defining it is "any recurring expense for a service
or product that can be cancelled or improved".
For the vast majority of people, satisfaction with financial health is lower than physical health, social life, and emotional health. Reports have found that 63% of consumers are unhappy with their current financial situation and that a staggering
38% of consumers (50% of millennials) would have problems paying back a loan of €450. Customers need help managing their subscription services. This conclusion stems from the 2019 report from the British consultancy firm 11:FS, stating that "helping
customers to get a better grip on recurring costs and monthly bills are one of the most underserved jobs to be done in retail banking." Subscription management is a great strategy to strengthen long term customer engagement, satisfaction and loyalty.
Challenger banks such as N26, Monzo, Revolut, Sterling, and Klarna have understood this and are working on subscription management features that aim to win over customers from incumbent banks. However, as incumbent banks are still the primary choice for
most people when it comes to money management, they are well-positioned to take the lead on subscription management and strengthen their natural position as number one in money management.
In conclusion, deploying subscription management is one of the best ways for incumbent banks to mitigate the risks of customer disintermediation and unbundling of services.