Despite rising living costs, consumers are reluctant to cancel their subscriptions. Instead, they are opting to upgrade or pause contracts, research from Minna Technologies, the subscription management platform embedded in banking and fintech apps, has revealed.
This research marks the launch of Minna Technologies’ inaugural Subscription Economy: Business Barometer report in partnership with FT Strategies and global market research firm Savanta.
More than nine in 10 (92 per cent) subscription businesses admit that the rising cost of living is a threat to their business. However, they note that consumers remain much more likely to upgrade their subscriptions rather than cancel. This is evident from Minna Technologies‘ previous research which indicated that 86 per cent of subscribers would consider accepting a new offer on their subscriptions rather than cancelling.
Each month 25 per cent of users change their subscription. Account upgrades are the most common switch with two-thirds (65 per cent) of subscribers opting for this.
Alternatives to cancelling
The research also shows that almost three-quarters (72 per cent) of users would rather pause their subscriptions than cancel. Currently, 61 per cent of subscription companies offer users this option. A further third (33 per cent) plan to introduce this functionality in the next 12 months. Minna Technologies explains that although upgrades are the most common change, providers recognise that the flexibility of being able to pause accounts is becoming increasingly important amidst rising living costs.
Despite the financial pressures on households, many consumers opt to return to paid subscriptions just a few months after quitting. This is known as the ‘churn and return’ phenomenon. Six in 10 (60 per cent) subscription businesses say that up to a fifth of their users cancel and then resubscribe within six months.
Over half (54 per cent) of subscription businesses have seen subscriber numbers increase by more than a fifth over the last 12 months. US businesses experienced a larger rise (63 per cent) compared to 46 per cent of UK companies. This could be partly driven by differing economic challenges in these markets. For example, US inflation sits at four per cent – less than half the 8.7 per cent experienced in the UK.
Help from regulators
Globally, regulators are looking to introduce legislation to offer subscribers more protections. This includes making it easier for them to cancel. For example, in the UK, legislation from the Competition Market Authority aims to clamp down on ‘subscription traps’. Meanwhile, in the US, the Federal Trade Commission, recently proposed requirements for companies with customers on recurring payment programs to offer easy online cancellation.
Almost half of subscription companies are planning to invest in AI technology or API integrations with partners. In doing so, they are looking to maximise the opportunity for growth. Consequently, gaining a competitive edge and attracting and retaining subscribers.
Adapting to the cost of living crisis
Amanda Mesler, chair and CEO of Minna Technologies, says: “For most subscription businesses, customer retention across all their channels, including native apps, banking apps and app stores, is a higher priority than acquisition. Subscribers can benefit from enhanced flexibility, convenience and control, unlocking greater value from their subscriptions. This is essential in the cost of living crisis.
“As subscription businesses face global macroeconomic challenges and evolving subscriber behaviour, demand and regulations, the ability to constantly adapt to the ever-changing landscape is vital. Regulatory developments in the US and UK also highlight the importance of protecting consumers’ interests in managing subscriptions. However, there is a growing optimism among subscription businesses in this rapidly changing landscape.”
Janine Hirt, CEO of Innovate Finance, adds: “The fintech community is an excellent example of how companies can leverage the potential of artificial intelligence and open data. At the onset, sharing and leveraging data across stakeholders has been fundamental to the growth and success of fintechs.
“The industry has led the way in offering consumers personalised financial services, tailored to each and everyone’s needs. The adoption of AI and the use of data for personalisation in financial products can help consumers and business to manage their spending in a more transparent and efficient way.’’
Cédric Petre, product area lead at daily banking and mobile first, ING Belgium, says: “Our feature, developed with Minna and available in our ING Banking app, has been a particularly important one in the context of high inflation when people looking for solutions to be more in control of their personal finances. ING OneView allows our customers to have a better insight into their subscriptions. They can save up to €240 every year via fully automated subscription management services.”