New findings show how subscription-related disputes are costing banks on average $136million per annum, with some disputes costing larger banks up to $200million. Negative customer experience and increased risk exposure are on top of that cost. Because of this, more inflated budgets are being allocated towards improving self-serve and end-to-end digital experiences.
According to recent findings from the thought leadership paper, ‘Banks Must Act Now to Avoid Subscription-Related Costs‘; a commissioned study conducted by Forrester on behalf of Minna Technologies, the cost of subscription-related disputes has increased.
Banks pay an average of $136million for subscription-related disputes per annum, with larger banks (with 15+ million customers) being the most heavily hit. More than 30 per cent of respondents from larger banks reported that the average annual cost of subscription-related disputes is more than $200million per annum.
The study reflects survey findings from over 300 senior bankers in the United States, United Kingdom, and Australia and illustrates the severity of the issue, the projected effect and their solutions, and respective budgets to address it.
As the subscription economy boomed, consumers have increased financial exposure to unrecognised subscriptions transactions and free trials, auto-renewals, and negative option subscriptions, where an individual feels ‘tricked’ into a subscription plan and gets stuck in a payment cycle. Most commonly consumers call their banks looking for solutions.
“The wave of subscription adoption, accelerated by Covid and projected to continue, has had a derivative effect on the banks’ balance sheets, has interrupted digital self-service experience customers demand and has increased banks’ risk profile,” Joakim Sjöblom, CEO of Minna Technologies explains. “UK, US, and Australian banks are allocating budgets to correct the trend, implementing solutions to simultaneously serve their customers while streamlining end-to-end services to support the subscription economy.”
Particularly in the regulated markets of the United States, United Kingdom and Australia, the rise in overall numbers and types of subscriptions have resulted in an increased desire for customer protection.
Banks, aiming to support the whole payment and management ecosystem of their clients, are currently facing a dual challenge; address both customer demand and combat rising subscription-related costs by offering solutions that blend customer self-service with operational efficiency.
“From a meta-perspective, the nature of a banking account has changed; customers expect a richness to their account feature set, a frictionless experience, and transparent, initiative and instantaneous access to their finances,” Pascal Bouvier, Partner, MiddleGame Ventures comments. “In parallel, banks seek to eliminate manual processes, the associated cost and risk, while aiming to satisfy the customer’s desire for control. The solution is a win-win for the retail client and the banks.”
The findings illustrate where banks are feeling the pain and their plans to respond in the coming 24 months:
- Seventy-five per cent of banks say that they have seen subscription-related dispute volumes increase by more than 10 per cent in the past 24 months.
- Eighty per cent of respondents said their bank increased its technology budget for dispute resolution during the past 12 months, and 76 per cent said their bank is increasing its budget during the next 24 months.
- End-to-end solutions are a top or critical priority for 82 per cent of banks, and 77 per cent are actively improving the user experience in digital channels.
To help address both customer demand and combat rising subscription-related costs, banks are looking for solutions that blend customer self-service with operational efficiency.
- Eighty-one per cent of respondents said reducing the customer’s need for assistance with simpler forms and self-service is a top priority. Respondents also said that reducing the cognitive load on customers is a priority.
- Banks reflect that 75 per cent of their customers welcome self-service capabilities to help them keep control of their finances and as a result, the future investment is reported to be going into subscription comparison and switch capabilities (44 per cent), subscription activation/change monitoring (47 per cent), single view of subscription capabilities (51 per cent) and self-service subscription cancellation capability (52 per cent).
Along with increasing customer service efficiency, respondents anticipate investment in dispute management technology to aid fraud reduction and lower costs for disputes and back-office operational costs
“Over the last few years we’ve seen a noticeable increase in calls relating to subscriptions,” comments Jacob Wanstall, Product Owner, Group Transformation, Lloyds Banking Group. “Working with Minna Technologies, we’ve been able to respond quickly to feedback and have created a self-serve process which means customers can easily manage their subscriptions directly within the mobile app.
“This has not only made life easier for customers, improving overall mobile app experience, but it has also reduced call volumes into our contact centres.”