Banks throughout the U.S, UK and Australia are facing significant costs due to a surge in subscription-related support calls. This article explains why, and what banks can do to reduce these costs.
During the last decade, technological breakthroughs have made it profitable for many companies to offer products and services on a digital subscription basis.
This technological leap has disrupted entire industries and paved the way for some of today’s best selling consumer products – including Netflix, Spotify, Amazon Prime, Adobe Cloud, and Apple’s App Store.
Because of this shift, consumers are now subscribing to more services than ever. Statistics from the U.S show that the average adult pays for 13 different subscriptions – an increase of 300% over the last seven years.
Not surprisingly, with so many new subscriptions, consumers are also experiencing more problems managing them.
A recent consumer survey found that 63% of Americans were paying for subscriptions they had forgotten about and no longer used. Similar numbers are reported in both Australia and the UK.
The survey also showed that 53% of Americans had been tricked into a subscription (e.g., a misleading free trial) which they later had trouble getting out of. A so called “subscription trap”.
A 2019 UK government investigation concluded that the problem with subscription traps is extensive, and that consumer law needs to be tightened up in order to protect consumers.
This is where banks enter the picture.
In the U.S, the UK and Australia, regulation now gives consumers the right to stop recurring payments (i.e., subscriptions) directly with their bank, and does not require consumers to contact the merchant.
Thus, when consumers are finding themselves trapped in subscriptions, they will call their bank.
Typically consumers will ask their bank to either block the unwanted subscription payment or deactivate the payment card.
Beyond this, consumers might also want to file a dispute with their bank in order to get their money back.
Recent data from banks shows that the volume of subscription-related support calls is significant.
Lloyds Banking Group (the largest digital bank in the UK with 12 million active mobile customers) estimates that roughly 10% of their customer base called support with subscription-related issues during 2021.
As consumer subscriptions are expected to double over the next five years, banks are anticipating even higher call volumes.
If this growth trajectory holds, from an operational cost perspective, a bank with 10 million customers could be facing subscription-related call center costs beyond $8 million per year.
(Note that this estimation doesn’t include the dispute costs related to subscriptions. We will cover these in another article).
Many banks are now asking: What can we do to reduce subscription-related support costs?
The simple answer is digital subscription management.
How digital subscription management help banks reduce support call volumes
Subscription management is a new consumer-facing digital banking feature embedded into the banks environment.
This new self-service feature has been brought mainstream by leaders in banking. European giants Lloyds Banking Group and ING are two successful examples.
So how does it work?
In short, subscription management features typically allow users to track subscription spending and cancel what is no longer needed with the tap of a button – without having to call support.
The video below demonstrates how the feature could work once embedded in the bank.
Banks that launch self-service subscription management typically see satisfying effects on call center volumes within the first three months.
In an interview with Visa, Nick Edwards, Director of Digital Transformation at Lloyds Banking Group, said:
“We saw a 70% increase in subscription payments after the pandemic – causing the bank to receive more than 100,000 calls a month related to cancellation of subscriptions.”
“Right away after launching the subscription management feature, we saw a clear reduction in call center volumes, as well as an overall increase in banking app usage”.
What banks should consider before launching a subscription management feature
While the demand is great and upsides are plenty, there are several pitfalls to consider before implementing a subscription management feature with optimal impact on reducing call volumes.
The biggest mistake is to launch a solution that only provides insights (e.g., data visualizations or spending tracking) – without the ability to take action on those insights.
While insights features offer good customer benefits, they are unlikely to have any effect on the bank’s bottom line. As most subscription-related support calls relate to the stoppage of payments, banks should focus their attention on developing self-service capabilities.
Hence, by allowing customers to cancel unwanted subscriptions using self-service, banks will see call volumes drop.
Along with developing the right types of capabilities, banks should also ensure a broad coverage of subscriptions that can be identified and canceled end-end. From experience, we know that there is a clear inverse correlation between number of cancellable subscriptions and support call volumes.
A broad cancellation coverage typically requires good relationships with the large merchants, as well as an automated self-service back-end system allowing merchants to effortlessly comply with any bank customer cancellation requests sent via the bank’s system.
In other words, the feature will only have its intended effect if it makes life easier for both customers and merchants.
Fortunately for banks, there are experienced full-service vendors who will take care of everything from UX design to building relationships with large vendors.
At Minna Technologies, we are world’s leading expert in building subscription management features for banks. We partner with top-tier banks across the U.S and Europe and are backed by some of the biggest financial companies in the world.
If you want to know how much your bank can save with subscription management, don’t hesitate contact us to for a free cost-savings analysis and consultation.