Why Customers Should be able to Cancel Subscriptions

By Roger Alexander

Subscription-based companies have been some of the biggest success stories in recent years. The likes of Netflix, Adobe and Spotify, among countless others, have all built multi-billion-dollar businesses and founded industries that have inspired endless numbers of copycat companies, some of which have become successful in their own right. 

Even companies that were wildly successful prior to the recent boom in recurring services have made strategic moves to offer subscription-based services complimentary to their original offerings – think of Amazon Prime, Uber One, or Apple One, which packages individual subscriptions for Music, TV, and Arcade. 

While their success is irrefutable, customers have every right to change their mind or cancel. According to our Cardholder Dispute Index, consumers want cancellations to be easier; 90% would like to be able to cancel recurring payments from their phones, without being required to contact the company. This will undoubtedly raise a red flag for such companies, as they will lose important touchpoints with their customer, unable to offer incentives to stay or exit surveys to determine why they decided to cancel. 

How then can subscription-based businesses balance their customers’ needs against their own business goals?

Subscribing to the subscription model

The digital age didn’t create the concept of subscriptions; they have existed for a long time, such as the days of milk and newspaper deliveries. Others signed up for magazine subscriptions, accessing special interest titles that their local newsagents wouldn’t necessarily carry. 

The model made its way into areas that were typically based on single sales. For example, software like Adobe Photoshop would have only been available via an expensive CD-ROM and wouldn’t include automatic updates and the latest functionalities. Professionals would need to upgrade every year to keep up to date, generating demand and regular buyers, but was open to being corrupted or duplicated. Adobe instead adopted a software-as-a-service model with users paying a monthly fee for unlimited updates to the software.

While there are many use cases across sectors, it was eCommerce that truly took the business model stratospheric. It has never been easier to set up a subscription, especially when using mobile apps and digital wallets, which can make it as easy as a few button presses to access services and saw customers signing up for services in droves. Subscriptions are now so convenient that three-quarters of people believe that they have subscriptions that they have forgotten about. While this may be relatable, it raises the question of how many subscriptions are fraudulent or even made simply in error. 

Those harnessing the power of subscriptions grew their customer base by 31% in 2021 alone, and while it’s likely that the post-pandemic era was responsible for a spike in subscriptions – many signed up for food boxes, streaming services and regular creature comforts – this increase is holding steady today. 

Handling cancellations with care 

Unlike low-value subscriptions like Netflix that can offer free trials, the high-cost subscriptions to professional-level SaaS products like Adobe are uneconomical to offer on a customer-friendly basis. Buyers must cancel within two weeks of signing up to a subscription to receive a full refund or receive a penalty, and this has caused friction with the FTC.

Faced with losing a significant sum of money because of these terms, it’s no surprise that a percentage of users initiate chargebacks. The SaaS industry suffers a higher-than-average level of chargebacks, with 0.66% of transactions being disputed. The system works in the favour of consumers, which means that of that 0.66%, many are likely to receive a full refund. 

The solution isn’t a tighter grip on subscribers as restrictive terms and conditions will result in a greater percentage of users will use the chargeback system. Ultimately this will cause greater financial harm than customer-centric policies. Conversely, policies weighted too heavily in favour of customers mean they can circumvent them, and 20% of subscribers do so because they ‘only signed up to benefit from an introductory discount’ for example.

Subscription companies must instead build cancellation policies that are both customer friendly and backstopped by strong chargeback prevention and remediation systems. Some companies with low-cost products may be able to offer fully customer-centric policies, with no-quibbles refunds, generous introductory discounts and discounts to entice cancelling customers back, but many with more costly subscriptions won’t find it economical to do so. In this case, only constant experimentation with policies to find what works, plus machine-learning-based chargeback remediation, will be able to maximise the value of subscriptions.

About Roger Alexander

Roger Alexander serves as a key advisor to Chargebacks911’s Advisory Board and its CEO, Monica Eaton, assisting the company with its expansion initiatives, including the highly-anticipated launch of its dispute resolution solution set to address the record spike of authorised push payment (APP) fraud claims. 

With over 36 years of payments experience, Alexander has previously served in various leadership roles within the payments and financial services sectors, including more than a decade in directorial roles at Barclays and subsequently as the CEO of Switch (the UK’s Debit Card) and President of Elavon Merchant Services Europe. He is currently a strategic advisor for Tarci and Pennies, a major UK charity, and previously held key NED positions with ACI Worldwide, Caxton and Valitor, among others.

About Chargebacks911  

Founded in 2011, Chargebacks911 is the first global company fully dedicated to remediating chargebacks and helping to eliminate first-party fraud and misuse. As industry-leading innovators, Chargebacks911 is credited with developing the most effective strategies for helping businesses manage disputes and reduce loss in various industries and sectors within the payments space.   

Chargebacks911 provides comprehensive SaaS solutions that are highly scalable for managing chargebacks, handling services and fraud strategy management. The company helps decrease the negative impact of chargebacks and provides real-time API connectivity and insights, thereby improving revenue retention using data-driven technology to help ensure sustainable growth for every member of the payment channel.  

Chargebacks911’s unparalleled category experience and patented Intelligence Source Detection (ISD™) technology helps identifies the true source of chargebacks, automatically remediates fraudulently filed disputes, safeguards reputations, monitors feedback 24/7 and provides insight to proactively prevent future fraud. www.chargebacks911.com

About Fi911  

Fi911 supports financial institutions with innovative back-office automation technologies created specifically for banking and financial institutions. By supporting direct communications between FIs and their ecosystems, the company’s scalable payment product suite offers features that range from fast, flexible merchant onboarding to highly transparent and feature-rich client portals. 

Fi911’s proprietary DisputeLab™ helps resolve chargeback disputes faster and more efficiently by utilizing next-generation technology that leverages a robust rule engine and highly scalable microservices specifically designed to optimize each step in the dispute cycle. The company’s unified platform also provides threat detection, reconciliation, risk management tools, and the ability to generate commissions and ISO pay-outs directly through the system. Established by the dispute experts at Chargebacks911®, Fi911 offers global reach and expertise, and customized training and support from recognized industry leaders. https://fi911.com/