What can subscription businesses learn from Mastercard’s new rules for auto-renewals?

What can subscription businesses learn from Mastercard’s new rules for auto-renewals? Mastercard’s new policy that requires subscription businesses to notify customers before billing them after a free trial lays a good template for the subscription industry. Shashank Venkat explores how subscription businesses can build more transparency and trust. 

Last week, payments giant Mastercard’s announcement of new rules around free trials was seen as a shot in the arm for the subscription industry which has been subject to all kinds of deceptive tactics. However, Mastercard has subsequently clarified that these rules only apply to physical products and not digital services, severely limiting the scope and effectiveness of this new policy.
 
Nevertheless, Mastercard’s announcement has put free trials and auto renewals right back in the spotlight. While free trials are a great way to let customers experience a product and/or service, unconsented auto-renewing subscriptions have completely spoilt this customer experience. We have all been subject to services that we unwittingly subscribed to – either because we forgot to cancel the free trial, or the terms and conditions were not made clear from the start. The end result can be a frustrating and costly one for subscribers – the absolute antithesis of the customer experience principles the subscription industry is built on.
 
In an earlier blog, we pointed out that sneaky subscription tactics have even plagued the iOS App Store with the leading rogue apps having raked in as much as $14.3 million in subscriptions.  Mastercard’s announcement is a recognition of the fact that such practices exist even in subscriptions for physical goods. With more industries entering the subscription space, this problem is only going to fester if nothing is done about it now.

What should subscription businesses do?

We think that self-regulation can be a great way forward for subscription businesses and Mastercard has set a good benchmark for what is required. However, the principle of gaining subscriber approval before billing them after a free trial should apply to all subscription businesses, not just those delivering physical goods. In addition, they should also provide clear instructions how to cancel subscriptions and make it easy to do so. Furthermore, all charges, including the transaction amount, taxes and other costs, payment date and merchant name should be included on the regular invoices that are sent out to subscribers.
 
The foundation for this is using a robust recurring billing platform which offers customer notifications at each stage in the subscription lifecycle. These systems come with built-in checks and balances that automatically provide detailed invoices, are compliant with applicable legal and accounting standards and help you provide a superior customer experience. Self-regulation is a great way to increase transparency and build trust in your subscription business.

What should subscribers do in the interim?

Until the subscription industry cleans up its act, subscribers will have to do more to protect themselves against such bill shocks stemming from free trial lapses and auto-renewals. Lifehacker suggests the following approaches:
 
Use a subscription management app – In our subscription roundup last month, we wrote about Truebill - a new app that allows users to manage and track all their subscriptions in one place. So, if you are hooked on subscription services, perhaps an app like Truebill will be a great way to keep track of where you are spending your subscription dollars.
 
Sign up and cancel – From personal experience, this is one that works like a charm. Most businesses honour the time period for the free trial, even if you cancel the subscription immediately. This is one of the easiest and best ways to ensure that you do not end up subscribing to a service that you are not really sure of.
 
Set up reminders – Alright, this is one of the more time-consuming things to do since it involves a lot more manual work. But subscribers also have the option of immediately setting up a calendar reminder on the date each free trial ends. This is also a good way to ensure that your subscription dollars remain in your pocket.