Demand for subscriptions defies cost of living crisis with consumers reluctant to cancel

Despite rising living costs, consumers are reluctant to cancel their subscriptions, instead opting to upgrade or pause contracts, reveals research from Minna Technologies, the global market leader for subscription management embedded in banking and fintech apps.

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 ten (92%) subscription businesses admit that the rising cost of living is a threat to their business, but note that consumers remain much more likely to upgrade their subscriptions rather than cancel – as previous research from Minna Technologies indicates that 86% of subscribers would consider accepting a new offer on their subscriptions rather than cancelling*.

Each month 25% of users change their subscription with account upgrades being the most common switch with two thirds (65%) of subscribers opting for this.

The research also shows that almost three quarters (72%) of users would rather pause their subscriptions than cancel. Currently, 61% of subscription companies offer users this option whilst a further third (33%) 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, known as the ‘churn and return’ phenomenon. Six in ten (60%) subscription businesses say that up to a fifth of their users cancel and then resubscribe within six months.

Over half (54%) of subscription businesses have seen subscriber numbers increase by more than a fifth over the last 12 months, with US businesses experiencing a larger rise (63%) compared to 46% of UK companies. This could be partly driven by differing economic challenges in these markets – with US inflation sitting at 4% less than half the 8.7% experienced in the UK.

Globally, regulators are looking to introduce legislation to offer subscribers more protections, including 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” whilst US regulator – the Federal Trade Commission – recently proposed requirements for companies with customers on recurring payment programs to offer easy online cancellation.

In order to showcase value to their customers in the current climate, and with cancellations becoming easier, almost half of subscription companies are planning to invest in AI technology or API integrations with partners in a bid to maximise the opportunity for growth, gain a competitive edge and attract and retain subscribers.

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 – 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 amongst 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 & 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 and people looking for solution to be more in control of their personal finances. ING OneView allows our customers to have a better insight into their subscriptions and save up to 240 euros every year via fully automated subscription management services.”

Minna Technologies is the only B2B2C platform with an automated subscription management engine, bank-grade compliance and the widest global subscriptions and payments coverage. Minna helps global clients, including financial institutions such as Lloyds Banking Group, ING, Swedbank, OP Financial Group and SpareBank, fintechs and subscription businesses, grow revenue, reduce operational costs, and drive engagement, retention and lifetime value for over 50 million users.

*Figures from Subscription Economy: A Transformed World, 2022. Available for download here: https://minnatechnologies.com/subscription-economy