The US Federal Trade Commission (FTC) has adopted a 'click-to-cancel' rule, which aims to make it easier for people to end subscriptions.
However, Chargebacks911 research has previously reported that nearly 90% of cardholders want banks to be able to cancel subscription services on their behalf.
Coupled with dormant accounts or consumers unaware of the subscriptions they have in place, it highlights the need for merchants to implement an effective strategy that enhances customer satisfaction and reduces unwanted disputes.
LONDON, United Kingdom — Chargebacks911, the global chargeback technology leader, has called on merchants across the globe to prepare their operational and customer service policies ahead of the U.S. Federal Trade Commission’s (FTC) 'click-to-cancel' rule, which will require businesses offering subscription services or memberships to make it much easier for customers to cancel. While the rule change is expected to reduce chargeback misuse for subscription services, transaction dispute experts at Chargebacks911 are giving merchants best customer service practices to appease customers and even retain subscribers.
The proposed ‘click-to-cancel’ rule will force companies to make subscription sign-ups and cancellations equally straightforward. It also means that businesses, including streamers, retailers and gyms, will also have to get consent from customers before renewing subscriptions or converting free trials into paid memberships—and is due to come into effect in six months' time.
While industry insiders maintain it should reduce chargebacks, merchants must start adhering to this policy now to avoid costly disputes and FTC penalties. Chargebacks911’s 2024 Cardholder Dispute Index—a comprehensive survey of more than 4,000 consumers gauging their views on transaction disputes—previously reported that subscriptions and free trials are changing to better fit the contemporary shopping ecosystem.
The global subscription eCommerce market, for example, already tops $100 billion annually. As subscriptions are used for an ever-widening list of products and services, that number is expected to expand to nearly $2.4 trillion by 2028. This growing trajectory means consumers are embracing subscriptions, but we see a different story when it comes to cancelling unwanted subscriptions.
In the case of personal subscriptions, 87.6% of respondents wanted their banks to provide a way to cancel a service on the subscriber’s behalf. “There are a number of reasons customers may not want to contact the retailer, including odd service hours, hard-to-cancel processes, and pushy agents,” said Monica Eaton, Founder and CEO of Chargebacks911. “In many cases, the customer simply forgets the subscription exists, then discovers months later they are still being billed.”
According to a report by C+R Research, 42% of consumers admit that they’ve stopped using a subscription service but forgot they were still paying for it, and that 72% report setting all their monthly subscriptions to autopay.
“Hidden or otherwise onerous cancellation processes will lead to unhappy customers, which will resort to chargebacks to recoup their money,” added Eaton. “Subscription cancellation should always be a simple and straightforward process for customers. Improving the customer experience in a way that allows them to self-manage their accounts is not only forward-thinking, but a growing market demand.”
While cancelling subscriptions will soon be easier than ever, Eaton maintains there are ways to keep their subscribers engaged—even at the point of cancellation. Eaton advises merchants to implement the following customer service processes to help retain customers:
Clear and consistent communication: Being transparent about terms and conditions, providing email updates about current services, and sending billing reminders can build trust and reduce the likelihood of surprise cancellations.
Offering exclusive content or perks: Many customers subscribe to loyalty programs or monthly subscriptions to take advantage of promotions or discounts they wouldn’t receive otherwise. Offering these exclusivities, especially at the point where customers are looking to cancel, could be the difference between retention and revocation.
Reinforce the benefits of your program: Send periodic summaries of how much you’ve saved the customer through your membership or subscription, or offer rewards and bonuses for long-term subscribers.
Provide subscription flexibility and cancellation surveys: At the point of cancellation, merchants should offer their departing customers the alternative of pausing their subscription rather than cancelling altogether, or allow them to downgrade their plan. Should a customer still choose to cancel, provide them with a survey that can gather feedback so merchants can develop solutions to address those concerns.
The stakes are high, and businesses that fail to address transaction confusion risk not only financial loss from chargebacks but also potential damage to their reputation and customer relationships. With friendly fraud representing a significant portion of chargebacks, Eaton says that companies should include recurring billing information, as well as terms and conditions, within the checkout process and to make sure the information is easily accessible for customers. Companies should also increase the frequency of reminders and billing confirmations ahead of renewal dates.
For more information on Chargebacks911, visit www.chargebacks911.com.
Chargebacks911® is the global leader in chargeback prevention and remediation technology. As a platform provider to merchants and financial institutions, Chargebacks911 is the first global company fully dedicated to providing an end-to-end platform specifically designed to counter post-transactional fraud and chargeback misuse. Today, Chargebacks911 safeguards more than 2.4 billion transactions per year on behalf of clients in 87 countries around the world, supporting over 2.5 million merchants. For details on Chargebacks911’s comprehensive dispute management solutions, visit https://chargebacks911.com.