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Thought Leadership Blog

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The Subscription Siphon: Draining Your Customers' Financial Tank

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Subscriptions are on the rise, increasing from $57 million in 2011 to $2.6 billion in 2016.¹ When that’s broken down, “the average American spends $237 a month on subscriptions.”² And it’s no surprise, considering some of the most beloved companies—including Netflix, Amazon, and Apple—use this increasingly popular and profitable model.

While this is great for companies, it’s not always great for consumers. Recurring subscriptions are something most of us likely have—from multiple services for movie and music streaming to a gym membership we haven’t used since setting our New Year’s resolution. But these seemingly harmless expenses can make it hard to save and budget.

In general, most Americans struggle to maintain a healthy relationship with money, and adding subscriptions to the mix can inevitably cause more harm than good for people who are already having a hard time managing their finances.

Although subscriptions are generally small charges, they can add up to big debt. “Analysts and financial planners say the popular revenue model could result in more personal debt and weigh on people’s ability to save.”³ Furthermore, according to a survey, "almost 62% [of consumers] have paid for unwanted subscriptions or memberships because they failed to cancel an auto-renewal feature." And perhaps what’s even more troubling is that “over half of the survey respondents didn't know how many subscriptions they currently have.” Even when consumers are aware of their subscriptions, 84% of them underestimate how much they’re spending a month.⁴

Unfortunately, none of this is particularly surprising. Staying on top of financial matters is hard enough as it is for most people, but when you add subtle and recurring charges like subscriptions, it’s easy for them to go unnoticed or become easily forgotten. In fact, "70% of [consumers] surveyed say they continue paying for unwanted subscriptions because they simply forget to cancel the service before it's renewed."⁵ And "19% of the respondents say it takes too much effort to cancel the service."⁶

Interestingly, the subscription landscape continues to evolve as more competition enters the popular space. As of right now, Netflix continues to be “the king of subscription streaming services, with nearly 150 million subscribers.” However, “with Disney+ and Apple TV+, the competition for subscribers is heating up.”⁷ As competition in the space intensifies, "fewer new providers entered… the market during Q2 2019, and players in the space have largely not been improving their performance."⁸

How Financial Institutions Can Help
A common misconception for consumers is that big costs are the primary obstacle to managing a budget. In reality, it’s often the less visible, smaller costs that can undermine people’s financial plan. Month after month, subscriptions quietly siphon dollars from consumers’ bank accounts. That can amount to hundreds of wasted dollars in a year—money that could be used for other things like big purchases, saving or even investing.

Today, consumers are increasingly looking for help and guidance from their financial institution when it comes to budgeting smarter and planning for their financial future. In fact, “78% [of consumers say they] want financial advice from their bank.”⁹ And now, with the use of technology, financial institutions are more capable than ever before to help their customers cut unwanted expenses and gain complete visibility into their finances. For example, financial institutions are already providing their customers with digital budgeting tools and personalized insights. Adding the ability to see which subscriptions consumers are signed up for is a quick win that adds value to the relationship.

How MX Can Help
At MX, we create technology solutions that give financial institutions the digital tools they need to provide customers with a truly modern banking experience. To that end, we’ve added a subscription feature to MoneyMap, our personal financial management solution, so financial institutions can help customers track spending and budget smarter. This simple addition surfaces subscriptions at the top of the transactions widget two weeks before they become due, so customers know exactly what they’re paying for month-over-month. Subscriptions cover monthly services from Netflix and Spotify to fitness and much more. We also include a yearly total per subscription, giving customers the ability to see how much money they’re spending over a year. Over time, the subscriptions feature can help your customers cut unnecessary spending and budget smarter—turning them from spenders to savers to investors.
Help your customers avoid unnecessary spending and budget smarter with our subscriptions widget >>

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  1. Reflects revenue for subscription e-commerce companies on Internet Retailer’s Top 500 list for 2011 vs 2016.
  2. https://www.waterstonegroup.com/insights-and-news/americas-relationship-with-subscription-services/
  3. https://www.cnbc.com/2019/11/18/subscriptions-building-revenue-for-companies-but-sapping-wallets.html
  4. https://www.westmonroepartners.com/Insights/White-Papers/Relationship-with-Subscription-Services
  5. https://www.globenewswire.com/news-release/2016/03/21/1240985/0/en/Hiatus-Survey-62-of-Consumers-Waste-Money-on-Unwanted-Subscriptions-Because-They-Don-t-Cancel-Automatic-Renewals.html
  6. https://www.globenewswire.com/news-release/2016/03/21/1240985/0/en/Hiatus-Survey-62-of-Consumers-Waste-Money-on-Unwanted-Subscriptions-Because-They-Don-t-Cancel-Automatic-Renewals.html
  7. https://www.pymnts.com/news/retail/2019/are-consumers-maxed-out-on-subscription-commerce/
  8. https://www.pymnts.com/news/retail/2019/are-consumers-maxed-out-on-subscription-commerce/
  9. https://www.jdpower.com/business/press-releases/2018-us-retail-banking-advice-study