As Mastercard enters the subscription management space, companies dedicated to the space are eyeing it with interest

Last week Mastercard announced that it will be partnering with fintech Subaio to offer a subscription management tool. This tool can integrate into bank apps and help consumers manage their payments at the point of action.

The subscription economy saw a boom during the pandemic and is expected to hit $12.5 billion by 2026. However as economic pressures have set in, consumers are cutting back on subscription spend with 43% of consumers doubting they will renew one or more of their subscriptions, according to PYMNTS. 

Even though the intent to cancel subscriptions has solidified for a lot of customers, actually doing it is a separate story. This is because customers have quite a few subscriptions across different platforms and categories. On average, consumers have an estimated 12 subscriptions in the media and entertainment category alone, according to Statista.  As consumers stack subscriptions across platforms, visibility into total expenditure on subscription reduces. 

Before Mastercard’s entry into the space, companies like ApexEdge, Recurly, and Minna Technologies offered similar solutions. Mastercard’s involvement, however, not only underscores the growing use case for such services but also adds to the competition that smaller companies face. 

Mastercard’s product

For Mastercard, the process of launching this product started out from gauging market interest. Their research showed that 74% of customers wanted the ability to control their subscriptions and 60% of them trusted their bank to offer it, according to Chris Reid, EVP of Identity Solutions at Mastercard. 

The message to cancel a subscription automatically alerts the merchant’s CRM, said Reid. “If you can take the operational inefficiency out of the process, that's the target state,” he said. In the future, the same functionality could be extended to offer upgrades, or pause a subscription, he added. 

Connecting merchants with banks and cardholders is what Mastercard does. So extending this relationship into the subscription world was a natural fit. 

Mastercard had methods of doing this before the announcement that were rather “inelegant” according to Reid. “You as a cardholder can ask your bank, the bank will inform us, and we'll block any transaction coming from that merchant to you,” he said. This blocks the service for a time rather than canceling it entirely. 

Once a bank decides to take on Mastercard’s subscription management tool, what a consumer sees on their app can differ bank to bank. The option to cancel can appear within the transaction history tab, next to the recurring payment, or it may be housed in a separate space within the app that is dedicated to subscription management. “We will advise the bank partner on the best practices there,” Reid added. 

Competitor’s POV 

For firms that are dedicated to the subscription management space, Mastercard’s new product is an intriguing development that will be followed by watchful eyes. “Large companies have the capital to run a lot of experiments and try stuff. And, I think the interesting thing will be, how the market responds. I'm not quite sure how the market will react, shops that are primarily Visa shops may not be so thrilled about it,” said Steven McKean, CEO of ApexEdge. 

ApexEdge offers banks solutions around subscription management, as well as bill negotiation. The company has been exploring Generative AI’s potential to help scale its technology as well as cut down on the need to involve human agents. “If you say 'ChatGPT cancel this', well, what if it didn't? So there's a way to go. I mean, we're doing a lot of work there. We think it makes sense to introduce it to customer support and quality control,” he said. 

While Mastercard already has a merchant network it is connected with, how ApexEdge manages to onboard merchants is part of its “secret sauce”, said McKean. The services that it can provide for a merchant is what helps ApexEdge differentiate in this space. “MasterCard is a company with billions of dollars, and we're not a company with billions. We're the little guy. We have figured out some ways to have a win-win setup and a constructive dialogue, beyond “Oh, this is good for you." We're approaching it a little bit differently,” he added. 

McKean also said that he had known for about a year that Mastercard might be eyeing the space. This announcement, then, was no surprise.

Customer’s POV

Solutions by both Mastercard and ApexEdge offer consumers increased convenience and usability when it comes to canceling subscriptions. But a user's visibility of all she spends on subscriptions is limited to the digital banking app environment. If a customer has accounts at multiple banks, she will only be able to utilize these services at the bank that offers this solution.

This means that a full, top down view of expenditure on subscription services as well as the ability to cancel all of them easily is not available through these companies. Even if every bank that a customer has accounts with offers subscription management, there isn’t a way to pull data from each one of them into one integrated place. Currently this is only possible from a personal finance management app or within an open banking environment that links data from all your financial institutions into one place. 

“At the moment, this is an individual bank led solution, where logically you would expect to see the transactions within that bank environment. Who knows where it will go with open banking?” said Reid.  

The Truebill app links with all of a consumer's bank accounts, finds the subscriptions associated with each account, and presents this aggregated view on a single platform. Customers can then manage their subscriptions across all bank accounts from the app and may enlist Truebill’s services to cancel subscriptions if need be. The company was bought in 2022 by Rocket Companies, the holding company for online mortgage provider, Rocket Mortgage, as well as other personal finance apps. “Since Truebill got bought by Rocket, they're focused on servicing Rocket customers and are not innovating as much. I do see a second crease emerging in the B2C space,” said McKean. 

He expects that the B2C space has an opportunity for a product that caters  more fully to all that comes with subscription management. This includes offering features like pausing a subscription, being able to negotiate better prices, as well as getting better offers and deals. A solution like this can produce benefits for both the customer and the businesses they pay. 

With a more robust solution, businesses will be able to identify what customers might be likely to leave and run campaigns focused on them, reducing churn. On the other hand, customers can get a better look at which subscriptions are worth their money or even re-negotiate prices that are more budget friendly. “A lot of the markets when it comes to home, internet, wireless, home security, and TV  are oligopolistic, where there's only two or three providers. So it's not much of a switching game. It's more of a negotiation game,” said McKean.

Although Mastercard’s entry validates the subscription management space, it is bound to make things more competitive. This competition and a renewed customer attention on subscriptions may in turn motivate exploration of the few stones that have been left unturned.