Mastercard’s new policy around free trials is likely to have an effect on subscription services.
Updated, 9.21am, 18 January 2019: Mastercard has updated its original blogpost to clarify that the new policy only applies when customers subscribe to physical products that are delivered to your door, such as subscription beauty boxes and supplements, not digital services such as Spotify or Netflix. A spokesperson for the company told The Verge that it was starting with physical products as this is where the majority of customer complaints had originated from.
Most people who have signed up to a free trial of an online subscription service have been stung with a surprise billing, particularly if they forget to cancel ahead of the trial’s end date.
Free trial rules tighten up
Yesterday (17 January), Mastercard unveiled new rules, which will see merchants required to send a text or an email to the cardholder with the transaction amount, date of payment, name of vendor and instructions on how to cancel a trial.
The company added: “For each payment thereafter, the merchant will have to send a receipt to the cardholder for each transaction by email or text message with clear instructions on how to cancel the service if the consumer so desires.
“In addition, all charges that appear on the cardholder’s statement must now include the merchant website URL or the phone number of the store where the cardholder made the purchase.”
“Free trial offers can be a legitimate and useful way to increase sales and improve consumer satisfaction. The new rules will help increase transparency and ensure an outstanding experience for cardholders,” Mastercard wrote.
A change for subscription services
Other payments companies are likely to follow suit, so this means major change for many subscription-based services that offer free trials. Many of these businesses bank on subscribers signing up for the free trial and continuing to subscribe to a service they don’t really want.
The US Federal Trade Commission has a service that allows people to complain about businesses using free trials to trap users into continuing to pay for a service. Many such companies can make it an arduous process to cancel. The new rules from Mastercard are likely to shake things up for companies using this strategy.