UPDATED Jan. 18
After publishing a blog post about its policy change that seemed to suggest that digital subscriptions would be affected by new rules around free trials.
As detailed below, Mastercard is requiring that businesses that use free trials to sign up new subscribers to get new customers to opt-in to continue the relationship. But that rule change won’t apply to online services, only to physical products such as cosmetics, skincare, healthcare, and vitamin subscriptions. Such services have recently become popular via a subscription vehicle with customers receiving a box of products per month.
Here’s the statement emailed to us by Mastercard: “Mastercard realized that what they posted yesterday was being seen as applicable to all online services, when the rules are only applicable to trial “products” (aka “physical products”) such as cosmetics, skincare, healthcare, vitamin subscriptions.
“The reason for Mastercard putting these rules in place for “physical” goods is because historically they have seen most issues occur in this space. Online subscriptions traditionally are quite explicit and ask people to opt in.”
Mastercard has updated its blog post about the policy change to be accurage, but did not note that a correction was made.
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It’s a specific type of buyer’s remorse that we’ve all shared. Everyone’s talking about that amazing new digital service and you just have to try it – after all, why not? The first month is free.
Of course, that’s the first month. You still hand over your credit card information when you sign up, telling yourself you’ll set a calendar reminder to cancel before the billing cycle begins. You forget to set the reminder or you ignore it, and suddenly it’s half a year later and you’ve paid more than $200 for content that you never consume.
The digital service hook of providing a free month of free service and then requiring customers to cancel the service if they don’t want to be billed can be described as an industry standard. All the major tech firms do it. Apple Music, Netflix, and Microsoft for its Xbox services, just to name a few examples. All of them are upfront about the terms when you sign up, and they even remind you a few days before the trial ends. But as so many of us know, we still fail to end the subscription in time even when that’s our intent.
Now a change in policy from Mastercard could have these tech giants rethinking that approach. In cases where their customers subscribe with a Mastercard, they’ll no longer be able to automatically start billing them at the end of that free trial. They’ll have to ask for clear, opt-in, permission in order to start charging them.
Demonstrating a sophisticated mastery of marketing lingo, Mastercard explains in a blog post that it is “introducing rules for merchants that offer free-trials to make this a hassle-free experience for consumers.”
Merchants will have to send their customers a message the end of a free trial – either by email or by SMS – with information including the transaction amount, payment date, and explicit instructions on how to cancel. Then, for every other payment related to the subscription in the future, the Merchant must send a receipt for the transaction. Charges appearing on the cardholder’s statement must include the merchant’s website URL or the phone number where the purchase was made.
The change will probably save many consumers from experiencing digital subscription buyer’s remorse. It’ll be interesting to see if digital services change their tactics as a result.