FTC’s click-to-cancel rule prompts subscription businesses to rethink operations

A new rule from the Federal Trade Commission (FTC) designed to streamline the cancellation process for subscription services has sparked debate among companies relying on subscription models. Known as the “click-to-cancel” rule, it aims to eliminate the frustrations many consumers face when attempting to end their subscription agreements. This regulatory shift places increased pressure on subscription-based businesses to reevaluate and potentially revamp their payment and cancellation processes.

This development comes in the wake of a survey conducted by the payment processing platform Solidgate, which provides insight into consumer experiences and expectations regarding subscription services. The survey of 1,000 adults highlighted significant consumer dissatisfaction with current practices. According to the findings, one in four adults encountered unexpected charges related to their subscriptions. This dissatisfaction is further compounded by the fact that 80% of those surveyed said they would not recommend a subscription service to friends if they experienced difficulties in cancelling it.

The survey also revealed that one in three consumers opted to cancel a subscription in the past year due to frustration with billing practices. More critical points from the research include that an overwhelming 70% of consumers would terminate a service if they encountered payment processing issues. Moreover, 60% of participants felt businesses provided insufficient information when transactions were declined, and over 50% believed they weren’t afforded adequate time to resolve payment issues before a subscription was cancelled.

Furthermore, a concerning 82% of consumers expressed anxiety over the potential for their credit card details to be compromised when associated with subscription services. Additionally, five out of every six respondents indicated a desire for more flexible billing dates to avoid declined payments.

Yuri Alekseev, CEO and co-founder of Solidgate, commented on the delicate dynamic between customer satisfaction and operational efficiency in the subscription economy. Alekseev stressed the importance of businesses refining their approach to payment processes to reduce customer churn and bolster trust and brand reputation. “Our research reveals the delicate balance between challenges and opportunities in the subscription economy,” Alekseev stated. He emphasized the need for businesses to offer flexible billing options, ensure clear and prompt communication regarding payment issues, and implement robust security measures to maintain customer loyalty and encourage positive referrals.

Alekseev further noted, “In today’s subscription economy, the payment process is no longer just a backend function – it is vital to driving revenues. Businesses that deliver smooth, secure, and flexible payment experiences can secure their advantage, reducing churn and boosting their brand reputation.”

The introduction of the FTC’s “click-to-cancel” rule serves as a pivotal moment for subscription-based businesses, urging them to align their operational tactics with consumer expectations and regulatory standards. This adjustment could potentially transform how these businesses interact with their customer base, influencing their strategic direction in the highly competitive subscription market landscape.

Source: Noah Wire Services