Mastercard's free trial rules likely to alter the subscription economy's playbook

Mastercard will require merchants ending free trials to notify consumers before they start billing. The move is likely to alter a key tactic in the subscription economy.
Written by Larry Dignan, Contributor

Mastercard is putting in new rules for free subscription trials that will require merchants to get approval before billing.

Under the rules, Mastercard will require a merchant to send the cardholder a text or email with the transaction amount, payment date, merchant name and instructions on how to cancel a trial.

It's a safe bet that these Mastercard rules will be emulated elsewhere by the likes of Visa and American Express. In the end, one facet of the subscription playbook--the free trial and the billing inertia will change. See: App economy expected to be $120 billion in 2019 as small screen leads digital transformation efforts

As consumers, we've all started free trials and wound up subscribing to something we didn't really want. This inertia is a big part of the subscription economy. Whether it's a gym membership, a magazine or a cloud storage subscription it's all the same. Once you subscribe you'll likely to keep paying largely based on inertia.

Mastercard summed up its rules free trials and ongoing subscriptions in a blog post:

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.

Now these rules are really best practices. But Mastercard's new approach will impact a bevy of apps as well as big guns like Apple, which is increasingly relying on services. For instance, Apple Music kicks off with a three-month free trial.

Here's a look at the most monetized apps according to App Annie and you'll quickly realize that many of these companies have a trial to get you going.

App Annie

Netflix, which is raising prices, has a free month. Tinder is free, but has a bunch of upsell opportunities embedded. HBO Now has a free trial too. The giants in the subscription economy will be fine, but it's unclear how the free trial approach works out for smaller players. In any case, the subscription marketing playbook is going to be rewritten as Mastercard's approach is emulated elsewhere.

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