Can VRP help UK consumers avoid subscription traps?
As consumers weather the cost-of-living crisis, unwanted subscriptions are becoming a costly annoyance. Could VRP offer some much-needed relief?
The cost-of-living crisis is having a devastating impact on British households. Steep rises in energy prices and the cost of consumer goods have reduced the purchasing power of most Brits. With inflation expected to peak at 13% toward the end of 2022, consumers are scaling back their budgets and looking for new ways to save.Subscriptions are likely to be a prime target. At a time when many Brits are tightening their belts, cutting out unwanted subscriptions is an easy way to make their budgets leaner. In fact, a recent survey from YouGov and TrueLayer found that 62% of respondents intend to review their subscriptions in the next six months in the wake of rising costs.
Unfortunately, that’s easier said than done. Opting out of a subscription can be a long and difficult process, one that’s often off-putting for customers. Almost half (45%) of YouGov respondents reported that subscriptions were too difficult to cancel.
One answer may come in the form of variable recurring payments (VRP). Using open banking technology, VRP already facilitates ‘sweeping’ — sending money between two bank accounts owned by the same person. But it could also allow account holders to manage all of their subscription payments in one place.So what is VRP, and can it help Brits escape the trap of unwanted subscriptions?
The problem with subscriptionsBefore we explain VRP in more detail, let’s look at why subscriptions currently pose so many issues.For starters, it can be difficult for consumers to track all of their plans across multiple accounts. Most subscriptions involve one of two types of recurring payments:
- Direct debits: merchants collect payments of variable amounts from their customers on a regular basis
- Card on file: merchants initiate a regular payment using their customer’ payment card details that are stored on file
This isn’t just a problem for consumers, either. Merchants degrade their customer experience when they make it difficult to end a subscription, costing them future business. YouGov’s survey found that more than half (51%) of respondents would be more willing to sign up for subscription services if they were easier to cancel.