Mastercard attacks subscription-pay chaos with open banking tools

Amir Hamja/Bloomberg

One of the pandemic's legacies was a broad surge in consumers' use of monthly online subscriptions to pay for everything from streaming to food delivery, and it's interfering with bank customers' ability to manage their budgets, according to Mastercard.

Wielding open banking tools Mastercard acquired through its purchase of data-aggregator Finicity in 2020, the card network is piloting a service giving mobile banking app users a bird's-eye view of their monthly subscriptions with the option to turn them off, pause or resume them, Mastercard said on Tuesday.

Smart Subscriptions is designed for any financial institution — even if it's not a Mastercard issuer — to add via an application programming interface, or API, on a white-label basis, said Stephanie Meltzer-Paul, Mastercard's executive vice president of global loyalty.

"Our research suggests that while many bank customers have more than a dozen monthly subscriptions, many don't realize how many they're paying or when they're all due, and most of them want help so they can more easily manage household expenses," Meltzer-Paul said.

The new tool builds on Subscriptions Control, a service Mastercard rolled out last year that created a one-click approach to cancel unwanted subscriptions, whether paid via a bank account or a credit card.

Combining that service with Finicity's ability to reach more than 95% of all subscription service providers, Mastercard hopes to set itself apart from a growing array of other services from banks and third parties that help users manage their various subscriptions, according to Meltzer-Paul.

For example, Smart Subscriptions introduces the ability for users to analyze their overall spending on subscriptions by amount and categories, and provides information about merchant offers in a single view, she said.

Rivals include Rocket Money, powered by Plaid, which gives consumers who opt in basic services to track subscriptions but it charges a fee for premium services. Many banks also offer services to change or cancel automatic payments within their mobile apps, but these typically require at least a few steps and they may not include full visibility into past and future subscription payments.

The open banking technology built into Smart Subscriptions gives users detailed payment history and upcoming bills due for selected recurring subscriptions, along with capabilities for managing offers and rewards on the same screen, Meltzer-Paul said. 

"There have been various attempts from bill-payment trackers and subscription trackers to help consumers with these, but our overall reach plus the ability to lean on Mastercard's open banking technology gives us an edge," she said.

In addition to helping banks reduce chargebacks around subscriptions that consumers didn't want or didn't know they had authorized, Smart Subscriptions could help banks retain card revenue, Meltzer-Paul noted.

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"If you're an issuer, having consumers use credit or debit cards to pay for subscriptions creates stickiness," she said, noting that consumers can often use payment cards to maximize cash-back and other reward programs for recurring payments.

Mastercard's decision to frame its newest product within its loyalty unit also underscores the card network's determination to diversify its revenue beyond merely enabling card transactions. This approach could help offset the growing downward pressure on credit card interchange.

Although Meltzer-Paul declined to comment on how the proposed Credit Card Competition Act could affect banks' existing credit card rewards programs, she noted that Mastercard is working to develop new types of loyalty programs that go beyond card payments including merchant offers and travel rewards, which it manages for banks and for a growing number of merchants. 

"We think it's important for banks to start thinking holistically about rewards across all of their products," Meltzer-Paul said, noting that Mastercard in recent years has expanded its loyalty services for banks and merchants to include more than 1,000 programs in more than 100 countries.

Mastercard said it's piloting Smart Subscriptions initially with an undisclosed U.S. bank before rolling it out more widely.