Joakim Sjöblom, Co-Founder & CEO of Minna Technologies, reveals how this Swedish tech company can offer subscription management solutions to lighten the load for banks, merchants and consumers.
It all began in 2014 when, as a cash-strapped student, I realized I’d been paying for two streaming services that I hadn’t used in over six months. It really irked me. More specifically, the lack of transparency and the difficulty in canceling set the idea for Minna in motion.
Today, the boom in the subscription economy means that consumers are increasingly subscribing to products and services instead of buying them outright. The issue from my student days continues to be widespread for consumers, but they aren’t the only ones struggling with this.
As the web of subscription payments expands, it’s become more and more complex for merchants and banks who’ve been burdened with the cost and complexity of supporting this transactional chaos.
Our initial goal was to build one interface where consumers could manage all of their recurring expenses and we’ve now grown this model to cater for financial institutions and the merchants themselves. Our platform helps all three parties to be more sustainable within this subscription economy.
Three core stakeholders benefit from our solution. Firstly, we have a network of connectivity to thousands of different subscription merchants. The model is only a profitable one, and worth the high customer acquisition costs, when merchants retain the consumer. Merchants’ main aim is to prevent churn, acquire new consumers and cross-sell in the interim.
Today, merchants struggle with blocked payments from banks. It’s a customer black hole – a process that alienates the merchant from its customer for up to 13 months after the block is placed. Merchants lose customers, customers lose services, banks pay the cost of this, and it’s a messy process for all.
Our second target audience is banks. They benefit by providing improved value to customers in the financial management suite, offering a much more engaged, self-service banking product for money management. Banks substantially reduce the cost of managing phone calls, disputes, and other costly customer services issues.
Finally, the consumer benefits. By embedding the tech into the banking app environment, merchants retain their relationship with their clients, while consumers are able to get a holistic view of their existing subscriptions in a centralized place, giving them not only transparency as to their spend but the ability to manage the cost directly there as well.
If your child has their own smartphone, you can be sure that there are at least a couple of app subscriptions on there. If they’re using your phone, your card is already stored, so they can simply purchase subscription apps at the click of a button.
This is known as friendly fraud and is the most common reason for disputes of this nature. You may see a payment that you didn’t make on your bank statement, so you’ll dispute it. Your child may have made this payment unbeknownst to you. As a consumer, you do actually have the right to dispute this, as there was no pin, chip or card used in the process. You didn’t actually make this purchase.
Another very common cause for dispute is the often-called click-to-subscribe, call-to-cancel model. Many companies make it very easy to sign up and become a customer but horrendously complicated to leave. It’s a very time-intensive process and expensive to carry out for the issuer.
By automating the process for the consumer in a self-service manner, we dramatically lower the operational cost for the banks. The merchant, similarly, benefits from the fact that we make sure the customer's card is valid (after canceling their subscription for example) so that they can resume payments and the subscription at a later date if so desired.
All three parties benefit from the process.
When we started in 2014, it was very early days in the subscription behavior and there were only two or three companies across the globe offering this service. Today there are more than thirty, which is a good indication that this is a real customer problem that people are trying to solve.
Where we stand out is that our go-to market strategy has the merchant and the issuer, i.e. the bank, as key stakeholders, as well as the consumer. We make sure that the product is embedded inside the bank – including passing its compliance, audits, and data security protocols – while also working in strong collaboration with the merchants, both from a commercial and technical point of view.
We add measurable value for both the bank and the merchant, whereas a lot of our competitors try to make it end-user centric – solving the problem for the consumer while only exacerbating the pain for the other parties.
Firstly, we work with banks across seven different markets. The banks’ investment in compliance is robust, and it’s in our interest to ensure that we continue to deliver a product that’s compliant for our customer base.
Additionally, Visa is one of our investors, and it’s a very strong ally to have when you need to understand where the future of the market is heading.
If we look at 2019 and 2020, the amount of subscription disputes rose by more than 40%. This can be tied to the pandemic, of course, as people started ordering more online (groceries, gym apps, streaming services etc.). Many “new age” services are subscription-based. As we come out of pandemic-mode, will we go back to where we were before? I don’t think so. Convenience trumps all. Subscriptions are convenient!
As for merchants and customers, the challenge is in streamlining the web of subscription transactions and making it problem-free. As we embed with banks, merchants are starting to receive tens of thousands of cancellations every month. With subscriptions becoming increasingly popular, customers are calling out for places to manage them.
In the long run, we see a future that’s sustainable for all parties. The days of locking in customers to a 12- or 24- month contract are gone. The younger generation expects to pay for a service when using it, and to stop paying when it’s no longer needed. Offboarding has become as important as onboarding.
It’s never as easy as it may look to scale a business. It’s well documented that our primary customer segment – financial institutions – are innately protective and risk averse. Sales cycles are long and complex, regulatory pressures are high, they’re protective of client data and their instinct tends to be to “build by ourselves” versus to “buy” or “partner”. However, we’re proud to have partnered with impressive brands and scaled across Europe, making us uniquely positioned to do it again and again.
Brand risk can be high. Minna has a unique place in the “shop window” of banking, e.g. within the banking app. It’s a protected space – the “crown jewels” of the wider customer experience. For our existing clients, Lloyds or ING for instance, customers can cancel their subscription directly within the app. Given that it’s prime real estate, building trust to cross that barrier can also take time. As we watch fintech and embedded fintech evolve, we learn the best practices to integrate as well as the best practices in improving customer engagement.
We currently have clients in the UK, Benelux and the Nordics. 2022 will see us expanding to the US, which represents exponential growth opportunity. Merchants in the US have a real problem with both acquisition and retention and a majority of the top ten global subscription merchants are US-based e.g. Apple, Amazon, Netflix.
Also, there’s no market in the world that’s as dependent on cards as the US, which means our business impact for its financial institutions is huge. The population exceeds 300 million which gives us a vital opportunity to bring convenience to their virtual door!
Onwards and upwards!