We're proposing changes to our regulation of phone-paid subscription services
19 February 2019, Simon Towler, Director of Policy and External Relations
You might be aware that we’ve been reviewing the regulation of phone-paid subscriptions to ensure consumers have trust and confidence in them. In doing so, we are looking to ensure that the regulatory framework provides the necessary protection for consumers but is sufficiently flexible to enable a range of products and services to operate.
Subscriptions have enormous potential as a growth area for phone-paid services. We’ve recently seen major brands like Spotify start offering phone-payment for subscriptions as a default payment option. Other music, video, film and TV streaming, books and other services are now also using or considering using phone-payment on a subscription basis.
While there is significant potential for positive growth, many of you working in the industry will be aware of problems, with over 95% of complaints to the PSA over the last twelve months being about subscription services. The reputation of phone-paid services is suffering as a result, and we’ve seen cases where PSA Tribunals have issued very substantial fines and prohibitions to non-compliant providers.
We recently commissioned research into consumer expectations of phone-paid subscriptions from Jigsaw, a market research agency. This research includes some interesting and significant findings.
Firstly, when purchasing a subscription, many consumers are not aware that phone payment is an option and therefore they may not know they are in a purchasing environment. Secondly, they expect clarity in a payment process, to ensure that it is made clear what they are being charged for, how they will be charged, and that the payment is for a subscription. Thirdly, consumers expect to see payment cues and friction that they are familiar with from other forms of digital payment, such as use of an account and password or a PIN number. Fourth, many consumers say that, provided the process is as secure and transparent as for other payment methods, subscriptions paid via a phone account can be a option for accessing content.
With all of this in mind, the PSA is proposing changes to the regulatory framework for subscriptions to reduce consumer harm, build confidence in the market and support good growth. The proposals are aimed at ensuring that:
- the process of discovering and signing up for subscription services is as clear as possible for consumers, including ensuring it is clear when a consumer is viewing promotional material and when they have entered a purchasing environment
- there are multiple steps in the payment and sign-up process for recurring charges, so that consumers engage with the process and are fully aware of what they are signing up to
- consumers receive receipts that contain the relevant service information, in a manner more consistent with what they are used to from other forms of digital payment, to help ensure that consumers engage with these messages.
In addition, we have asked for further input on free-trial periods to make sure that the length of a free trial period does not result in a consumer accidentally being subscribed to a service and then losing trust and confidence in phone payment more generally.
High complaint volumes, and the perception that operator billing is a vehicle for ‘scams’ are in no-one’s interests. We think that the proposals in our consultation document will address these issues: providing consumers with a payment experience that they understand and trust and helping to support growth of phone-paid subscriptions. The good news for the industry is that when services get this right – as some already do –consumers find this payment option convenient and are happy to engage.
We are very much looking forward to hearing your views on the proposals in the consultation.