Fintech sector warns of decline in the ‘subscription economy,’ but businesses remain bullish

By Gaia Lamperti

After the huge growth seen during the pandemic, the subscription economy has evolved as the cost of living starts to impact consumer spending, with Brits starting to be more selective about the subscription services they use.

According to recent Barclaycard Payments research, a 5.7% fall in subscription spending has been recorded between May 2021 and May 2022. The data shows that concerns around the rising cost-of-living have prompted seven in 10 Brits to be more selective about the subscription services they use with over a third (36%) of consumers saying they’ve cancelled at least one subscription because their disposable income has fallen as interest rates and inflation increase, with 31% citing higher prices as a reason why.

However, the Barclaycard Payments’ research found that that the appeal of sign-up products and services remains strong, despite economic uncertainty. Almost 40% believe subscriptions offer good value for money and 34% say they help them manage their finances at a time of rising costs.

Businesses remain bullish about the future of subscriptions

Yet, despite inflationary pressures, the majority of businesses remain confident in the returns they expect to see, after they made sizable investments during the pandemic to increase their subscription offering. Seven in 10 (69%) forecast the subscription economy will continue to grow and nearly two thirds (64%) will offer sign-up products and services for the foreseeable future. Of those planning to launch a subscription offering, a quarter expect to do so in the next six months and 42% in the next year.

To encourage more customers to sign up to subscription services, over half of businesses stated they provide free delivery on products, while almost 67% offer discounts. Some retailers (18%) also have plans to offer subscription customers a bespoke loyalty programme, in a bid to increase value for money.

“Subscriptions saw huge growth during the pandemic as Brits spent most of their time at home, so it was inevitable this would steady as the economy opened back up. Yet, as the rising cost of living continues to squeeze finances, many consumers are re-evaluating their discretionary spending and cutting back on some products and services they no longer deem essential,” Kirsty Morris, Managing Director, Barclaycard Payments, said.

The Barclaycard Payments report also shows many Brits continue to prioritise the products and services they obtain digitally or direct to their front door. Three-fifths (59 %) say they use subscriptions because they provide exclusive access to content and over half (54%) believe they save them time. Meanwhile, two in five (45%) believe subscriptions offer a personalised experience and almost two-fifths (37%) state subscriptions help them to organise their life.

“It remains clear however, that consumers still value the ease, convenience and often additional extras they can access through subscriptions; whether that be through digital services, or products delivered regularly to their door. Many retailers adapted quickly during the pandemic to meet changing demands, and those which continue to evolve their subscription offering to respond to this new set of challenges will be best placed to benefit from increased consumer loyalty and satisfaction,” added Morris.