Subscription based companies such as video and music streaming companies, dating services, gyms and many others, are facing serious challenges as millions of the new chip-embedded cards go into use across the country.
Netflix, for instance, reported recently that it lost a large number of accounts during the three-month period that ended in September. Many of the customers who cancelled were not aware that with the new replacement cards, they must update their information to allow the merchant to automatically withdraw payments.
As the new cards go into service, in many instances the card number is changed. Or the number is okay, but the expiration date has been changed. That all wreaks havoc for the companies that have benefited from automatic withdrawals in the past. Payments often won’t go through if the card’s expiration date has changed.
A San Francisco company that manages bill collection for more than 1,900 subscription businesses reports that it has seen an increase in the number of transactions declined recently.
Bumps in the financial services that deal with these businesses are caused by any irregularities in the marketplace. The data breaches in big retailers, such as the recent Home Depot debacle, for instance, threw them into disarray because thousands of those who shop the home improvement store had to get new cars.
Dating websites such as Match.com and OkCupid also felt the effect of credit cards that were not updated. IAC/InterActive Corp, parent company for the dating services, lost some $5 million in earnings because of the problems.
Although the new chip technology is expected in time to make huge dents in the costly fraud that has plagued the card services, there are obvious downsides to the switch that will require resolution as the technology becomes widespread.
