Revenue leakage can happen from anywhere – Case in point is the Reserve Bank of India (RBI) policy

Kiran Mohan, Marketing Assurance

Many reports haven’t yet come out on this, but it looks like RBI has dented subscription business big time in India. Though that wasn’t the intention. I knew that a small change in a policy could have some implications, but I didn’t perceive the magnitude until my friend shared her experience.

Policy Summary:

The guideline says that a customer must re-authenticate any standing instructions for recurring payments, such as subscriptions and bill payments, up to INR. 5000. For payments over INR 5000, customers have to give their consent and go through a two-factor authentication process for every payment.

Note: This blog is not to discuss the merits and demerits of the policy, but to share an instance of revenue leakage.

One of my friends is a marketing consultant. If the average consumer has about 8 to 10 subscriptions, she has close to 20-25 as her role requires her to subscribe to several tools, plugins and so on. She did confess that there would be about 10% of subscriptions she could do away with. Everything else was smooth as she would automatically get charged periodically for her various subscriptions – blissfully out of sight, out of mind. It wasn’t until the time that she wasn’t able to access the image repository that she began to panic; her payment wasn’t getting through. She frantically got in touch with the company and found that the RBI policy needs her to either change the card that allows recurring payments, make a big annual payment, or keep requesting a payment link from them at the end of each month. And, as most of the companies she subscribes to aren’t based out of India, sending a cheque or other means were ruled out. The next day, her CRM, email, and a bunch of plugins also stopped working.

Annual payments were too expensive and making manual payment at the end of each month for 20+ subscriptions meant huge bandwidth pressure. Since she isn’t financially savvy and didn’t understand these complications, she decided to change her subscriptions wherever she could.

By her confession, she had to let go of at least 15 subscriptions. While she was working out on alternatives through her frustrations, several thousand organizations got hit.

Though RBI had announced this policy a long time back, not much could prepare the companies to avoid such a significant blow. This is one form of revenue leakage which was partly out of their control. While there are no official reports on the money companies lost, I’d think it wouldn’t be any less than hundreds of millions, if not billions.

Revenue leakage can happen from any source, and at times you might not have complete control over it. However, what’s important is to assess the risk of leakage and the quantum to make necessary changes in the business strategy.

Do let us know if you’ve come across any example like this where the revenue leakage occurred due to external factors.