How do you ensure trial subscriptions are compliant?

What are trial subscriptions?

Trial subscriptions are those that have an introductory trial period or initial promotional discount. E.g. ‘free for 30 days’ or ‘half price for your first month’.

Why are there requirements for trial subscriptions?

VISA announced the new regulations in 2020. They require additional communication about when a subscription trial will end and how much will be charged. This means adding extra details to the emails and receipts that trialling users receive.

Free trials and discounts are a common way for SaaS sellers to attract new subscribers. But if the terms of a promotion aren’t clear, buyers are sometimes surprised by the first full payment and raise a costly dispute.

It can also be a bad user experience if they aren’t sure what they will be charged or when. But if the trial & payment flow is well communicated when they sign up, that can send a good message that you care about their experience. Which can in turn increase retention and improve word of mouth for your product.

That’s why catering to these requirements is not only necessary to meet VISA’s new standards, but will help to keep down chargebacks and build goodwill with customers from their first interaction.

What makes trial subscriptions compliant?

Over the course of an introductory trial or promotion, the subscriber must repeatedly be provided with the following points:

• The fact the customer has signed up for a subscription
• The date the subscription started
• The duration of the trial period
• The subscription name
• The recurring price and next payment date
• A link to somewhere they can update their payment method, or cancel their subscription

This is shared across the following emails and transaction receipts:

• Welcome Notification Email: The initial email they receive when signing up, confirming that they’ve joined on a free trial or discounted period
  • Welcome Notification Receipt: Linked to from the welcome email is the receipt confirming the amount paid, even if zero (example image shown below)
• Enhanced Notification Email: A mandatory one-off email which tells them their discounted period is ending and they are about to be charged for the first time.
• Initial Transaction Email: An email sent to them after they make the first payment on their subscription after their initial trial/discounted period has ended.
  • Initial Transaction Receipt: Linked to from that email is the receipt confirming payment.

Other subscription emails such as the optional pre-billing notifications and recurring subscription receipts are unaffected by these compliance changes.

Which subscriptions does this apply to?

The more detailed receipts and emails discussed on this page only relate to any subscription which:

• has an initial ‘trial’ period at a reduced price, e.g. free for a month
• or has a non-recurring coupon applied to a subscription for an initial period, e.g. first 2 months of subscription is 10% off

All other ‘regular’ subscriptions are exempt and will not show this additional information on emails & receipts, nor will we send non-trial subscriptions the additional emails, such as the enhanced notification or the initial transaction email.

I offer a subscription that does not have a free or promotional trial. Do these changes apply to me?

No, these changes do not apply to you.

Do I have to do anything?

No.

Paddle manages your subscription receipts and email flows so you don’t need to change anything; as your Merchant of Record we handle the necessary compliance and development work for you.

The only exception is if you are providing a trial/promo period on a subscription by using our Charges API. See below for more details on what you need to do in that situation.

What does this mean if I’m using the Charges API to manage subscriptions with an initial trial/promo period?

If you are using the Charge API to manage a promotional or trial subscription yourself, then you will need to send the following required receipts and emails yourself. This is because we won’t be able to determine, for example, when the trial period will expire in order to supply the customer with the enhanced notification. You need to send the:

• Welcome Notification Email: An initial subscription confirmation email, confirming that they’ve joined on a free trial or discounted period. As with our version this should include confirmation of:
  • The fact the customer has signed up for a subscription
  • The date the subscription started
  • The duration of the trial period
  • The subscription name
  • The recurring price and next payment date
  • A link to somewhere they can update their payment method, or cancel their subscription. This can come from our update_url and cancel_url links returned from the List Users API.
• An ‘Enhanced Notification Email’: Your version of our enhanced notification which tells them their discounted period is ending and they are about to be charged for the first time.
  • This needs to be sent 7+ days before you charge the customer for their first regular subscription payment (or to notify them if the price or billing period has changed)
  • It should also provide a link for them to update their payment method or cancel their subscription.

Also, we are going to add an optional field to the Charges API which you should include when you want to charge the customer their initial full payment (post trial/discount). We’ll then still be able to send on your behalf the final requirement of the:

• Initial Transaction Email: An email sent to them after they make the first payment on their subscription after their initial trial/discounted period has ended.
  • Initial Transaction Receipt: Linked to from that email is the receipt confirming payment.

VISA will conduct spot checks and may ask us to block Sellers who are not using the Charges API in a compliant manner, so implementing these flows are important.

What is the enhanced notification? Is it a pre-billing notification?

This email is different from the ‘pre-billing notifications’, which are sent to subscribers ahead of their recurring billing dates if you have them enabled.

The enhanced notification is instead a one-off email sent to a customer who is currently subscribed as part of an introductory trial or promotion. Before their first payment they’ll be sent an email which tells them their trial is about to end and provides them with the upcoming transaction date & amount, plus a link to manage their subscription.

• If the trial is due to last more than 7 days, the email is sent 7 days ahead of payment
• If the trial is due to last 7 days or less, no enhanced notification email will be sent

The enhanced notification cannot be disabled because it’s part of the requirements.

Click here to see an example of the enhanced notification email.

What is the initial transaction email? When is that sent?

As part of VISA’s rules we’ve also added this new email. This is sent when a subscriber makes their first payment on a subscription following a trial or discounted period.

This is the last time we’re required to give them a link to manage their subscription. After this point the subscription emails and receipts do not include any prompts for the customer to update their payment method or cancel their subscription.

Click here to see an example of the initial transaction email.

Could this negatively affect churn?

It’s possible that these emails may prompt customers who did not want to pay a recurring fee to contact you regarding cancellation.

However, for the majority of customers, the increased transparency with subscription details leads to a better customer experience and improved brand perception.

When will these changes be live?

All these changes are live as of July 2020.