Netflix: The dog ate our credit cards

Tracey Samuelson Oct 15, 2015
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Netflix: The dog ate our credit cards

Tracey Samuelson Oct 15, 2015
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In a mixed-results third-quarter earnings announcement Wednesday, Netflix acknowledged that U.S. subscriber growth had not met expectations. The problem, the company said, was due in part to the credit card industry’s transition from the old swipe cards to new chip ones, also called EMVs, which are supposed to be more secure. But as Netflix pointed out, they present a potential problem for companies heavily dependent on automated payments.

“I think I had three cards reissued in the past 18 months,” said Deborah Baxley, principal in the cards and payments practice at CapGemini, adding that alerting vendors to newly issued cards is a perennial problem for consumers that has been magnified by the switch to chip cards.

“It’s just that with so many cards being reissued at once, it’s just like a perfect storm,” she said.

Some 120 million Americans already have their new chip cards, according to the Smart Card Alliance. That number is supposed to rise to 600 million by year end.

Consumers may be getting tired of updating their information, said Matt Schulz, with CreditCards.com. 

“There could be fatigue, because a lot of people have gotten new cards several times over the last few years with all the data breaches and now chip cards,” he said.

The changeover may be inconvenient, but is it to blame for Netflix’s recent performance? 

“I titled my note this morning, ‘The dog ate my homework and other excuses,” said Michael Pachter, a research analyst at Wedbush Securities.

He thinks consumers who truly value a business or service would put in their new information. If Netflix’s subscribers aren’t bothering to update their accounts, “that belies a much bigger problem, which is that there probably are a significant number of people who are paying but don’t actually use the service,” Pachter said.

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