By Sudipta Banerjee | Senior Director at RIA Advisory
Organizations across different industry sectors like utilities, content streaming, insurance, publications, and software have been riding the subscription wave for a long time. But can banks script their own subscription success story?
Recently, experts from RIA and Oracle hosted a webinar titled “Embracing the Next Growth Frontier – Subscription Banking”. The webinar focused on how subscription-based models have been major disruptors in other industries and how the banking industry is also looking at subscription banking as a key differentiator for long-term growth and success. The webinar also talked about the effect subscription models will have on market shares and profitability ratios in the banking sector.
Let’s look at some key takeaways.
Banks are slowly but gradually riding on the subscription wave
Subscription-based businesses have been enjoying numerous laurels for several years now. Be it Netflix, Spotify, or National Geographic, the trend is on an upward rise. Paid subscriptions have risen 20-40% in 2020 – especially in the wake of the pandemic. Banking companies are also looking to embrace the subscription model to overcome the ever-increasing challenges from FinTechs and digital-only banks, which are threatening to eat into their market share with simplified offerings.
The pressure to embrace subscription banking is also a direct result of clients – The ones at the top demand more simplicity in product offerings as well as clarity and transparency of information. Those at the bottom increasingly seek price assurance. To meet these customer demands around better experience and transparency, many banks are in the process of offering subscription based-services, setting the stage for subscription as the new norm in the financial services sector.
The risks of not following suit are many
Despite the benefits of subscription-based pricing offers, only a handful of banks are diligently driving efforts in providing their services as subscription. The more traditional ones are still unsure of why or how they need to hop on to the trend, not realizing the risks of not embarking on the subscription journey. Continuing to rely on old-school methodologies can lead to:
- Failed attempts at keeping up with market trends or evolving customer expectations
- Jeopardized relationships with existing and prospective customers while experiencing a sustained drop in revenue
- The inability to offer value-added services to customers and deal with competition from newbies head-on
- Unnecessary time and effort being wasted in building predictable schedules and making pricing and budgeting easier
- Banks losing out on the opportunities to up their game in terms of personalization, market share, and competitive standing
- Poor customer engagement, loyalty, and retention can result in a sudden drop in revenue or even insolvency.
What banks can do to script their subscription success
Modern customers having more choices than ever before, thanks to the rise of fintech start-ups and digital-only banks. It has become very easy for them to take their business elsewhere – if they do not get the level of service they’ve come to expect. Here’s what banks can do to script their subscription success:
- If banks want to achieve success from subscription models, they need to learn from other industries – especially utilities – and evaluate how they have done it. The success will depend on their ability to package services properly, offer good discounts, as well as the capability to integrate add-ons.
- Overlaying the subscription strategy with the current regulatory context and individual bank context makes the designing of subscription-based packages much easier. Therefore, take the time to be aware of the volatilities of the regulatory environment and design packages such that they are relevant and compliant.
- Although subscription pricing is an important tool, don’t expect it to be the overall go-to proposition, but don’t ignore it either. Remember that subscription pricing will only be one element of the bigger enterprise strategy. For long-term growth and success, banks will need to adopt a bunch of other pricing tools and strategies that work in conjunction with the subscription model.
- When it comes to subscription banking, what prices you offer will be a key differentiator. The value you offer to your customers and the profitability of the offers will define what pricing model/tool to use. So, make it a point to assess the value of each package you create and then finalize the prices accordingly.
- Finally, don’t look at subscription banking as a one-time project. If you want to receive benefits from it in the long run, you need to keep the subscription pricing relevant over time. This means constantly tracking your subscription business, assessing how well it meets customer needs, and making changes as needed to keep offers and prices relevant, competitive, and transparent.
One of the experts on the panel aptly said, “The more you can put in the subscription package, the more valuable it will look and the better it will sell”. So, if you want your subscription banking efforts to take off, make sure to have a detailed understanding of the market, drivers, and challenges, and capitalize on offers and opportunities to drive long-term customer and business value.
To watch the webinar recording, click here.
