By Michael Mansard, Principal Director – Subscription Strategy at Zuora 

The UK’s financial services (FS) sector has undoubtedly reached a critical point in history. Reduced interest rates, stricter regulations and increased fines have put intense pressure on both legacy banks and fintech start-ups. As a result, many concerns have been raised around what the industry – which has seen market caps plummet – might look like in a post-Covid world.

Moreover, while traditional FS organisations have been equipped to steer risk with great precision, in the current state, this comes at the cost of agility, with many companies operating on business models that have remained intact for decades. For instance, in the UK market, the concept of ‘free banking’ has become deep-rooted, with FS companies presuming that customers simply won’t be ready to pay for their services.

Nevertheless, research reveals that when a service is of high value, consumers are more inclined to pay for it. This makes way for a new business model, allowing FS organisations to elevate their offering, and, in turn, maximise their profits by delivering real value to their customers. In addition to making necessary changes, in order to compete against new, more agile digital players, traditional businesses must look to develop an innovative digital offering, rather than just amplifying their existing services.

The bank of the future: The heart of Asia

The ongoing pandemic has accelerated a global trend that had already been in place when it comes to consumer buying behaviours: The end of ownership. Individuals are increasingly spending their income on experiences, while steering away from buying materialistic “things”. This shift has, therefore, prompted a surge in subscription services. To gain access to a product or service through subscription models, customers are charged a recurring fee at fixed intervals, whether weekly, monthly, annually or on a pay-as-you-go basis. The key distinguishing feature between this and the recurring fees or premiums provided by most FS organisations is the emphasis on customer-centricity, whether that’s through pricing, delivering consistent value, or allowing subscribers to be in control of their own journey. In Zuora’s End of Ownership Report, it was revealed that these models are being well-received, with 77% of UK adults currently making use of subscription services.

Through subscription models, companies in the financial services industry would be more capable of upselling and cross-selling various services, which, in turn, would help increase customer satisfaction, while making way for new revenue streams. For instance, Singapore-based DBS bank – an incumbent player over the last 53 years – is leveraging subscription models to take their services to the next level. Its Video Teller Machines – which are the first to come into existence in Singapore – enable customers to engage with agents through video calls. In addition to this, the bank’s SingPass face verification technology facilitates quicker sign ups, positioning themselves as a leading figure in terms of the digitalisation of its processes and services.

Start Digital, one of DBS’s projects, is an initiative that has been launched in partnership with the Singapore Government. The subscription programme’s purpose is to accelerate the digitalisation of Small and Medium-sized Business (SMBs), offering DBS customers a variety of digital tools to help them expand their business through digitalisation. Given digital transformation is top of mind for most businesses, DBS is leveraging the subscription service to deliver true value to its customers. Not only is it solidifying existing relationships, but also unlocking new, improved revenue streams. By deploying subscription services across its different divisions, DBS is on its way to becoming a next-generation bank and a key partner in the future of its customers.

Boosting value

In order to make subscription models a success, determining your customer needs is of utmost importance. Recent research, for instance, revealed that over half of UK consumers would be willing to switch to another bank if an entertainment bundle was included in their subscription. This was closely followed by smart phone insurance (31%). While offering these additional services may encourage consumers to sign up, the real challenge for FS businesses looking to emulate the success of DBS is shifting from subscriber acquisition to subscriber retention and therefore achieving that elusive ‘partner’ status.

Through a significant amount of usage data, subscription models enable businesses that are using them to interact with their customer base and adapt their services to match demand, therefore, driving customer-centric offerings, as opposed to “one-size-fits-all” models. This data can be used by businesses to curate competitive pricing structures and develop strategies to entice and retain customers with customised offerings. A fundamental success factor for subscription sellers is personalisation. A product or service tailored to suit a customer’s individual requirements is a great way to earn customer loyalty and build stronger, long-term relationships.

Furthermore, subscriptions can help FS organisations to grow their addressable market. For instance, banks can make their products and services more affordable, not necessarily by decreasing the overall cost of the product or service, but by giving customers the option to disperse their payments over a longer period of time. Given subscriptions open up the possibility of organisations expanding their addressable market and increasing their user base, they can help boost revenue growth in the longer term while increasing their footprint through new services beyond banking.

In today’s fluctuant climate, building strong relationships with customers has never been more important. Carrying out the right customer experience initiatives at the right time could be the key differentiator between an FS business remaining profitable, or collapsing. According to Zuora’s latest Subscription Economy Index, subscription services, alongside the unique insights provided by them, have been proven to drive growth across a wide range of industries. In fact, subscription usage has grown by more than 435% over the last 9 years. This isn’t set to slow down any time soon, with reports predicting that the Subscription Economy will expand into a $1.5 trillion market by 2025. It’s time for FS firms to rise to the occasion by delivering true value to their customers and embracing subscription services as the new wave of growth for banking.