From as early as the 16th century, authors and publishers have been using the “subscriber concept” to help cover the costs of printing and publishing and to broaden their reach. The world of subscriptions has expanded rapidly in recent years and now encompasses a huge range of services that we use in our daily lives — from mobile phones, TV, and music streaming to food and drink deliveries and arts and crafts supplies. In fact, the average US consumer spends a whopping $219 on subscription services every month. Most community financial institutions’ (CFI’s) business customers pay a range of fees — from service charges to fees for cash, wire transfers, or statements. This can create risk for CFIs in a variable economic climate as a proportion of revenue is reliant on customers’ actions that are unpredictable. As such, it is perhaps surprising that the subscription model has only recently started to gain acceptance among financial institutions, although several fintechs and neobanks have previously attempted to shake up the status quo by offering subscription-based banking services. A recurring flat subscription fee instead of a pay-as-you-go setup offers CFIs and their business customers various benefits, as highlighted below. Why Subscription-Based Banking Services Might Appeal to Business Customers
- Simplicity and predictability. Customers can sometimes find traditional banking charges and fees complex to understand, if not frustrating. Subscription-based banking eliminates these different charges by replacing them with a fixed, recurring fee that is more predictable and easier to account for.
- Choice, flexibility, and convenience. Businesses can choose a product bundle that matches their needs and then go about their day-to-day banking without worrying about additional ad hoc fees.
- Personalization and value. Services can be bundled together and tailored to meet business customers' needs, ultimately providing them with better value for the services they choose to use. Customizing a subscription bundle can allow customers to swap out services that don’t make sense for their business with other services they know they’ll use regularly.
Subscription Model: Benefits for CFIs
- Deeper and wider customer relationships. Subscription models can create an ongoing and longer-term relationship between CFIs and their customers as they encourage a recurring, stable source of engagement, greater loyalty, and lifetime value. By offering various subscription packages, CFIs can provide a natural incentive for customers with multiple banking relationships to consolidate their accounts, thereby deepening existing relationships.
- More predictable and alternative revenue streams. By bundling a range of products and services, CFIs can upsell and cross-sell a variety of different products and services to business customers. This could help them to unlock new revenue streams, boost revenue, and expand their market share.
- Increased efficiency and reduced costs. A recurring flat fee can help lower a CFI’s operational costs. What’s more, a subscription product can result in customers being less interest-rate sensitive, which can support a CFI’s overall performance.
Strategies for Success When implementing a subscription model for business customers, CFIs should remember to: Understand what your business customers want. CFIs need to ensure that their subscription offerings focus on meeting the needs of their customers and can be personalized to help businesses achieve their unique goals. To create a successful subscription model, an institution’s focus may need to shift from driving revenue through transactions to generating lifetime customer value and providing customer-centric solutions and outcomes. Keep it simple and transparent. To attract business customers and solve the issue of complex and ad hoc charges, CFIs should ensure that their subscription offerings are clear, transparent, and accessible. This can mean anything from having tiers to allowing customers to pick and choose a menu of different options to include. Ensure it adds value. Business customers paying for subscriptions will expect benefits over and above what they may have previously been receiving. CFIs need to be creative in how they bundle services and products to ensure they provide personalized and holistic value propositions that help solve their customers’ challenges. You could even create packages tailored to a specific type of business or industry.Partner, if necessary. CFIs may want to consider working with fintechs and other providers such as tax, law, and accounting services to ensure that their subscription services are compelling for both new and existing customers. Offering subscription-banking services to business customers can be a key differentiator for CFIs to help them attract new business customers, create new revenue streams, and generate recurring value and increased loyalty from existing customers.
