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Becoming more than a bank: adding value through financial solutions as-a-service

Becoming more than a bank: adding value through financial solutions as-a-service 41

By Michael Mansard, Principal Director – Subscription Strategy at Zuora    

There is no doubt that the UK’s financial services (FS) sector has reached a pivotal moment in its history. Lower interest rates, tighter regulation and increased fines have been met with an ever-growing pressure from both fin-tech start-ups and technology giants. As a result, there’s been a lot of speculation around what the industry might look like moving forward, especially in the wake of the pandemic, which has seen market caps plummet. Given that interest rates are determined by central banks, FSI companies have no control over this destructive and volatile aspect of the business.  

To add to this, traditionally FS organisations have been conditioned to manage risk to a millimetre perfect state. But, in today’s climate, this is coming at the cost of agility, with many still operating on a business model that hasn’t changed for decades. In the UK, for example, the concept of ‘free banking’ has become entrenched, with FS companies believing that their customers simply won’t pay for their services.   

However, research has proven that consumers are willing to invest in a service, provided there’s value attached to it. This is why it’s time for a new business model; one that will enable FS organisations to expand their offering, maximise profit and deliver true value to their customers. To compete with digital players, it’s clear that some changes need to be made. Rather than purely focusing on growing the services they already have in place, these organisations need to consider building their own new digital businesses. 

Becoming more than a bank  

Today’s pandemic has accelerated a global trend that was already well underway when it comes to consumer buying behaviours: The end of ownership. Individuals today are less interested in the status that comes from owning things. Instead, they are motivated by a desire for fulfilling experiences that enrich their lives, and this is where subscription services come in.  

Through subscription business models, customers pay a recurring fee at regular intervals — whether that’s weekly, monthly, yearly, or just based on usage — to access a product or service. The key difference between this and the recurring fees or premiums already carried out by most FS players today is its obsession with customer-centricity: whether that’s through pricing, continuous value delivery, or subscribers being in control of their own  journey. Our recent End of Ownership Report discovered that these models are proving popular, with 77% of U.K. adults signed up to subscription services today. This is up from the 58% that had subscriptions 5 years ago. 

For the financial services industry, subscription models could mean more opportunities to upsell and cross sell different services to customers, helping to maintain existing customers, reduce customer churn and to unlock new streams of revenue. One FS organisation already leading the way is Singapore-based DBS bank. From its Video Teller machines – which are the first of their kind in Singapore and enable customers to interact with agents through virtual conferencing – to its SingPass face verification technology for faster sign ups, the DBS bank is widely cited as being in the vanguard in terms of embedding digitisation across its full range of banking processes and services.   

Working with the Singapore government, one of DBS’s projects has been the launch of an initiative titled Start Digital. Designed to accelerate the digitisation of Small and Medium-sized Businesses (SMBs), this subscription programme offers DBS customers various digital solutions to help them grow their business through digitalisation. In an age where digital transformation is top of the agenda for every business, this subscription service is enabling DBS to deliver true value to its customers and build stronger relationships, whilst also opening up new, improved revenue streams. In essence, DBS is utilising subscription services to become more than a bank; transforming itself into a key partner in its customers’ futures.   

Adding value    

The trick to making subscription models a success is working out exactly what your customers want. For example, recent research discovered that the majority (52%) of UK consumers would be enticed to switch to another bank if their subscription included an entertainment bundle. This was closely followed by smart phone insurance (33%) and utility services (31%). Offering additional services might be the key to drawing consumers in but for FS businesses looking to emulate the success of DBS, the real challenge is pivoting from subscriber acquisition to subscriber retention and achieving that elusive ‘partner’ status.  

Thanks to a substantial amount of usage data, subscription models offer the businesses that are using them the opportunity to engage with their customer base and adjust their services to match demand. This data can help businesses to curate creative pricing and position strategies to entice and retain customers with tailored offerings. For example, one of the primary success factors for subscription sellers is often personalisation. Tailoring a product or service to suit a customer’s individual needs is a great way to gain loyalty and build stronger, long-term relationships.  

Subscriptions can also help FS organisations to cast a wider net and expand their addressable market. For example, banks can make their products and services more affordable, not necessarily by reducing the overall cost of the product or service, but by giving customers the option to spread their payments over a longer period of time. Since subscriptions offer the potential for organisations to expand their addressable market and grow their user base, they can help boost revenue growth in the longer term.  

In today’s uncertain landscape, building strong customer relationships has never been more important. Implementing the right customer experience initiatives at the right time could be the difference between an FS business remaining profitable or collapsing. Subscription services – and the unique insights that they provide – have been proven to drive growth across a vast range of industries, as highlighted in Zuora’s latest Subscription Economy Index which discovered that 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 indicating that the Subscription Economy will expand into a $1.5 trillion market by 2025. It’s time for FS organisations to join the subscription revolution and become more than a bank, through delivering true value to their customers and achieving that trusted partner status

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