This article was originally published in Financial IT UK by John Phillips, General Manager, EMEA at Zuora
In the not too distant past, we would sign up for a current account post-school or university and still be carrying around the same worn debit card in our 30s and 40s. With very little differentiation between retail bank offerings combined with consumer inertia, there’s traditionally been very little competitive value in switching banks. As a result, High Street banks knew they could ‘keep customers for life’ with minimal effort.
But those days are over. With new entrants disrupting the landscape, there’s a vast difference between the customer services and offerings from traditional High Street retail banks and the new, nimble, proactive financial services providers on the block.
New disruptors are focused on offering mobile, convenient and easy-to-use applications and services which truly create more seamless customer experience. Look no further than the latest launch of NatWest’s trendy cloud-based challenger app, ‘Bo’, designed to help consumers manage their money. High Street banks are now on high alert, and must transform to meet the needs of a new generation of consumers in order to successfully compete.
In fact, at Zuora, we recently conducted a personal banking survey that made some interesting discoveries. Over half of respondents (52%) said they’d be happy to switch banks for one offering a free entertainment bundle like Netflix or Spotify. Insights revealed that there was also a clear preference for bundled offerings that package travel, car services, phone insurance and airline points among many other incentives. This opens up a huge opportunity for traditional banks to offer smart, creative and meaningful ‘bundled’ banking experiences to better service existing customers and attract new ones.
Key to this opportunity and driving the future of banking are subscription services. Nearly half (44%) of consumers would consider switching to banks on a subscription basis in return for personalised service bundles. And a quarter (26%) would be willing to pay a fee of between five and ten pounds per month for their bank account if it included these bundled services.
We’re living in a Subscription Economy – an era marked by broad consumer preference toward access to services over the ownership of physical products – and subscription-based services are set to deepen loyalty and rapidly improve the customer experience over the coming years, serving as a way for banks to build and maintain meaningful relationships with their customers. And those who adapt to this new era will be rewarded.
Earlier this year, Zuora released its Subscription Economy Index (SEI), designed to measure the health and growth of subscription businesses across various industries. The SEI found that subscription-based businesses have grown their revenue by more than 350% since 2012, indicating the growing demand to access convenient, digital services. A critical signal for the financial industry, banks are faced with transforming into service providers that provide recurring value to consumers in this new era.
Changing consumer demands are a key factor in driving banks to offer relevant and personalised services and new subscription offerings. Further to half of consumers expressing interest to switch banks on a subscription basis in return for an entertainment bundle, our survey also showed that smartphone insurance (33%) and utility services (31%) were other reasons they’d be willing to switch.
Consumers are looking for personalised, convenient services that add value to their lives beyond the traditional transaction. They want tailored ‘over the top’ services based on their spending habits, with the majority (68%) open to paying a recurring fee to access these additional personalised services.
In a similar way that Netflix created new avenues to consume TV and film and Spotify transformed music consumption, the new imperative for the financial services industry is to offer compelling subscription-based models in order to meet evolving customer demands. Those that don’t will struggle to compete in a marketplace focused increasingly on attracting Gen Y and Z.
As the new generation of fintech start-ups continue to disrupt the financial services industry, traditional banks also have an opportunity to push their legacy USPs by re-establishing their roles as trusted financial advisors and build on their knowledge of banking behaviour.
The game has changed quickly and dramatically, and there’s already strong evidence that traditional banks have a significant challenge ahead to remain competitive and earn loyalty. But they’re also ideally positioned to capitalise on their heritage to change the way consumers bank with value-added subscription services.