Can the past years’ massive growth of the #subscription economy pose an opportunity for financial services players looking to pivot and grow? Let’s take a look.

UBS estimates the subscription #economy at $1.5tn (2025), having grown by 435% over the past decade (SEI).

In a subscription business model customers pay a recurring fee at regular intervals to access a product or service.

Think of Amazon Prime, Netflix, Spotify, Disney+ and will realize that our life is full of subscriptions. The average American spends about $1,600 a year on subscriptions (2022, Subscription Service Statistics and Costs).

Why is the model so attractive?

— For consumers it combines flexibility, with convenience, transparency and value for money

— For businesses it not only allows to bundle more offerings together and to increase revenue (bundled plans can result to a 30% average order value increase), but also offers revenue predictability and boosts customer loyalty

In #financialservices, it was #fintech players that have mostly made use of the model in the last years, whereas incumbents have been much slower.

There is a good reason for this:

Subscription models are built around holistic customer propositions, i.e. they focus on an outcome that solves a problem and not on products and features. Traditional #banking has not yet made this transition, whereas challenger fintechs have focused early on on alternative pricing models.

A few examples:

— Challenger banks like Revolut and Monzo have been early adopters of a multi-layered subscription plan, where the quantity and quality of bundled offerings increase as we move up the value ladder

— Klarna recently announced its first subscription plan in the US, “Klarna Plus,” which includes double rewards points, exclusive discounts and no additional fees for $7.99 per month. The move allows Klarna to deepen engagement with US consumers, further diversify their portfolio and boost revenues ahead of an imminent IPO

Here is an example that shows the way for incumbents:

— Singaporean bank DBS has bundled together under its Start Digital Programme a range of accounting, HR, Marketing, Transactions, Collaboration and Cybersecurity services targeting an all-in-one subscription approach to SMEs

Subscription business models might not be a panacea for innovation FS laggards, but they do seem to address a few of the main root-causes:

— People are not buying product usage and features any more, but are interested in getting an outcome or solving a problem

— The rise of the as-a-service model indicates that there is fertile ground in bundling more offerings (including some that would have otherwise likely been harder to sell individually) under one umbrella

— Younger customers (who normally are the hardest for incumbents to approach) are simply accustomed to and much more familiar with the flexibility of the subscription model

Sources: Panagiotis Kriaris LinkedIn's Post