# Amazon, Netflix…banking. Would a subscription-based model fend off challenger banks?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2020-01-07
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: Mobile Banking Revolution: Adapting to Customer Demand
Meta Description: Discover how traditional banks can stay competitive in the digital era by implementing innovative business models and subscription service strategies.
URL: https://financedigest.com/amazon-netflixbanking-would-a-subscription-based-model-fend-off-challenger-bankshtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/banking-1-1736838982241-compressed.jpg)

_By **Mark Grainger**, VP Europe at Engage Hub_

It is forecasted that [mobile banking is set to be more popular than visiting a high street bank branch within two years](https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.theguardian.com%2Fbusiness%2F2019%2Fjul%2F01%2Fmobile-banking-to-overtake-high-street-branch-visits-in-two-years&data=01%7C01%7Ctom.bermingham%40brands2life.com%7Ca31bd2b4607849f23b0d08d751457b26%7Cc3b1e3e0d7dc4a4ebd68519f408e9175%7C1&sdata=NiFpF7O6l8d2cc0XsSTx8dqxiV8WLjoiihm1f0v1gpw%3D&reserved=0). And as the banking industry continues its digital journey, consumers are coming to expect more control over their data, greater convenience, and “anytime, anywhere” accessibility.

To keep up with customers’ demands banks need innovative business models that revolutionise the marketing, delivery and consumption of financial services while also delivering differentiation, competitive advantage and significant growth.

**Mobile-first consumers**

So far, most banks worldwide have handled the mobile era in exactly the same way, simply shrinking down traditional [bank accounts](https://www.financedigest.com/lebanese-bank-closes-over-30-british-held-accounts-after-uk-ruling-depositors-group.html "Lebanese bank closes over 30 British-held accounts after UK ruling-depositors’ group") and putting them on a smartphone screen without offering real innovation or engagement.

But simply pouring millions into innovation hubs and piecemeal digitisation strategies isn’t going to deliver the kind of results that will win over those tempted by the [challenger banks](https://www.financedigest.com/the-rise-of-challenger-banks.html "challenger banks"). [Traditional banks need](https://www.financedigest.com/traditional-banks-need-an-overhaul.html "Traditional banks need an overhaul") to shift gears and use the valuable information they already have to provide customers with seamless interactions across different channels.

At the same time, banks need to understand that the digital [banking revolution is more than a mobile app](https://www.financedigest.com/why-you-should-use-a-mobile-banking-app-and-how-to-make-the-most-of-it.html "Why You Should Use a Mobile Banking App – and How to Make the Most of It"). It’s about creating an entire experience. The implications of failing to facilitate a seamless cross-channel [customer experience](https://www.financedigest.com/the-next-generation-of-customer-experience-in-banking.html "The next generation of customer experience in banking") – one that lives up to growing customer expectations – is huge. Today, consumers have more choice than ever before, thanks to the rise of [fintech start-ups and digital-only banks](https://www.financedigest.com/how-partnerships-between-fintech-start-ups-and-traditional-banks-herald-a-brave-new-world-of-opportunity.html "How partnerships between FinTech start-ups and traditional banks herald a brave new world of opportunity"), and if they do not get the level of service they’ve come to expect, they will not hesitate to take their business elsewhere.

**[Subscription service](https://www.financedigest.com/how-to-press-cancel-on-the-threat-of-subscription-style-ransomware-services.html "How to press cancel on the threat of subscription-style ransomware services") model**

Using a service model patterned after Amazon Prime or Netflix may seem odd to many [retail banks](https://www.financedigest.com/the-power-of-digital-why-theres-still-life-in-the-traditional-retail-banks-yet.html "The power of digital: Why there’s still life in the traditional retail banks yet"), but challenger banks are already experimenting. Would consumers pay a subscription to get the same [service they do with Amazon](https://www.financedigest.com/uk-to-examine-cloud-services-dominated-by-amazon-microsoft-and-google.html "UK to examine cloud services dominated by Amazon, Microsoft and Google") and Netflix? The answer is yes.

[Revolut is already showing itself as a front runner in subscription-based banking](https://www.financedigest.com/the-open-banking-revolution-enabling-accessible-and-inclusive-finance.html "The open banking revolution – enabling accessible and inclusive finance"). The challenger provides a ‘freemium’ model, which gives users a free UK [current account and a free euro](https://www.financedigest.com/euro-zone-current-account-swings-back-to-a-surplus-in-june.html "Euro zone current account swings back to a surplus in June") IBAN account that offers no fees on exchanging in 24 currencies, up to £5,000 a month. Revolut also provides [monthly subscription plans with higher](https://www.financedigest.com/global-stocks-trade-higher-at-the-end-of-a-volatile-month.html "Global stocks trade higher at the end of a volatile month") thresholds for no fees, as well as instant access to crypto-currencies, cash back, travel insurance, free medical insurance abroad, airport lounge access and priority support.

[Research](https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.zuora.com%2Fpress-release%2F57-of-brits-will-pay-for-a-bank-account-if-given-valuable-add-on-services%2F&data=01%7C01%7Ctom.bermingham%40brands2life.com%7Ca31bd2b4607849f23b0d08d751457b26%7Cc3b1e3e0d7dc4a4ebd68519f408e9175%7C1&sdata=0GTg9kSQobny8Fsini%2BzjFF%2BQ27eetYYugOvJRXK0aw%3D&reserved=0) shows that in the UK 57 percent of people would be willing to pay an extra monthly fee for additional services from their banks. Most consumers – 45 percent – would like additional [media services](https://www.financedigest.com/best-media-placement-services.html "Best Media Placement Services") such as Netflix and Amazon while 40 percent prefer earned cashback and 37 per cent would pay for overdraft facilities.

Considering that at present, 72 per cent of customers don’t pay any monthly fees to their banks it’s fair to [say](https://www.financedigest.com/swiss-national-bank-raises-rates-says-bank-crisis-stopped.html "Swiss National Bank raises rates, says bank crisis stopped") that there is a great potential for financial institutions to leverage these services and elevate their game when it comes to competing against challenger banks and unconventional financial services.

**Trust and value**

Furthermore, traditional [banks have a crucial asset](https://www.financedigest.com/u-s-to-move-3-5-billion-in-afghan-central-bank-assets-to-swiss-based-trust.html "U.S. to move .5 billion in Afghan central bank assets to Swiss-based trust") compared to challenger financial institutions, and that is trust. Traditional [banks have a much longer and seemingly more robust security record](https://www.financedigest.com/credit-suisse-shares-hit-record-low-after-report-bank-is-looking-to-raise-cash.html "Credit Suisse shares hit record low after report bank is looking to raise cash").

The paradox is that many people trust their primary financial provider but distrust the financial [services industry](https://www.financedigest.com/why-sustainability-presents-one-of-the-greatest-opportunities-for-the-financial-services-industry.html "Why sustainability presents one of the greatest opportunities for the Financial Services industry") overall. Therefore, [banks that want to persuade their customers to adopt](https://www.financedigest.com/strong-customer-authentication-must-be-adopted-to-make-open-banking-a-success.html "Strong Customer Authentication must be adopted to make open banking a Success") new models and pay a potential monthly fee have to prove that they have customers’ interest at heart.

One way to achieve this is through transparency. The financial services industry still lags behind other sectors when it comes to transparent policies, costs and customer data. This needs to change and they need to show that they are keeping pace with the [market trends and customer expectations](https://www.financedigest.com/medical-device-technologies-market-expectations-and-growth-trends-highlighted-until-2028.html "Medical Device Technologies Market Expectations and Growth Trends Highlighted Until 2028").

Another crucial aspect [banks need](https://www.financedigest.com/what-banks-need-to-prepare-for-eba-pillar3-disclosure-of-esg-risks.html "What Banks Need to Prepare for EBA Pillar3 Disclosure of ESG Risks") to keep in mind when it comes to monthly subscriptions is the added value they would bring to customers. If they agree to additional costs, [consumers will also expect](https://www.financedigest.com/keeping-up-with-heightened-consumer-expectations-in-financial-services.html "Keeping up with heightened consumer expectations in financial services") extra benefits and not just the same things they used to get for free. Without additional value added, it will seem that [banks are trying to simply make some extra money thus confirming](https://www.financedigest.com/britains-co-op-bank-confirms-tsb-approach.html "Britain’s Co-op bank confirms TSB approach") customers’ distrust in financial institutions.

Bank of America, for example, [learnt this lesson](https://www.financedigest.com/lessons-learnt-what-financial-technologies-will-survive-post-covid.html "Lessons learnt: What financial technologies will survive post-COVID?") the hard way when they wanted to charge their customers a $5 fee for using their debit cards for purchases. The backlash was swift and strong, and the [bank had to cancel the plan within six weeks](https://www.financedigest.com/spain-expects-to-agree-with-banks-mortgage-relief-measures-by-end-of-week.html "Spain expects to agree with banks mortgage relief measures by end of week").

To avoid such situations, banks need to focus on their customers’ financial health and create personalised and holistic value propositions that will provide a [competitive edge](https://www.financedigest.com/leveraging-ai-for-the-competitive-edge-in-insurance.html "Leveraging AI for the Competitive Edge in Insurance  ") against challenger banks and convince millennials that they can provide safe and innovative solutions for life’s complex challenges.

By understanding these strategies and embracing the changes in [consumer buying](https://www.financedigest.com/from-burgers-to-bleach-stressed-consumers-buy-cheap.html "From burgers to bleach, stressed consumers buy cheap") behaviours, financial institutions will be able to create new ways to generate recurring value for their customers and new sources of predictable income.


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---