# Why the Financial Services sector could thrive in the subscription economy
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-05-31
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Subscribe Today: Embracing the Subscription Economy in
Meta Description: Discover how financial services can thrive in the Subscription Economy, creating loyal customer relationships and new revenue streams.
URL: https://financedigest.com/why-the-financial-services-sector-could-thrive-in-the-subscription-economyhtml

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_By **Michael Mansard,** Principal Director – Subscription Strategy at Zuora_

Over the last decade, the financial services industry has seen more radical transformations than virtually any other sector. Challenging regulatory frameworks and interest rates have been met with ever-increasing customer expectations and competition from a new wave of digital disruptors – including fintech start-ups and challenger banks.

To add to this, within the last year, the pandemic has become a catalyst for the [worst economic disruption since](https://www.financedigest.com/worst-flooding-since-1998-leaves-33bn-economic-toll-in-china-according-to-aon-catastrophe-report.html "Worst flooding since 1998 leaves bn economic toll in China, according to Aon catastrophe report") the Great Depression, intensifying threats to the industry that have been brewing under the surface for some time. Even if the [global economy](https://www.financedigest.com/september-tropical-cyclones-cost-global-economy-more-than-4bn-according-to-aon-catastrophe-report.html "September tropical cyclones cost global economy more than bn, according to Aon catastrophe report") were to recover completely tomorrow, many FSI businesses would still be in a highly precarious position.

Moving forward, the [key to success](https://www.financedigest.com/mvp-for-startups-the-key-to-success.html "MVP for startups: the key to success") will be embracing the customer-centric business practices at the heart of a phenomenon currently being labelled the “Subscription Economy”. Unlike the more traditional “product economy” which relied on one-off transactions, this model grants businesses a [unique opportunity](https://www.financedigest.com/the-rise-of-finfluencers-presents-unique-opportunities-but-brands-must-proceed-with-caution.html "The rise of “Finfluencers” presents unique opportunities but brands must proceed with caution") to build loyal, long-term relationships with their customers. For the [financial service sector](https://www.financedigest.com/iot-for-the-financial-sector.html "IoT for the Financial Sector"), this could mean more opportunities to upsell and cross sell as well as the discovery of new revenue streams and a reduction in churn.

By implementing a subscription-focused strategy that is customer-centric, [financial services](https://www.financedigest.com/as-hackers-declare-cyberwarfare-financial-services-cannot-afford-to-be-complacent.html "As hackers declare cyberwarfare, financial services cannot afford to be complacent") organisations can renew their business model, go-to-market strategy, and value propositions to ultimately achieve accelerated and sustainable growth.

**Subscribing to** [future success](https://www.financedigest.com/banking-on-the-future-why-payments-transformation-is-the-key-to-success.html "Banking on the Future: Why Payments Transformation is the Key to Success")

There is no doubt that the [subscription economy is on the rise](https://www.financedigest.com/the-rise-of-the-subscription-model.html "The rise of the subscription model"). During the pandemic and the ensuing lockdowns, for the most part,  [businesses with digital-based subscription models](https://www.financedigest.com/7-factors-to-consider-before-your-business-moves-to-a-subscription-model.html "7 Factors to Consider Before Your Business Moves to a Subscription Model") fared better than those without. In fact, Zuora’s most recent [Subscription Economy Index](https://www.zuora.com/resource/subscription-economy-index/) found that companies that utilise subscription models have consistently grown six times faster than traditional businesses over almost ten years. Subscription models can also help businesses stay resilient, [with 4 out of 5 subscription businesses growing in 2020](https://www.zuora.com/press-release/subscription-businesses-remain-resilient-amid-covid-19/) despite the economic impact of the pandemic.

Business models that incorporate subscription [services are already being utilised](https://www.financedigest.com/how-financial-services-companies-can-successfully-utilise-low-code-and-no-code-technologies.html "How financial services companies can successfully utilise low-code and no-code technologies") across many different industries. They are helping organisations to reinvent themselves and build a new foundation for growth, even in the most challenging times. For example, in the technology space, after years of selling on-premise software, companies like Microsoft have successfully adapted to monetising software-as-a-service (SaaS).

Meanwhile, media companies across the world are using subscriptions as a lever to [accelerate growth](https://www.financedigest.com/china-nov-export-growth-slows-but-imports-accelerate.html "China Nov export growth slows but imports accelerate"). [In fact, the Telegraph recently reported digital subscription revenues increased by £13.7m (77%) in 2020, and are expected to be substantially higher in 2021.](https://www.telegraph.co.uk/business/2021/04/27/telegraph-hits-record-603000-subscribers-profits-surge-despite/#:~:text=Total%20subscribers%20increased%20by%20139%2C000,to%20423%2C000%20by%20December%202019.)  Similar success patterns can be seen across other industries, including  automotive, retail, and heavy manufacturing. These industries did not collapse under pressure, they reinvented their offering and adapted in order to survive.

During a time of immense change, it’s essential that businesses are able to put the [customer first and tailor a product or service](https://www.financedigest.com/revolutionising-customer-service-three-sectors-that-are-leading-the-way.html "Revolutionising Customer Service: Three sectors that are leading the way…") to meet their requirements. This is a great way to build [loyalty from customers](https://www.financedigest.com/financial-companies-delivering-better-value-for-customers-in-loyalty-programmes-compared-to-other-sectors.html "Financial companies delivering better value for customers in loyalty programmes compared to other sectors") who want to feel that a business understands their needs. The offering of a more personalised [service has been a contributing success factor for organisations](https://www.financedigest.com/can-financial-services-organisations-harness-data-and-bi-to-catch-up-in-the-digitalisation-race.html "Can financial services organisations harness data and BI to catch up in the digitalisation race?  ") across the board and those that embrace customer-centric business practices more often than not prevail over those that do not.

Subscriptions can also help companies to expand their potential market by allowing customers to suspend or resume their payments, pay monthly, or pay by usage – meaning [services are made more affordable to customers without the need](https://www.financedigest.com/do-you-need-to-buy-guest-post-services-why.html " Do You Need to Buy Guest Post Services? why?") to reduce the overall cost, maximizing customer lifetime value. With their ability to help an organisation cast a wider net and grow user bases, [subscriptions can boost](https://www.financedigest.com/netflix-cuts-prices-in-some-countries-to-boost-subscriptions-shares-drop.html "Netflix cuts prices in some countries to boost subscriptions, shares drop") revenue growth in the long term.

**The FS companies leading the charge**

When it comes to the Subscription Economy,  it’s still relatively early days for the [financial services](https://www.financedigest.com/what-can-we-learn-from-financial-services-security.html "What can we Learn from Financial Services Security?") industry. However,  over the last 12-18 months we have seen growing interest and several companies are already reaping the rewards, we identified over 30 examples outlined in our recent whitepaper;  [A new formula for growth for The Financial Services Industry (FSI)](https://www.zuora.com/the-financial-services-industry-and-subscription-economy/).

For example, financial advisory company, Charles Schwab, shifted to the subscription model on just one of their product lines, offering automated investing to [build and manage client portfolios](https://www.financedigest.com/building-a-portfolio-for-retirement.html "Building A Portfolio For Retirement") for a $30/month fee for accounts with at least $25,000. This brought in $1B in new client assets, primarily from younger investors.

Sberbank’s Sber Solutions offer [financial services](https://www.financedigest.com/how-big-data-is-sending-shockwaves-through-the-financial-services-sector.html "How big data is sending shockwaves through the financial services sector") online, along with operational, legal and HR outsourcing available to both clients and non-clients. An example of Sberbank’s subscription [pricing can be seen](https://www.financedigest.com/wall-street-seen-opening-higher-but-u-s-recession-priced-in.html "Wall Street seen opening higher but U.S. recession priced in") in its accounting service, offered for 6,000 RUB to 29,000/ month depending on volume of employees, documents, and operations.

The insurtech start-up Lemonade demonstrates one strategy for leveraging the subscription economy within the FSI: reinventing an existing [service as a streamlined and customer-centric experience](https://www.financedigest.com/video-collaboration-is-pushing-the-boundaries-of-the-customer-experience-in-financial-services.html "Video Collaboration is pushing the boundaries of the customer experience in Financial Services"). Through an easy to use smartphone app, Lemonade can onboard policyholders in a minute and a half and fulfil claims within seconds. Customers can cancel and modify policies just as easily, and Lemonade even refers to its policies as “subscriptions” on its website.

In the B2B sector, Serai (by HSBC) leverages HSBC’s network of trade banking clients to connect buyers and sellers around the world – simplifying the complexities of global trade. For B2B offerings that are ‘high touch’, the sales force is an essential component of sales strategy.

**The subscription revolution is here**

Industry transformations aren’t a quick-fix, and they can be tricky to implement. Since most established organisations in the [financial services sector](https://www.financedigest.com/overcoming-information-overload-in-the-financial-sector.html "OVERCOMING INFORMATION OVERLOAD IN THE FINANCIAL SECTOR") have been using the same operating models for decades, a shift to a totally new approach can seem daunting.

The good news is that financial services companies don’t need to dive in and completely change their entire business model to reap the [benefits of the subscription economy](https://www.financedigest.com/a-two-way-street-chinese-investment-in-the-uk-will-benefit-both-economies.html "A TWO WAY STREET: CHINESE INVESTMENT IN THE UK WILL BENEFIT BOTH ECONOMIES"). A try-and-learn approach can help [businesses to ease into this new world](https://www.financedigest.com/be-the-digital-eyes-and-ears-of-your-business-from-anywhere-in-the-world.html "Be the digital eyes and ears of your business – from anywhere in the world!") at their own pace.  With such [clear benefits](https://www.financedigest.com/clearing-out-your-garage-benefiting-from-corporate-simplification-2.html "Clearing Out Your Garage – Benefiting from Corporate Simplification ") – industry leaders should be asking not if, but how they can best adopt subscription models to lead their organisation to accelerated growth and sustainable success.


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