Subscription Economy

window of opportunity

Whitepaperby

INTRODUCTION

Over the last 10 years, consumer behaviour has changed drastically. The way we’re shopping today has changed from feeling the need of ownership to now prefering subscribing to products and services.

This whitepaper aims to present the challenges that modern consumers are facing while their shopping behaviour are changing. As well as sharing how retail banks can tap into consumer challenges in the Subscription Economy.

After reading this paper you’ll be left with some ideas on how retail banks can increase customer loyalty by extending their value-chain.

This whitepaper assume that in the real world, a consumer experience is best if the experience seems to be coming from one and the same company, even if there are multiple legal entities providing services together.

An assumption

1. Business Insider, 2015. http://www.businessinsider.com/millennials-are-renting-instead-of-buying-2015-5?r=US&IR=T&IR=T 2. Zuora, 2017, https://www.zuora.com/vision/subscription-economy/

Utilizing a subscription based business model isn’t news. It’s been around for decades. Why has it suddenly become such a trend?

The difference now is that the technology for it is both cheaper and easy to implement. Which has drastically changed the way we shop today. The fast acceleration is much due to the technology development the past 10 years.

It’s companies like UBER, Netflix, Spotify or Airbnb who’ve been in the forefront of this technology development. But they didn’t get there by themselves.

The shift in consumer behaviour was the second major factor to their success. This engine of this change is mostly the first digital native generation, often referred to as "millennials".

A generation of consumers born in 1990’s and forward who have a tendency of not wanting to own but rather subscribe 1. A generation that expects to quickly have access and be able to manage close to everything from their smartphone – and it includes private finances.

But it’s not just the millennials who share these expectations or behaviour.

The modern consumer are happy to subscribe to the products and services that fulfill their needs when they want rather than purchasing a product that comes with the burden of ownership. Today’s consumers demand customization and constant improvement – not generalization and planned obsoleteness. 2

Consumer behaviour – a dramatic shift3

3. Minna Technologies, 2017, Internal study conducted on a user base of 70,000 Swedes in subscription management tool ‘Mina Tjänster’.

As the number of potential subscriptions increase out there, it’s getting easier and easier to register for new subscriptions. This leads us to more subscriptions and recurring costs. In Sweden alone, every individual between 20-35 years old have on average of 8 subscriptions and pay on average $40 monthly for these subscriptions. 3

One one hand, many companies that utilize a subscription based business model have designed it in a way where it’s easy to sign up, but hard to unsubscribe and that leaves consumers in a tricky situation. On the other hand, it creates an opportunity for third-party actors or a consumer’s natural go-to actor for matters regarding their private finances – their bank.

New directive change the courseFor centuries, the bank has been the reference for anything money related. In today’s society this is still true but after 2019, it all might just be another story.

As the new directive PSD2 is established to it’s full extend, this will change how we interact with our bank going forward.

In short, the directive will make it easier for third-party service providers to access bank data with the bank customer’s consent. Which consequently may leave many banks to lose their customer interaction. Unless they develop their own value adding services or start collaborating with the third-party providers. Read more on this in our whitepaper on PSD2.

The dark side of the moon

Mikael ByströmSenior Investment ManagerSwedbank

We are very satisfied with the Minna Technologies partnership. When the concept is proven in our Swedish market, we will look into how to best expand Minna’s scalable platform to our Baltic markets. Minna’s subscription management platform would then be available to over 7 million private customers in 4 markets.

Consumers subscribe to more products and services. Some companies offering subscriptions make it difficult for consumers to terminate their contracts and banks are facing a revolution that might lead to losing customer interaction and customer loyalty.

Within this triangle lies an opportunity for banks to increase customer loyalty.

From this starting point, banks can, with (or without) third-parties, become that real one-stop-shop for their existing and new customers.

Opportunity for banks

Figure 1: Illustrating an opportunity for banks in the Subscription Economy

By extending their value-chain with add-on services that solve consumer problems. They could gain a competitive advantage against the competition, which could lead to new undiscovered revenue streams and increased customer loyalty if designed and implemented correctly.

Enter or notSo, should banks wait or seize the opportunity presented in this whitepaper?

Waiting could be an option, but what we do know is that the the subscription based economy is not just a trend. It’s rather an economic revolution that’s here to stay and will keep growing. 4

As presented earlier in this whitepaper, the number of subscribing consumers will keep increasing. European retail banks are facing challenges through new directives. Directives that might lead to losing their customer interaction or has it change drastically.

But still, there’s a clear opportunity facing banks to further develop value-adding tools and services for their existing as well as new customers. Ceasing such an opportunity would give them a competitive edge against other retail banks.

What’s important to emphasis is the level of influence. The banks who embrace this window of opportunity and jump onboard early will have much more influence on the development.

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Figure 2: Illustrate the level of influence a bank could have if they utilize their first-mover advantage.

4. Zuora, June 2017, “The Subscription Economy Index, 2nd Edition”

1. Business Insider, 2015. http://www.businessinsider.com/millennials-are-renting-instead-of-buying-2015-5?r=US&IR=T&IR=T 2. Zuora, 2017, https://www.zuora.com/vision/subscription-economy/3. Minna Technologies, 2017, Internal study conducted on a user base of 70,000 Swedes in subscription management tool ‘Mina Tjänster’.4. Zuora, June 2017, “The Subscription Economy Index, 2nd Edition”

SOURCES

ABOUT

Kungstorget 7

411 17 Gothenburg

SWEDEN

A FinTech startup based in Gothenburg, Sweden creating value adding features for banks. We make private finances easy for the modern consumer.

Launched it’s first subscription management platform in 2016, under the brand “Mina Tjänster” (My subscriptions).

A standalone application for consumers to manage their subscription based services, like streaming, gym memberships, phone contracts, insurances and electricity supplier etc..

Currently working with Swedbank, offering a white label solution for Swedbank’s 4 million customers.

CONTACT

CEO & Head of Partnershipsjoakim@minatjanster.se+46 73 659 21 41

JOAKIM SJÖBLOM