Part of the contactless lifestyle and the business model that promotes it is subscription-based. Many companies today face a difficult question as they observe consumer behavior patterns: should they continue to sell products and services with usage-based pricing, where the customer pays for each unit or use, or should they transition to a Subscription-based model, where the service is always available? Both business models have their pros and cons, and as competition grows, it’s important to understand which may be more dominant in the future.
Maybe based on orders subscription based the business model allows the company to create long-term customer relationships and ensure stable income. The model has been used in several business areas, it is offered by Microsoft, Spotify, Netflix and Wolt Plus. It is probably only a matter of time before Bolt also offers its services with a single monthly payment: if a suitable rental car it’s too far away, take a taxi from the street corner to reach the car and you don’t have to worry with separate payments, everything is included in one monthly payment.
First tests
If and when will the subscription system be able to extend to financial services? Subscription based the business model is not often found on the financial market, however the first tests have already been carried out worldwide. One example is FloatMe, which offers consumers access to short-term loans for a monthly fee. Even if it is not pure form subscription based business model, allows users to have permanent access to credit.
Which subscription financial service could one day establish itself in Estonia? I offer the possibility to choose different packages, within which it is possible to take advantage of both installment payments and small loans with a monthly fee. Without going into mathematical calculations relating to the size of the customer base and consumer behaviour, it can be argued that if the customer joins, for example, a three-year package and pays 4-8 euros per month – even if he does not have a contract active installment: the service can be interesting from both the customer’s and the supplier’s point of view. The customer can use the specified credit, pays a monthly fee for this option and, by using the credit, no other costs, interest or contractual fees are added.
The customer prefers privacy
But would the consumer be willing to pay, figuratively speaking, the price of two cups of coffee a month for the right to receive zero interest? I think it would be. We can already see today that people are looking for ways to avoid signing up for an installment plan at the store checkout, where they must provide information about their income and obligations to the customer service representative who fills out the application.
Already today, people want to pay in installments for purchases they make from a merchant who does not offer installment payments, whether in their own country, in an international online department store or abroad. Non-traditional business models are increasingly attracting interest to financial firms in the face of ever-increasing competition, especially if they offer opportunities that attract customers.
Cost sharing is becoming increasingly important
What is the customer’s expectation? The main ones can be considered the expectation of a more affordable price and comfort. With the monthly price the service is cheaper because the cost of the financial service is spread across the entire customer base. Whoever uses the service the most will win in money, the others will win above all in convenience.
From the customer’s point of view, no less important is the equalization and distribution of costs over time. Pay an imperceptible amount every month and get access to financing or be prepared for higher costs for an order or one-time purchase? Our Generation Z and the Alpha Generation that is growing up after us are more accustomed to the former. Furthermore, the fact that the customer does not have to choose a seller based on the financing option offered, gives the freedom to make purchases in stores where the selection and price are best suited to the customer.
So, I believe it subscription based pricing has the potential to expand into financial services, and this model offers new opportunities for both customers and financial companies. I am more than convinced that in the near future we will see the first tests in Estonia too, but we will see if it becomes really popular.
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2023-12-20 17:54:00
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