銀行にとってのネットフリックス型プライシングモデルは、抱合わせ販売以上のものであるべき

A major difference between neobanks and traditional banks lines in pricing. Indeed, while neobanks invariably deliver a strong, intuitive digital customer experience, for most customers the primary switch factor is the allure of a free, or low-cost, core service, with the choice of selecting additional services for a predictable cost. In line, with widespread trend seen in the media (think or Netflix or Spotify) or software (Microsoft 365 or Adobe Creative Cloud) sectors, these are typically based on a subscription-pricing model where consumers pay a recurring monthly set fee for access to a bundle of products/services.

At a number of banking get togethers this year, Celent has come across significant executive interest on this topic from traditional banks, considering whether they should switch to such an approach. From Celent’s perspective, this is positive development, and one that most banks should explore. However, a key point to note is that subscription pricing should not just been be a marketing rebrand of the monthly maintenance fee. The move to subscription pricing is part of a far wider rethink of the customer value proposition, and as such the underlying banking business model. It should be a bigger change than offering a collection of pre-paid fees or a product bundle for a fixed fee.

The fee structure for most banks is complex, often resulting in unpredictable and unequitable charges

While the typical structure of pricing models for transaction accounts does vary considerably by country, most banks operate with a mix of a monthly maintenance fees together with individual charges for various services. These may relate to payments transactions (use of checks, credit or debit cards, or non-bank ATMs), overdraft usage, or other services provided (such as sending a letter, reissuing statements, new cards, returning a check). Admittedly there has been a move to simplify structures in some markets, but in the main overall pricing structures remain complex.

For customers, the result of such pricing intricacy is often one of the primary sources of dissatisfaction with their banks. Of course, banks must provide full information around fee charges, but this complexity means fee documents can run in tens of pages. As an example, for Britline, a French bank targeting British residents in France, the 2022 fee document is 48 pages long. This can mean that pricing detail is not intricately known by most. Particularly for those that are unable to regularly meet waiver requirements, customers can end up feeling fees are both high and unpredictable.

From a societal perspective, the wider issue here is that costs are often disproportionately borne by low-income customers or customers with financial struggles. Monthly fee waiver requirements typically demand a high minimum level of balance and/or income into the account, and for most banks the majority of penalty charges are collected from a subset of the customer base (the 80:20 rule generally applies here). This can create the perception of inherent inequity in the system; one that regulators in many markets have been taking an active interest in reducing.

Subscription pricing provides control to customers in setting predictable, transparent, and flexible recurring fees

Subscription pricing can address many of these issues. Here customers pay a set recurring fee (typically monthly) that they choose upfront for a desired level of service. As this includes per-use items, for consumers this is a predictable and fully transparent cost. Depending on options available, this can also offer the perception of greater flexibility, with customers able to upgrade, downgrade, or suspend the service as required. As pricing is based on service bands and common to all, it can also more seem more equitable, particularly if the base level of service is free.

Interestingly, consumers are often willing to pay more for this predictability, as most over-estimate their likely usage. The gym membership phenomenon is a good example here - a customer may pay $30 a month for unlimited access if one-time access is $8, despite most ending up using it less than five times a month. Similarly, for banking, a subscription including all ATM fees in the US for a set fee month may appear attractive, even if actual average monthly usage with one-off fees is a lower amount. Consumers generally prefer the predictability.

Subscription pricing requires a shift to a service over product approach

For banks, the challenge here is that the move to subscription pricing can feel like a painful one. Banks need to give up what can be highly profitable fee income streams in return for a regular, recurring ones. However, pricing for many banking products is already a combination of periodic fixed pricing combined with a usage-based pricing (e.g. an overdraft or revolving credit facility may have both a commitment fee and interest calculation based on usage), so in reality a shift to subscription pricing is less dramatic than it can first appear.

The bigger issue for most banks is that it a requires a shift in product management thinking from selling products to offering a subscription to services. This requires a change in key performance metrics, away from individual product profitability, and indeed even individual customer past profitability (how much economic profit a customer made in the last 12 months), to focus on future customer value (e.g. annual recurring revenues), customer lifetime value, and customer churn.

The focus on customers then becomes on monitoring and encouraging usage to drive loyalty. For example, Netflix prefers you to watch it rather than enjoy the profit benefit of having a customer with no usage; it knows that customer will eventually stop subscribing – hence the provision of the recommendation engine. Similarly, in banking the focus becomes that of finding new ways to deliver value to customers to strengthen the customer relationship. Advisory, value-add services, like financial management, financial wellness support, or concierge-type services become easier to justify as a means of enhancing the service proposition, rather than being seen as a cost associated with a banking product. Indeed, over time these value-add services will be seen as the main source for driving customer value rather than individual product components.

Banks therefore need to think about the shift to subscription pricing as a business model one, questioning how they create value for clients, rather than a mere pricing one. The good news for banks is that the shift to a service-based value proposition can help move banks away from the highly commoditized banking product market, where interest rate/fees rather than value delivered is the main determinant for in selection.