The financial services industry is rapidly changing, and new models are emerging to satisfy the needs of modern consumers. Two such models that have gained traction in recent years are subscription-based and on-demand financial services.
We'll look at these developing models and what they signify for consumers and financial institutions in this post.
Financial Services on a Subscription Basis
Subscription-based financial services charge a monthly or yearly fee for access to financial products and services. These services are frequently offered online, making them available to a wide range of customers. Subscription-based financial services include the following:
- Budgeting tools assist consumers in tracking their expenses and developing a budget based on their income and spending habits.
- Financial advice – Subscription-based financial advisors provide tailored financial advice to consumers to help them accomplish their financial objectives.
- Consumers can invest their money in stocks, bonds, and other securities through investment platforms. They frequently provide a variety of investment possibilities, ranging from low-risk to high-risk investments.
- Credit monitoring services check users' credit reports for changes and notify them of probable fraud.
Consumers benefit from a variety of subscription-based financial services. For starters, they provide a consistent cost structure, which allows consumers to better budget for their financial demands. Second, they frequently provide access to services that would otherwise be prohibitively expensive for customers to obtain on their own.
Financial advisors, for example, generally charge hourly rates that are out of reach for many people. Subscription-based financial advisors, on the other hand, make financial advice more affordable.
Subscription-based financial services provide a recurring revenue stream, making it easier for financial institutions to estimate revenue and plan accordingly. They also allow financial organizations to reach a broader audience, particularly younger clients who may not have the financial means to access traditional financial services.
Financial Services Available on Demand
As the name implies, on-demand financial services provide financial products and services on an as-needed basis. On-demand financial services include the following:
- Payday loans – These loans provide consumers with short-term loans when they need money immediately.
- Personal loans – On-demand personal loans enable users to borrow money for a range of purposes, including medical costs, home repairs, and debt consolidation.
- Peer-to-peer lending platforms match borrowers with private investors eager to lend money.
- Mobile banking enables customers to access their bank accounts, transfer payments, and pay bills using their mobile devices.
Consumers profit from on-demand financial services in a variety of ways. For starters, they offer quick and simple access to financial products and services. This is especially crucial for customers who may lack the time or finances to obtain traditional financial services.
Second, on-demand financial services frequently have fewer eligibility standards, making them more accessible to individuals with poor credit or a limited financial background.
On-demand financial services provide a business opportunity for financial institutions to enter new markets and consumer groups. They also provide a more flexible revenue stream because financial institutions can change their offers in response to customer demand.
Subscription-based and on-demand financial services provide unique issues.
While subscription-based and on-demand financial services have numerous advantages, they also present their own set of issues. Subscription-based financial services, for example, may suffer customer retention issues.
Customers may cancel their memberships if they believe they are not receiving adequate value for their money. To keep their clients engaged, financial institutions must constantly supply new and valuable services.
On-demand financial services may face regulatory compliance issues. Many on-demand financial services are subject to regulatory uncertainty, making it difficult for financial institutions to comply with all applicable rules and regulations. Legal disputes and fines may occur, which can be costly for financial institutions.
Known Problems with Subscription-Based Financial Products
While subscription-based models offer several advantages, such as predictable revenue streams and increased customer retention, they also come with their fair share of problems.
Costly Fees
One of the biggest problems with subscription-based models is the cost of the fees. While financial institutions may argue that their fees are reasonable, they can add up quickly, particularly for clients who use multiple services. For example, a client may sign up for a basic subscription plan that includes checking and savings accounts, but then may also be charged additional fees for other services, such as investment advice or credit monitoring. These fees can quickly become unaffordable for clients, particularly those with limited budgets.
Limited Customization
Another problem with subscription-based models is the limited customization they offer. Financial institutions typically offer pre-packaged plans that include a set of services. Clients may not be able to customize their subscription plans to meet their specific needs. As such, a client may only need investment advice, but the subscription plan they are offered includes several other services that they do not need or want. This lack of customization can be frustrating for clients who feel like they are paying for services they do not need.
Difficulty Canceling
Cancelling a subscription can be a challenge for clients, particularly if they have been subscribed for an extended period. Financial institutions may make it difficult to cancel a subscription, either by requiring clients to call in or by hiding the cancellation option in a difficult-to-find location on their website. This can lead to frustration and dissatisfaction among clients who feel trapped in a subscription they no longer want.
Inflexibility
Subscription-based models are inherently inflexible. Clients may be locked into a contract for a set period, typically a year or more, and may not be able to make changes to their subscription plan during that time. This can be a problem for clients whose financial needs change over time. For example, a client may need more investment advice in the first six months of their subscription but then may need to reduce their investment advice and increase their credit monitoring. The inflexibility of subscription-based models can make it challenging for clients to adapt their financial services to their changing needs.
Lack of Transparency
Finally, subscription-based models can lack transparency. Clients may not fully understand what services they are paying for or what fees they are being charged. This lack of transparency can erode trust between clients and financial institutions, particularly if clients feel like they are being charged for services they do not need or want.
The Financial Services Industry's Future
Subscription-based and on-demand financial services are just two of the numerous growing financial service concepts. We should expect much more innovation in the financial services industry as the world gets increasingly digital and consumer demands continue to grow.
The use of artificial intelligence and machine learning is one area of innovation that is already gaining pace. These technologies can be used to develop tailored financial products and services based on the needs and preferences of individual consumers.
An AI-powered financial platform, for example, may offer investment options based on a consumer's risk tolerance and investment objectives.
The usage of blockchain technology is another area of innovation. By providing a secure and transparent log of all financial transactions, blockchain has the potential to transform the way financial transactions are handled.
This technology has the potential to enable the development of new financial products, such as peer-to-peer lending systems that are more secure and transparent than traditional lending platforms.
As new financial service models arise, financial institutions must be ready to react to the shifting landscape. This includes investing in new technologies, creating new products and services, and discovering new ways to reach consumers.
It also entails taking a proactive approach to resolving the problems and risks connected with new financial services models, such as regulatory compliance and customer retention.
Finally, subscription-based and on-demand financial services are just two of the numerous new financial service models. These approaches provide numerous benefits to consumers and financial institutions, but they also present distinct obstacles.
As the financial services business evolves, we may expect to see even more innovation, such as the usage of artificial intelligence, machine learning, and blockchain technology. Financial institutions that are willing to adapt and innovate will do well in this changing landscape.
