What Financial Institutions Need To Know About The Subscription Economy

Today, there's a subscription for everything. Netflix, HBO, Amazon Prime and other streaming services. Pet food and meds. Cosmetics. Meal kits. Music streaming. You name it, there's a subscription for it. It's getting so popular that our economy is shifting around it, moving from the traditional business model of one-time payments to subscriptions that automatically recur monthly, quarterly or yearly.

The model is a win-win for businesses and customers. For customers, it's easy and convenient and the fixed expenses help them budget each month. For businesses, recurrent subscription payments create effortless revenue and customer loyalty.

But for financial institutions, those wins aren't always so clear.

Subscription Economy Facts

• A recent survey by PYMENTS and sticky.io found that the average U.S. consumer now has subscriptions with five retailers. That number increased in four consecutive quarters and is now twice what it was in the first quarter of 2021. It works out to roughly $200 per household. And they're sticking with them. Only 14% say they plan to reduce the number of subscriptions they have while 51% are planning to add more.

• Gartner tells us that by 2023, 75% of companies selling direct to consumers will offer subscription services. Our economy is shifting from the traditional business model of one-time payments to subscriptions and automatically recur monthly, quarterly or yearly.

•  The subscription economy is estimated to grow to $1.5 trillion by 2025. It has been called a "once-in-a-century business transformation."

What It Means For Financial Institutions

Revenue. Account holders need to pay for those subscriptions and they have a choice of payment vehicle when signing on the virtual dotted line. If they choose their debit or credit card issued by their financial institution, those transactions will provide increased interchange revenue for their FI. But, if they choose bill pay or ACH transactions, it may cost their FI. Incentivizing account holders to make those recurring subscription payments on their debit or credit card can flip that expense into revenue.

PFI status is key. Today's banking consumer identifies their primary financial institution as the place where they get their direct deposits and pay most of their bills. The more the consumer relies on that account for transactions, the more "sticky" they become. Regular, recurring payments make consumers sticky.

Highlight subscription management. FIs can deepen relationships with their account holders by providing subscription management — transparency about all of those little subscriptions they signed up for. One large financial institution provides customers with a monthly run-down of their subscriptions that are coming due the following month. Another gives its account holders an alert when a subscription charges a fee. Any consumer with multiple auto-renewing subscriptions can see the value in that transparency. But their FI can only provide that if the customer pays for the subscription through them. That's a big benefit your account holders might not know about.

Identify positive financial wellness. Account holders that consistently make subscription service payments on time show they have strength in this one path of their journey, and provide insights for an FI to expand on from a relationship perspective. This audience set may be good candidates for other products and services that can drive additional revenue to the FI.


At Segmint, we're on top of the growing subscription economy and can help our clients gain significant value from their account holders' recurring payment transactions via merchant payment cleansing, customer insights and marketing automation.

To learn more about how to leverage it for your financial institution, please get in touch.