Resources > Data Jam Sessions and Podcasts > How Banking Can Win Big in the Subscription Economy

How Banking Can Win Big in the Subscription Economy

May 19, 2022 by Jim Marous (The Financial Brand and Banking Transformed Podcast) with Joan Clark (VP of Product for Segmint)


Old revenue models are dead. Financial institutions must rethink their business models and create new growth levers to be future-ready. Subscriptions make our customers’ lives easier with the touch of a button, a recurring purchase or even a reminder about content of interest.

Helping customers pay directly from their debit or credit card can generate revenue. Beyond that, there are even subscription opportunities with personalized financial content.

It is great to have Joan Clark, VP of Product for Segmint on the Banking Transformed podcast. Joan discusses the way banking can benefit immediately from the subscription economy.


Jim Marous  00:20
Hello, and welcome to banking transformed. I'm your host, Jim Rose, founder and CEO of the digital bank report and CO publisher the financial brand old revenue models are dead. As a result, financial institutions must rethink their business model and growth levers to be future ready. subscription models make our customers lives easier, sometimes a touch of the button to hear a podcast, or maybe to get an automatic refill or to get groceries delivered within an hour of ordering. helping consumers to pay directly through their debit or credit card can generate revenue. Beyond that they're even subscription opportunities with personalized communications. It is great to have John Clark, Vice President product from Segmint on the bank of transform podcast. John discusses the way banking can benefit immediately from the subscription economy. So welcome to the show today, Joan, you know, we officially live in a subscription consumer society, what was really once reserved for magazines and door to door encyclopedias, salespeople has really become the default way we consume media order food, Halo ride, and even buy retail products. You know, in the digital world, subscriptions make our lives easier. What's interesting, when you look at it, it's really recurring stable sources of engagement, that make businesses better be at financial institutions or other institutions. In addition, the consumers who subscribe are obviously quite loyal. So John, before we get into talking about how banks can leverage the subscription economy, can you tell us a little bit about yourself, as well as a little bit about Segmint? Sure. Thanks,
Joan Clark  02:08
Jim. And thanks for having us. I appreciate that. I am the VP of product for Segmint and I've been with the team for just over nine years. Segmint is a provider of a data analytics platform, we help financial institutions make their transaction data usable and meaningful. It's powered by AI and a very creative team, our products both enrich the transaction data that provide insights to the financial institutions to identify the merchants where the transaction was processed. But we also identify customer insights that describe the customers who are processing those transactions. And it's all for the purpose of helping the FBI deepen the relationship with the customer, and help grow their business,
Jim Marous  02:57
you're gonna give it a little plug for your company, you know, on almost every podcast, and every writing I do for the financial brand, I bring up the importance of partnering with organizations that can move your organization forward quickly and at scale. And Segmints are a great example of a way that an organization can help a financial institution, leverage your data quickly, even if it's not in the greatest state within the financial institution, and bring really good revenue opportunities to the table. So we're talking today about the subscription economy. And really, there's so many different ways to look at this. But what do you consider be the current state and subscription economy? And where do you think it's headed? Well,
Joan Clark  03:39
I think the subscription economy is has really been on the rise. Even before the pandemic, it started, like you said, with a lot of those subscription box services like HelloFresh, and, is one that I was thinking of. But since the pandemic it's really gotten wider and deeper in almost every every industry, it makes our lives easier, as you said, and and based on the research that we found, it's expected to grow to $1.5 trillion in 2025, which is really astounding, which is more than double what it was, I think, just last summer. And the other research that we found is that the consumers have five subscriptions, which I thought was a lot but then when I started adding what my husband and I have, like Hulu and Netflix and HelloFresh and and Disney plus I have probably five so I guess I'm an average consumer, Jim. Well, you know,
Jim Marous  04:41
it's it's even goes deeper than that things that we don't pay for, you know, I'm a subscriber for normal, a lot of podcasts. I'm a subscriber to things through for personal care products that I have on a recurring basis. They're always pushing, saying, Hey, you want to subscribe for this for less Money, because they realize it's going to create a new behavior, which is really what we're talking about here. But more importantly, from a financial institution or non financial student perspective, it really is building new behaviors and deeper engagement. So right, how do you think this trend is impacting financial institutions basically, all sizes? So
Joan Clark  05:22
I think that's a really great question. Because, as you said, there's so many new opportunities for us to engage with those subscription services. And if you think about it, the more subscription services we're making payments to, the more transactions we're processing on that financial institutions account, the stickier we're becoming with that financial institution. And once you sign up with a with a subscription service, switching to another card is just not easy, you know, and we'd like we'd like things to be easy. But But the other thing, Jim, is, it's not just some of those subscription box services. So so it's encouraging more than more of that behavior of that recurring payment behavior beyond those subscription box services is also important. So, you know, we all have payments that include like insurance payments, and cell phone payments and utility payments. So those recurring payments can also be lumped into this type of behavior that we want to encourage more of for the institution, because the more that the FIA can capture that, the more likely that they're going to be the PFI for that consumer.
Jim Marous  06:42
Well, it's important also, because, as you said, it's hard to unwind those. But if a consumer doesn't do it on a credit card or debit card, we lose the interchange income, which is obviously an important revenue source. But we as you said, we also lose the stickiness because every time of consumers relying on our financial institution to build this interchange between us and a another party, it builds that relationship stronger, and obviously makes it more difficult to unwind it. So how can financial institutions capitalize on this trend, other devotees use cases of how an organization has really taken this somewhat, you know, something we take for granted, we know we do this, but we don't really think about it very much, and have taken it to another level where they've generated more revenue and actually made it an important source of ongoing revenue for the financial institution. Well, I
Joan Clark  07:37
think that interchange revenue is the perfect example of that. Really, Jim, I think that, you know, becoming sticky on the account by having as many transactions as possible, having the account be the hub of that transaction of that consumers payments is is rare, very critical. But But how are they making those payments? Is it through Ach, or bill pay? Or is it on the credit card where like you said, they could be earning that interchange revenue. And it seems obvious to me to put those subscription services like Netflix and Hulu on your card. But payments, like utilities, or insurance or cell phone payments, it's not so obvious, it's not really the traditional way that we've paid for utilities. But sometime during the pandemic, I made that transition because I wanted it, I wanted to make it easier for myself, right, I wanted to make sure that I was making that payment on a regular basis. And I didn't forget about it. Plus, if I put on my card, then I'm getting all those rewards, and that cashback on those on that bat dollar spent. So I think that that is a way that the FBI can capitalize on that trend,
Jim Marous  08:47
we don't miss something really build with the the Gen X and Gen Z because these are these people are right now the ones who are opening all these new credit cards, there's a study that came out yesterday that the growth in new credit cards is just enormous right now. And it's a lot with the younger consumer, while the younger consumer also are the ones that are most engaged in the subscription economy. So if we can bring these two elements together, and we can make it so that these people decide that this Gen X and Gen Y and Gen Z all start using the credit card as a way for making these payments. Not only is it making them more entrance, but it makes them think about the financial institution. Now on the opposite side of that more than just the revenue side. You know what Segmint can do is then you can use this purchase data, this information to build a better portfolio or view of the consumer for other services. So, again, one of the things we lost as an industry over the last 20 years is as more and more payments are being done outside as more transactions and more organizations are getting this data we People are losing the opportunity that was really expanding tremendously in the digital economy, to understand their customers better understand what they bought what they subscribe to. I mean, if you understood what I subscribe to, from a podcast basis, what I buy from Amazon on a recurring basis, what subscriptions I may have outside of this, maybe it's with my taxi or Uber, or with any of the other organizations, this helps you build a better profile the consumer, correct?
Joan Clark  10:31
Yes, for sure. Yeah. So we're seeing all those behaviors and through our customer insights product, we can identify what you know, who is who is their customer base, that are making those payments to subscription box services? Or who are those that are making their payments, their cell phone payments with that account, or their utility payments with that account. And again, that's identifying those those consumers that are thinking of your account as their PFI.
Jim Marous  11:02
So how can a financial institution identify recurring spend transactions?
Joan Clark  11:09
Well, it's all in the transaction data, really, there's so much information, there's valuable a lot of valuable insights that you can that you can get out of that transaction data. And really Segmint is the world leader in analyzing and cleansing transactions, we take in all those transactions or consumer those transactions from the FIS. And they come in, and they're very raw and cryptic. And if you had to look at them, they'd be indecipherable by the human eye. But our we have transaction analytics and AI that identifies both a user friendly merchant name for which the transaction was processed, like HelloFresh, or Netflix or Hulu, or whoever it may be that you're actually making the payment to. And then we provide multiple levels of categorization. So that you can start to see trends of where the the payments are being made. So we can identify there's meal delivery service, or cellular telephone services or utilities. And then we provide even a higher level of categorization like food and dining. And so with all that categorization, they can start to use that information in their BI tools in their data modeling tools, to start to understand where their customers are spending and how they can encourage more of that spend the type of spend, that they want to make more profitable customers and to help provide products and services to deepen that relationship with our customers.
Jim Marous  12:44
You know, it's interesting, John, because when you talk about this, and the insights we develop, you know, this is where we can build some really good engagement, because we can really help the finances to some then going back to the consumer, their customers, and tell them about themselves to help them make better financial decisions. So when you look at the flip side of generating revenue from subscriptions, do you believe that subscription management services or simply the ability to tell a consumer, by the way, here's a list of subscriptions you're currently engaged in can be a, you know, a valuable asset, and maybe something that we can actually charge as a subscription to consumers to provide on a regular basis. You know, I remember a situation where I have a financial account, and I had some fraud of my my debit card. And the first thing that came to my mind is, oh, my gosh, I'm gonna have to change my debit card number, and change all my recurring payments. And I don't know what I'll be honest with you. And I asked a financial institution to provide me this and they go, Well, no, we really can't. And immediately, my my trigger says, oh, yeah, you can't, you just don't? Well, this isn't a very good, you know, level of customer experience, and a great benefit for the consumer to know if their financial institution can help them identify, by the way, here's what you're currently doing. You can adjust it. There's also you know, there's services out there. But do you think this level of insight for the consumer is going to be table stakes going forward?
Joan Clark  14:18
I definitely do. And we can provide that data to financial institutions into FINDEX to help provide those tools to their customers and provide customer facing applications for that. With our enrichment merchant payment cleansing service that enriches transactions data, we actually identify the set the pool of merchants that are identified as recurring providers payment merchants that accept recurring payments. So that would be an easy solution for us to provide that set of merchants that those customers are making payments to, and it would help them again, Reese Add that up when they have to open up a new card. It's actually one of our use cases that we have in our, in our Merchant payment cleansing products hit the nail on the head.
Jim Marous  15:09
Yeah, and you know, there's so much available here, because we've taken it for granted, we were excited about the fact that people have recreated payments. There's interchanging Comm, as you mentioned, you know, also the the ability to collect insight. So, Canvas recruits bend data be used for AI, mom
Joan Clark  15:27
definitely can. So there's a lot of, if you have that high volume of recurring spend, it's a characteristic of customers that you want to see more of, right. And so our We've had clients that have used that enrich transaction data, to identify card spend behaviors that represent those most profitable customers. And when they've looked at that transaction data of their most profitable customers, what they've seen is that those most profitable customers are the ones that have those recurring payments, the recurring payments, not only to the subscription, subscription box services, but to utilities and cell phone payments, and so forth. And then they drill down into that data, and they find out what types of payments or what types of merchants are making that payment to. And then they offer additional rewards to to encourage those that are not the most profitable customers to have that type of behavior. So they're looking for those in the AI modeling, they're looking for those correlation between profitability and type of spend behavior.
Jim Marous  16:40
Yeah, so you know, what's interesting is when you look at the auto payment idea, through a credit card, it can be any kind of major payment, a financial institution, encouraging the consumer to do it is one way for the financial institution to say, we're looking out for you, we're using insights that we know. And we're making your financial life easier, or at least more beneficial to you, even though we're paying out the reward. So it's, it's saying, instead of having to come directly from your checking account, what you're used to doing, we have this data that says you're doing this regularly, you may think of this alternative. So, you know, let's do a bit of a pivot here, because we're looking at the overall subscription economy, not only their revenue opportunities, but as we've talked about, predict this call prior to this call, is there's certainly other subscription opportunities around engagement. So is there a subscription model where banking solutions could offer enough that there may actually be the ability to create a monthly fee? In other words, the different things we've talked about here, where we're overall subscribing to a financial institution may have enough value that you could actually charge for it? Such as let's look at Amazon, you know, they're charging 230 $140 a year now, for the right to shop digitally? Are there examples out there where financial shoots can bring enough value that a consumer could actually subscribe to the financial institution?
Joan Clark  18:04
Yeah, so if we could convince them to, to, to switch their payments from that bill pay to an ACH to card services, then there is an opportunity to do that, right. And then they can, the FIA can earn that this subscription, excuse me, earn those entertainers revenue dollars,
Jim Marous  18:27
right, and even the ability to to show the value of what you're doing for the consumer, or the consumers can actually pay a monthly fee for you know, we call it monthly fee. But this is really subscription revenue. This is what you know, any other organization is doing on a regular basis. You know, this is another example of where subscription of subscription can be can play in. And while it's not revenue basis, certainly engagement base, you know, we have a number of fintechs that create ongoing content, very specific content for different sets of their consumers, some of them already focused on a specific base. But if if your developer will say an ongoing blog and ongoing podcast, something else, and while you may not charge for it, is this another way to leverage the data we have internally to know what a customer's interests are, and then build content or connect them to content that's out there that can serve them and actually enhance the value of that relationship? Because the more we show the customer that we know them, the less likely is that they want to go through the process of trying to find another institution who would have to know them again.
Joan Clark  19:36
Yeah. And that's really the the focus of our customer insights is to deepen that customer relationship. It is it is for the purpose of marketing content, but it is really to engage with the customer on a more personal level to show that we truly understand them. And so we see transactions that the customers are processing that really explain Their priorities, their financial priorities, their, their, you know what's important to them from their children to their homes to their investment. And so we see, for example, if they're trying to, to figure out how to pay for college for their children, and maybe there's content on that, how to pay for college for your, for your children, you know, entering in the next two or three years, or maybe they see that their consumers are making small investments via acorns. And that can be another way to target customers for specific investment advice. Yeah,
Jim Marous  20:36
it's interesting, because we take all this for granted. But what you're really doing it and we've discussed since the beginning of the podcast is, instead of simply using data for us to know the customers better, you're actually talking about using data to help the customers pretty much know themselves better, but also continuing illustrate that we can help them down their financial journey. And you know, this, this is the missing link that most financial institutions haven't done in the past. You know, I my saying is, you know, instead of making great reports, we need to make exceptional experiences. Why don't we even move that further and say, Build exceptional engagement opportunities, because you keep on bringing it up that the more data that you have, the more data that's created, the more opportunities that are out there? So as a wrap up question, you know, financial institutions, obviously have an abundance of data that they're sitting on. Why is it more important than ever, for financial Institute's use this data, not only to extract value and insights, but to make major strategic decisions that may involve revenue models or entire business cases?
Joan Clark  21:50
Yeah, it's so so important. And it is really important that I love the context of the journey of the customer. FIS do sit on a lot of data. But making use of all that data is not easy. Like I said that, that especially transaction data, that transaction data is messy, and it's difficult to understand. But there are so many valuable insights that can be gleaned from that from the transactions that customers make. Because like I said, it defines our priorities, where we spend our money reveals what's important to us, children's homes, investments. But if FIS are going to look to their customers, and the life events that their customers experiencing, to drive their business strategies. And really understand like, how are we not? How am I going to sell a HELOC, but how am I going to help my customers put their kids through college? Or how am i How am I going to help my customers save for retirement appropriately have enough a sufficient amount of money to save for retirement? Or how am I going to help this young couple, buy the next home that they're looking for, they need to they can't ignore their customer swipes and the payments that they're making on their digital banking platform. They need all that data to better understand their customers and what their financial, their financial goals are. And so they can use this data to really hit hit the ground running, and really use that information to drive the institution strategies.
Jim Marous  23:23
You know, I said at the beginning, consumers engaged in some in the subscription economy, because it makes their life easier. We as financial institutions should be really interested in subscription economy from a standpoint of revenue, engagement, and building a lasting relationship that can be more more important to the consumer at a time that they're right now in many cases, taking their financial institution relationship for granted. You know, it's it's great to have you on the show, Joan, you know, one thing I keep on telling everybody I said at the beginning, I'm gonna say it again, financial institutions have every excuse in the world for not engaging with third party providers. So say teeth my dad is not in great shape or cheese. I have a court provider that's supposed to provide this we have all these excuses, but the reality is, the consumer is not going to wait for us to build a better engagement model to understand them better. Organizations like Segmint are a tremendously positioned today to help organizations out of the box quickly and at scale. Take advantage of the data and insight you have buried in your financial institution and immediately convert it doesn't matter what your core provider is, doesn't matter what kind of platform you have. Doesn't matter how many silos you have. And yeah, that sounds like a plug but I'm what I'm getting to is we need as finances to make this decision today. We can't wait another year to make this decision. The lag we have between the analysis and actually making the decision is lost money. Jump, how to organizations find out more about Segmints and also find out more about what you can do to get some early wins right out of the gate.
Joan Clark  25:09
So thanks so much for that, that fabulous wrap up, Jim, there is the best way to get a hold of us is to first go to our website and check out all of the information that we have there. We have case studies, we have use cases, we have blogs, we have so much information out there about how our data can help your financial institution. Take advantage of the information that you have, right, they're readily available to you. And then you can reach out to any one of our team members, either through the website or just pick up the phone and our team can schedule some time to talk with you and walk you through step by step how to take advantage of the data that you have.
Jim Marous  25:54
Yeah, and Joan, your firm has so many case studies, so many examples of how an organization can very quickly take advantage of revenue opportunities that can more than pay for the engagement with Segmint. And I'm going to make sure people understand it because a lot of people may spell it wrong, is SCG m i And, you know, John, great to have you on the show again and great to have Segmint is a sponsor of this podcast. Thank you. Thanks for listening to bank and transform just rated a top retail banking podcast. Also the winner of three international awards for podcast excellence. If you enjoy today's interview, please give our show a five star rating on your favorite podcast app. In addition, be sure to catch my articles I'm writing for the financial brand and the research we're doing for the digital banking report. This has been a production of evergreen podcasts a special thank you to our producer Lea long break audio engineer Sean row Hoffman and Video Producer will be. Fritz. I'm your host chimeras. Until next time remember, sometimes the greatest opportunities are hidden. We just need to seek them out.