While more consumers than ever switch to subscriptions to manage their spending, the problem of frictionless recurring payments persists, and is something banks should resolve, according to new fintech research.
In a flight to flexibility, 1 in 3 customers (37%) will switch banks to achieve a better recurring payment experience.
Published today, Subscription Economy: A Transformed World, a report by Minna Technologies written in partnership with FT Strategies and with data and analysis from Savanta, finds that, amid the cost of living crisis, 93% of consumers surveyed are more aware now of the amount they spend on subscription-based products and services (such as online entertainment streaming, gaming and gym memberships) compared with 12 months ago.
However, one in two consumers (46%) are spending more on their subscription services than at this point a year ago and only a third (37%) have cancelled a subscription in the last six months.
Four in five (77%) consumers in the UK and US now have at least one subscription; this rises to 88% among younger consumers aged 18 to 34. More than a quarter of all consumers (27%) have six subscriptions or more. Gen Z and millennials are the most prolific participants in the so-called subscription economy with 88% of them possessing at least one subscription. 53% of 18 to 24 year olds report spending more on subscriptions now than a year ago and half of them (48%) don’t expect to cancel any subscriptions in the next six months.
Joakim Sjöbolm, Cofounder of Minna Technologies said, “The extraordinary expansion of subscription adoption among consumers in recent years is indicative of a huge mental shift in the way they are thinking about what they want and need from their products and services.
“It’s not just about what they consume but how easy it is to access it, use only what they need and cancel it on the terms that suit them. In modern commerce, customer loyalty comes down to flexibility and ease of use, and so customers’ flight to transparency and flexibility will become more pronounced as times get tougher.”
More than half of consumers (54%) believe that to own something they do not need is ‘a waste of time’. Data confidently links this wide scale behavioural change from ‘ownership’ to ‘renting’ to the challenges of the current economic environment. Half of consumers surveyed (50%) say that subscriptions enable them to access products, services and lifestyles that they otherwise would not have. Equally subscriptions satisfy the growing preference to not commit to long-term purchases: 63% of consumers would rather sign up to pay for a subscription through higher recurring monthly fees, than a lower annual fee.
In their desire for greater flexibility, transparency, and personalisation, consumers are calling for their banks to provide the right technical solutions. Three quarters of consumers (74%) would like to manage all their subscriptions ‘all in one place’in one place, and a third (34%) say they want to use their banking app to do this.
To resolve the complexity of managing multiple subscriptions, one in three (37%) consumers are prepared to switch bank accounts to find the right app that allows them to manage payments in one place. Among Gen Z and millennials, this proportion rises to 50%.
Sjöbolm concludes: Banks who support consumers to flex their spend up and down will remain highly attractive as we continue through the uncertain period ahead. The ability for households to manage their spend, their usage and their outgoings in one place empowers them to be financially nimble and more resilient. When half of adults aged 18 to 44 say they’re prepared to switch to a new bank that can help them better manage the half dozen or more subscriptions they use, banks need to sit up and pay attention.