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BANKING ON THE SUBSCRIPTION ECONOMY: CONSUMER DEMANDS DRIVE THE SHIFT TO SERVICES FROM THEIR BANKS

Over half of consumers open to paying a bank a subscription fee for additional personalised services

 

Zuora®, the leading cloud-based subscription management platform provider, today unveiled research about a striking shift in consumer sentiment towards banking services. Nearly half (44%) of consumers would consider switching to banks on a subscription basis in return for personalised service bundles. This is significant in that over one-third (35%) of all UK consumers have never switched their bank. A standardised package isn’t enough to entice change, instead they want tailored offers and 60% of consumers will allow analysis of their purchasing data to get this.

 

The UK-wide study of 1,000 consumers, conducted by CitizenMe with Zuora, looked into what people want from their bank. The report found that UK consumers, who are notorious for never switching banks despite offers, showed over half (52%) of respondents would be enticed to switch banks if their subscription included an entertainment bundle. This was followed by smart phone insurance (33%) and utility services (31%).

 

The report found that there is a clear appetite for subscription services amongst consumers. Results showed 70% subscribed to entertainment (video and music) services, followed by insurance (52%) and grocery services (29%). Now the demand is on for a shift to subscription banking.

 

Consumers are looking for more than just financial incentives from their banks, rather they want personalised services that add value to their lives beyond a transactional level. The survey found that consumers want tailored over the top services based on their spending habits, with the majority (68%) open to paying a recurring fee to access these additional personalised services.

 

“Just like Netflix created new ways to consume television, the time is now for the financial services industry to shift to a subscription-based model. As younger fintech companies continue to disrupt the financial services industry banks need to re-establish their roles as trusted financial advisors. It’s clear the tides are turning and the survey results are evidence that banks will have to do more to earn loyalty now,” said Zuora Managing Director for EMEA, John Phillips.

 

Additional report findings include:

  • Nearly 6 in 10 consumers would be willing to share their transaction details in return for services that bundled their subscription payments and regular outgoings
  • A quarter of respondents (26%) would be willing to pay £5-10 per month for their bank account if it included these services

 

“The interest from respondents in additional services shows the opportunity for these banks to invest in subscription services to secure recurring revenue stream, which serve not only to retain existing customers but also draw in those willing to switch. In return for loyalty, customers expect more value added services that are delivered in a personalised way, and the research shows they’re willing to pay for it,” said Phillips.

 

Earlier this year Zuora launched its Subscription Economy Index report, which shows that an average subscription-based company increased its revenue by 321% compared to 2012. Importantly for the banking industry, this growth was driven by subscriber acquisition over average revenue by account

 

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ERSTE BANK HUNGARY IMPROVES AND SECURES THE REMOTE BANKING EXPERIENCE WITH ONESPAN MOBILE SECURITY

ONESPAN

Leading Hungarian bank deploys OneSpan’s Mobile Security Suite to one million customers to make mobile banking convenient while fighting fraud and meeting PSD2 requirements

 

OneSpan™ (NASDAQ: OSPN), the global leader in securing remote banking transactions, today announced that Erste Bank Hungary, a subsidiary of Erste Group Bank AG, one of the leading banks in Central and Eastern Europe, has integrated OneSpan’s Mobile Security Suite into its banking app MobilBank. Erste Bank Hungary selected Mobile Security Suite to enable and protect online and mobile transactions and to comply with PSD2 requirements for authentication and dynamic linking.

The European Payment Council has stated that social engineering attacks continue to increase and remain instrumental in fraud schemes, often in combination with malware.[1] Erste Bank Hungary chose to implement OneSpan’s Mobile Security Suite to protect against potential social engineering and malware attacks directed at its customers. OneSpan’s technology enables banks to integrate application shielding, biometric authentication and transaction signing.

Erste Bank Hungary added Mobile Security Suite’s Cronto visual transaction signing to replace the bank’s SMS authentication with push authentication for login and transaction signing. This new process improves security and eliminates significant costs related to SMS delivery. OneSpan’s Cronto technology also helps fight social engineering attacks like phishing, while enhancing the customer experience by  enabling transaction signing using a color QR code.

“OneSpan’s proven technology will help us maintain our leading position in the market without compromising on security or the customer experience,” said Erste Bank Head of Digital Services, Akos Andras Molnar. “As part of this roll-out, our customers can also make online purchases using push notification with any retailer connecting to Erste Bank via the 3-D Secure protocol.”

“Criminal hackers continue to target banking customers as social engineering remains a preferred technique,” said OneSpan CEO, Scott Clements. “In their search for security solutions, banks need to consider cost, convenience and regulatory compliance. OneSpan’s technologies address these concerns so that banks can focus on providing a secure and convenient customer experience.”

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HOW WILL LENDERS TREAT THE FINANCIAL SYMPTOMS OF COVID19?

FINANCIAL

COULD the coronavirus pandemic spark a financial crisis similar to that which was seen in 2008? Tim Kirby, Group Commercial Director of the global fintech Monevo, a personal lending marketplace and platform, discusses how Covid-19 could play out for lenders.

The 2008 financial crisis, explains Kirby, was about credit over-exposure. While strains are apparent in the money markets today, it is not 2008, when risky mortgage investments in the US banking sector and into the UK caused everything to collapse.

Kirby said: “The financial crash was self-inflicted for many reasons, including poor income verification, poor credit quality assessment and poor employment verification (self-certification). It was asset-backed predominantly as it was led by sub-prime mortgage lending.

“My thoughts are that once the virus is contained, the economy will most likely turn back on within a few months, however recovery to current levels will be somewhat longer.”

Kirby predicts that it is very possible this downturn will be shorter than the 2008 financial crisis based on a number of factors.

He said: “The financial crash was either at a house purchase level or encouraging debt consolidation through re-mortgaging that placed unsecured debt into secured debt over a longer term. The consumer then ramped up unsecured debt again with the same poor assessment applied and eventually ran out of headroom.

“This was propped up by the capital markets and warehouse funding lines being supported through securitisation models that rated the loans held in the bonds as AAA.”

Kirby adds that the coronavirus outbreak is more micro and consumer-led than the recession was.

“There is still a great deal of uncertainty, but consumers are certainly going to experience affordability difficulties in the short-term, perhaps three to six months,” Kirby explains. “Lenders are already tightening their criteria and that could lead to more tactical initiatives being introduced.”

Kirby points to the potential introduction of black-listing certain occupation types most affected, and reducing opening balances to applicants that they are most prepared to lend to.

He said: “At Monevo, we have been speaking to lenders who are predicting a 50% slow down, with some pausing to assess short-term strategies, as clearly there are aspects of credit / risk scorecards that aren’t working at the moment.”

Kirby also adds that access to capital markets will be a challenge in the short term: “Lenders who don’t lend off balance sheet may become constrained and you would have to question the Peer-to-Peer lender impact as the returns and appetite of investors could be under threat.”

“Additionally, those lenders nervous about funding certain cohorts of consumers, now have those very same consumers currently in their loan books.

“So, for lenders, focussing on forbearance and other support activity to protect these consumers in the short term of 3-6 months, will be a priority.

Kirby takes the view that it is important lenders relieve some repayment pressure from consumers in the short term, so they can rehabilitate when the new normal arrives.

“Lender feedback in the last week is that they haven’t seen a massive increase in defaults, it’s very early days though. Anecdotal feedback from lenders that are strong and well-funded is that they expect strong growth when the market returns, and that those who are optimised and agile will see an upswing.

“What I am hearing, is that consumers will remedially seek liquidity through debt, as the world normalises to address the short-term pain being experienced at present.”

Kirby adds that lenders who look at credit risk closely when the upturn comes in three to six months could see dramatic growth, albeit from a reduced base.

He added: “From Monevo’s perspective, day trading is difficult to predict and lenders are re-assessing short-term strategies.  We are using the time at present to apply additional focus on our internal tech pipeline in driving the product development roadmap forward to continue to deliver great solutions for our partners.

“We want to ensure when normality returns and the upswing in both demand and supply inevitably happens, that we are supporting our origination partners and the lenders on our panel as effectively as possible.”

 

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