Riding on the wave of the “Subscription Economy”​

Millennials and Gen Z are progressing towards an “asset-light” generation. The availability of high-speed internet together with online marketplace model has made that possible.

So, what is the Subscription economy and how do we become the first movers to tackle the threat of becoming technologically extinct?

Millennials, born between 1981–1996, came of age during the Great Recession. known for being tech-savvy, pursuing their passions, and killing a bunch of industries. They’re also known for shouldering several financial burdens specific to their generation.

Subscriptions have made life easier for the generation, but a huge chuck of them keep losing money because they forget to cancel their subscriptions.

Rising areas of financial concerns revolves around the following:

Morley Safer, a distinguished broadcast journalist, had this to say when he was addressing the subject of workforce dilemma in his article;

The workplace has become a psychological battlefield and millennials have the upper hand, because they are tech savvy, with every gadget imaginable almost becoming an extension of their bodies. They multitask, talk, walk, listen and type, and text. And their priorities are simple: they come first.

Forbes, in one of their articles, suggested that one of the driving factors for the change in the consumption perspective is that people are more utilitarian now than in the past.This means that the descent of the industrial-era structures is now being dominated by a range of digitally enabled business models and consumer experiences.

The radical shift is very real and happening in two-folds.

  • First, the consumption pattern of people is changing from “ownership” to “access”. A shift towards shared access, virtual exchange, digital money and flexible on-demand infotainment.
  • Second, convenience is evolving from just a competitive differentiator to an emotional bond for driving fierce customer loyalty. And as a result of this digitized marketplace, a new form of “On-demand Economy” has emerged to manage retail supply & demand.

Three unique systems that underlie this are:

Millennials are the bold decision makers who are making trends and technology work for them. Unlike the previous generations, they realize that their voice and actions matter. Surveys extensively show that they will switch if they are not benefiting from the product / service.

The consumption pattern displays that millennials are no longer interested in only products / materialistic aspirations, they are inclined towards experiences. They do not let societal traditions run over their aspirations and goals — professional & personal.

They have already surpassed the baby boomers and are being closely followed by the Gen-X in terms of behavioral patterns.

Out of the billions of smartphones around the world today, what is exactly that the consumers are spending their time on?

Research believes that online shopping and personal banking are the two most prevalent activities conducted by users online.

Now here’s the pressing problem — How much do we really understand the Consumer Life-cycle around a Subscription Economy?

The very nature of subscriptions makes it friction-less and almost invisible to consumers.

Zoura, in its biannual Subscription Economy Index, studied subscription businesses across North America, Europe and the Asia Pacific regions. Exhibiting a CAGR of 18%, these numbers are 5 times higher than the S&P 500 company revenues.

In 2014, AOL was profitable only because 2 million subscribers forgot to cancel their subscriptions. In 2015, Apple rolled out its Apple Music stats. Out of a total of 15mn, 8.5mn users were on trial periods. Apple Music came pre-installed with the updated iOS. 60% of these users forgot to actively cancel their free trial periods and subsequently ended up paying ~$10 per month without their knowledge.

In reports published by the Harvard Business Review, millennials are indulging their growing impatience for convenience by buying into the flourishing on-demand economy, which now attracts more than 22.4 million consumers annually and $57.6 billion in spending. They consume information differently and communicate with businesses differently.

The Report now looks into the European Markets

According to the report published by ING Economic Department in April 2018, 5% of European household consumption is spent on subscriptions. The consumer research also shows that a monthly average spending on all subscriptions (services, information goods and tangible goods) by European households amounts to 130 Euros. Extrapolating it to EU28, the total size of the B2C subscription economy is easily estimated at around 350 billion Euros. Out of which, a large chunk, about 240 billion Euros consists of service subscriptions such as Internet, fixed and mobile phone services and cable TV. However, over the last decade, the market for information goods subscriptions, such as software, music, video-on-demand and games have shown tremendous growth and is currently estimated at 30 billion Euros.

Meanwhile in the UK Market;

British consumers are spending on average over £2 billion a year on monthly delivery subscription packages even though one in five say they don’t use the services they’ve signed up for.

Convenience (45%) & Value for Money (60%) are the two key drivers.

Demand is high for more options when it comes to delivery subscriptions, with those surveyed stating their wish for coffee pods, vape liquid, fashion accessories (scarves and handbags) and even Disney related items on monthly subscription.

Those in the 45–54 age group are most likely to spend over £300 a year on subscriptions. While one in three people in the 25–34 age group refuse to shop with retailers that they don’t have a subscription with — suggesting perhaps that subscriptions are a good way of ensuring customer loyalty.

Challenges consumers face when it comes to Subscriptions:

Spain and France are the leading European countries with 30%-35% of individuals using between 6 and 11 subscription services. Germany and Italy on the other hand, have the lowest subscription penetration.

Consumers, especially the ones falling in the age group of 16 years — 34 years, are also interested in subscribing to new, cutting edge services: car-as-a-service, connected-cities services like city-wide WiFi, self-driving cars and ‘SMART’ services, healthcare and robotic assistants.

Furthermore, Does Subscription Economy influence Retail Banking?

While traditional banks had a way of holding on to consumers due to lack of better options, the scenario has drastically changed with the incoming of revolutionary technology in the sector.

One of the primary frustrations that millennials have with banks is the lack of digital solutions. According to PWC, nowadays, even though millennials are open to paying a premium for better service, only 25% of banking products are available online and most banks’ mobile apps are not up to par. The agile institutions in such situations will end up taking advantage of this opportunity to create meaningful and creative bundles to better serve their existing customers and enrolling new customers as well.

Looking at the European Markets; the top 3 challenges faced by banks are:

New regulations and increased oversight are leading banks to experiment with new avenues for generating revenue and managing customer relationships. Banks are trying to recreate themselves, and their reputations.

Subscription based payments provide a “request once, use many” way of working that provides benefits to both the merchant and the consumer. The consumer benefits from the ease of use of receiving goods and services without incurring the added effort of paying bills on a periodically (e.g. monthly) basis. The merchant takes a one-time request from the consumer to be able to charge the service without being prompted to from the next time. This implies that they are the very point of contact for every transaction that every individual makes or has given permission to any third-party to make.

This future will require institutions to be agile and open, ready to explore different options in an uncertain world. Technology is rapidly morphing from an expensive challenge into a mandatory enabler of both customer experience and effective operations. New service providers are emerging and customers are demanding ever higher levels of service and value.

Moving to the Nordics, 80%-90% of the consumers surveyed by McKinsey are open to digital product purchase for most of their financial products. They expect the interactions to be simple, interactive, intuitive and have the capability to seamlessly connect across all the physical and digital touch-points. The new entrants in the Fintech space are being mindful of these factors and hence are creating customer-specific solutions that wisely utilizes their resources as well as maintains minimal but satisfactory services.

Social and behavioral change through rising customer expectations and the need to regain public trust are the mega-trends we presume to have the greatest impact on the way the retail banks change their style of working and set up their larger vision for the institution. Banks will be expected to organize themselves around customers instead of products or channels.

The top priority and areas of investment for the retail banks will be Enhancing customer experience, Regulatory compliance and Implementing new technologies.

As Consumers, what are we on the look-out for?

In the next decade, we will see a lateral shift in the trends that drive the retail banking, which will be a direct effect of the new way of consumption pattern among the customers.

And as SAAS Entrepreneurs what can we provide and how? (in the European Markets)


  1. Cognizant, 2017, The Road To 2025 Retail Reimagined
  2. Forbes, 2018, Your Next Car Could Be A Flexible Subscription Model
  3. Global Banking & Finance Review, 2019, The Subscription Economy Grows More Than 300% In The Last Seven Years
  4. ING, 2018, Now That We Subscribe To Music, Are Tools And Toiletries Next? Opportunities And Challenges For Tangible Goods Subscriptions
  5. KPMG, 2019, The Future Is Open — Reshaping The Banking Experience
  6. KPMG, 2018, Global Retail Trends 2018
  7. Mckinsey, 2017, Data Sharing And Open Banking
  8. PWC, 2014, Retail Banking 2020 Evolution or Revolution
  9. Zoura, 2019, The Subscription Economy Index

Thank you for your time. Please feel free to leave your comments or feedback.

BicameralAB7 || Abstract Writer

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