By Ray Birch
DALLAS— As banks and fintechs race to turn financial services into subscription businesses, promising everything from premium checking and insurance discounts to travel perks and buy-now-pay-later benefits for a monthly fee, Brian Scott sees a fundamental question many institutions have yet to answer: Would members actually pay for the privilege of banking with them?
That question sits at the center of the growing subscription banking movement highlighted in a recent PYMNTS report, which found that financial institutions are increasingly exploring recurring-fee models as a way to generate steadier revenue streams and deepen customer engagement.
While the concept has gained momentum among digital-first players such as ING, Revolut, Monzo, N26 and SoFi, Scott, co-founder of RAI Partners, believes most traditional credit unions and banks are not well positioned to follow suit.
"The hardest thing with these subscriptions is you have to show and prove that this subscription will save your customers or members money or reduce some sort of friction that they have today," Scott said. "If you can't show somebody how you're going to save them money through this subscription, it's going to be really hard to keep them as a member."
The appeal of subscription banking is easy to understand. According to PYMNTS, recurring monthly fees offer a predictable source of revenue regardless of interest-rate cycles or deposit spreads. Institutions also hope that bundling banking products with insurance, loyalty rewards, travel benefits and other services will encourage customers to consolidate more of their financial lives with a single provider.
But Scott argues that many institutions may be overlooking the economics behind those promises.
"On the surface it sounds like, 'I'd love a repeatable $10-a-month subscription,'" Scott said. "But how are members going to use that subscription? What benefits are they going to take advantage of? It actually might cost you more money."
That concern is especially relevant for credit unions, which have traditionally generated revenue through lending and interest income rather than fee-based business models. Scott said offering meaningful savings to members through a subscription package could ultimately reduce profitability if institutions fail to fully understand the costs associated with the benefits being offered.
Consumer Engagement Important
PYMNTS noted that consumer engagement will be critical to the success of subscription banking. Research cited in the report found that mobile and online banking rank among consumers' most frequently used digital activities, creating opportunities to place additional services directly inside banking apps. The hope is that frequent interaction will make subscriptions feel like an essential part of a consumer's financial life rather than an optional add-on.
Scott believes fintechs have a distinct advantage in making that strategy work.
"You're competing against fintechs, which is primarily who you're going to compete with if you offer this," he said. "Generally those fintechs are offering that subscription service because they have a really good product around the parts that are in the subscription."
Rather than attempting to build broad subscription ecosystems, Scott expects fintechs to focus on narrow, specialized financial products where subscription pricing can be more easily justified. Buy now, pay later programs, for example, could evolve into subscription offerings because the value proposition is relatively easy for consumers to understand.
"There may be a subscription model around something very focused and narrow like BNPL, and it works in some of those models," Scott said. "But as you try to expand that to other things—checking, savings, auto loans, credit cards—it becomes so much harder."
For most credit unions, Scott believes the larger challenge is differentiation.
Brian Scott
For years, he said, he has posed a simple question to financial institution executives: If members had to pay a monthly subscription fee for the entire bundle of products and services the institution provides, would they willingly do it?
"I think most credit unions would not be able to answer that question honestly and say, 'Yeah, my members would gladly pay me a $20-a-month subscription fee for these services,'" Scott said.
That situation, he argues, suggests that many institutions should focus less on copying fintech business models and more on strengthening the value they already provide.
While a handful of large, digitally focused institutions such as Alliant Credit Union may have the scale and operating structure to experiment with subscription-based banking, Scott expects adoption among traditional financial institutions to remain limited.
"I don't think very many traditional financial institutions—banks or credit unions—are going to use a model like this," he said.
Instead, Scott sees subscription banking as another example of a trend that could distract credit unions from their core mission.
"This is a great example of where credit unions can get distracted by something that's going on in the marketplace and lose focus on what they do best," Scott said. "It's an opportunity to ask, 'How do we do what we do better?' instead of trying to be like somebody else."