NEWYORK (Reuters) – Paying a subscription fee for financial services like checking accounts and investment advice may become more common, Ernst and Young says in a new study that found interest among U.S. consumers ages 25 to 34.
The consulting firm found that a majority of the group was willing to pay for subscriptions that bundle products and services like saving accounts and life insurance and financial advice especially when tied to major life events like getting married or saving for college.
Many banks already provide incentives to bundle their services like lower interest rates and free perks, but few charge a monthly or annual fee for the convenience. Switching to a subscription model, which has gained popularity in the technology sector, could have a significant impact on revenue growth in banking, wealth management and insurance.
Some companies, like brokerage and bank Charles Schwab Corp, have already begun implementing the subscription model, but many banking institutions remain sceptical that the model can be successful because tight regulation of the industry, Ernst and Young principal Nikhil Lele told Reuters.
Lele said, however, that regulators would likely be supportive of the switch if the subscription provides sufficient value because it is more transparent than providing products for free up front, then imposing a wide range of charges like overdraft and ATM fees.
“Most consumers just aren’t aware enough to be able to manage the intricacies of financial pricing across every product,” he said. “This is a price certainty model.”
Consumers surveyed by Ernst and Young also showed a high willingness to pay for similar subscription bundles from technology companies.
“This is a matter of urgency for the industry because if the tech player were to come in, it could be a disruptive force for the financial sector,” Lele said.
(Reporting by Imani Moise in New York; Editing by Steve Orlofsky)