Fintechs must rethink revenue models in the post-COVID-19 era
Global day-to-day purchases have seen a drastic reduction, even though e-commerce is booming. This, coupled with regulatory changes – such as the Bank of England reducing interest rates from 0.75% to 0.1% – means banks have experienced declining revenues. Therefore, many banks will have to adapt business models to the realities of pandemic-centered economies by digitizing most client-facing operations, says GlobalData.
Challenger banks are facing a conundrum. More people are opening digital bank accounts with them, but their revenue is dropping due to the pandemic. One solution to staying on the path of profitability would be to make a subscription model – i.e. Revolut Premium – more attractive to the average user by incentivizing the subscription with more cashbacks and rewards.
The analysts say that as spending is down for the average consumer, the reduced number of transactions impacts revenue for banks. With lockdowns and restrictions not going away anytime soon, and the prospect of an impending recession, the industry will be affected by losses in income for the foreseeable future. Either way, financial institutions will need to understand that the revenue model needs to mirror a consumer who buys more online and in bulk, rather than smaller purchases made more often.