What are Corporate Credit Cards? – Different Types of Cards
February 12, 2025
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Commercial banks were first hesitant to adopt a subscription-based revenue model. This is because it was widely believed that such a revenue model would lead to a drop in revenue for the banks and hence would be unsustainable in the long run.
However, over the years, several studies have been conducted. The results of the studies show that subscription-based revenue models are unlikely to negatively impact the revenue or bottom line at a commercial bank. Instead, a positive impact is highly likely.
It is for this reason that the subscription-based revenue model for commercial banks is likely to become mainstream in the industry. This is because of the several advantages which are provided by this model. Some of the main advantages have been listed below in this article.
For instance, the usage fee which banks charge for credit cards is charged in a different way as compared to the transaction fee which is charged when a payment is made using the bank’s infrastructure. The bank as well as the corporate customer both have a hard time understanding and navigating this complex schedule of charges.
A business model with fewer complications will give the customers a feeling of transparency and encourage them to do more business with the bank.
Right now, banks have to maintain a wide variety of systems in order to collect revenue and reconcile the same. However, if the bank were to move on to a subscription-based system, it would not be necessary to maintain these systems. This would lead to a lower operating cost which could add to the bottom line of the commercial bank. Hence, there are very tangible financial benefits to moving to a subscription-based model.
Right now, customers have their accounts in various banks. It is financially feasible for them to do so since they pay when they use the service. Hence, for them, the costs remain the same whether they use one single service provider or several service providers.
On the other hand, if there is a subscription-based banking model, banks will try to make maximum utilization of a single subscription. Hence, they are likely to route all their business through one single bank. This helps the commercial bank extend their banking relationship without incurring huge marketing expenses which are typically associated with making cross sales.
Predictable cash flow enables banks to plan their cash flow in a better manner. It allows them to take more risks with their lending activities since they have another source to fall back upon.
At the present moment, the transaction data of the corporate customer is scattered across several banks. However, when the relationship is consolidated, the bank has access to all the data. They can then take the help of data mining tools and software in order to identify patterns and develop financial products which can add value to the business of the customer.
The bottom line is that the subscription-based commercial banking revenue model seems like a compelling proposition, at least theoretically. Since this would be a tectonic shift in the way the industry operates, commercial banks want to ensure that they introduce such a revenue model only after due diligence. Hence, this revenue model is unlikely to be implemented in the near future. However, it is highly likely to make its way into the commercial banking business in the long run.
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