The ‘Netflix of finance’: How MoneyLion is evolving its subscription offering

MoneyLion

Personal finance, banking and investment platform MoneyLion is moving its monthly subscription fee to a rate similar to Netflix and Spotify starting next year.

The company currently offers a free checking account and a $19.99 per month “Plus” membership, which includes access to 5.99% APR credit-builder loans, cash advances and loyalty perks.

Starting next year, MoneyLion’s subscription bundle, which will encompass banking, investing, trading, loans and cash back rewards, will cost $9.99 per month. It’s a move that aligns with the evolution of consumer behavior and lets the company focus on mass market customer acquisition, explained MoneyLion CEO Dee Choubey.

“Amazon, Costco, Spotify have taught Americans how to use subscriptions and they have showed [consumers] that you can basically disintermediate so many different types of fees,” he said. “The business model [for MoneyLion] is to be the ‘Netflix of finance,’ where memberships and subscriptions are the lion’s share of the P&L.”

MoneyLion, a six-year-old company headquartered in New York, has been offering subscription-based memberships since 2018. It initially began offering a membership product in 2018 for $29.99 per month; a year later, it dropped that price to $19.99 per month. The free tier, which it said is a way to introduce customers to the brand, will continue to be part of MoneyLion’s offerings. MoneyLion currently has 5 million members, but the company declined to specify how many of them are paying subscribers.

According to Choubey, the decision on a $9.99 per month price point — a rate on par with Spotify Premium — was based on user research. “The reason why a lot of the best companies have chosen that price point is that it’s easy to understand, it’s transparent and we think that it’s much more mass market,” he said.

See also: MoneyLion to use $160m funding to add savings, stock trading products

MoneyLion’s subscription price trends align with recent research that suggests the digital subscription model pioneered by e-commerce companies is making its way to financial services.

“Streaming services didn’t just create a new distribution model for content; they fundamentally reframed the creation, consumption and distribution of content,” wrote Ernst & Young in a recent report about the emergence of subscription models from financial services providers.

“Value will shift from the monetization of products and transactions to the ‘productization’ of user experiences that monetize consumer relationships themselves.” The concept of the “personal financial operating system” will eventually outpace today’s product-centric model, the study argued.

From a pricing perspective, MoneyLion’s model also supports research from Cornerstone Advisors which suggests millennials are open to paying for an Amazon-style checking account with added perks, for $5 to $10 per month. The study, which was released in 2018, noted that 46% of old millennials (consumers over 30) and 37% of young millennials (consumers in their twenties) would open such an account.

MoneyLion’s revenue model, according to Choubey, is based on subscriptions, interchange revenue, net interest margin on loans, referral fees from product recommendations, and fees merchants pay to participate in its rewards programs. With the new membership price point, MoneyLion can beef up its revenue base from subscription fees, while continuing to offer value to customers.

“We’re trying to get to gross margin neutrality on all the financial products,” said Choubey. “It’s no different from Costco — Costco makes a small margin selling you cereal but they make all their margin on your subscription [fees], and our model is very similar.”

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