Over the past decade, the financial technology, or fintech, sector has grown significantly. Boston Consulting Group projects that the fintech sector will become a $1.5 trillion industry by 2030, a prediction based on the rapid consumer adoption rates seen by fintech apps and infrastructure solutions. 

Fintech has managed to marry the security that traditional banks offer with the ease of use consumers expect from popular apps. This innovation has extended to how fintech companies price their services, with bundle pricing now playing a critical role.

Bundle pricing has been effective enough for even traditional banks to incorporate it into their offerings. Let’s take a closer look at how bundling is playing out across the fintech and financial services sectors.

Bundling to build loyalty

Banks have always relied on building loyalty within their customer bases to ensure steady business. Bundling played a key role in this. A bank would bundle its services (loans, banking, and investment accounts) and offer existing customers discounted prices and a seamless experience.

Fintech initially disrupted this picture by offering consumers low switching costs and easy onboarding. While some banks initially chose to compete with fintechs, the smarter ones eventually folded fintech into their bundled offerings, with simplified bundle pricing.

The rise of banking as a service, or BaaS, highlights this partnership trend. BaaS allows any financial institution to create an ecosystem via APIs and offer various services that might cost too much to build in-house.

For instance, N26, a challenger bank incorporated in Berlin in 2013, recently partnered with Wise to offer its customers money transfer abilities. In the past, N26 might have chosen to build this functionality in-house.

By choosing to partner with a fintech firm, N26 leverages Wise's brand equity while offering the latter a readymade customer base that boosts its business. This technological bundling is an offshoot of the bundle pricing strategy where companies offered more services for lower prices to customers, building loyalty and ensuring generational business.

Rebundling

The fintech and bank partnership trend also goes the other way. While banks receive technological benefits by partnering with a fintech, fintechs receive the solidity and regulatory heft a traditional bank offers. These benefits have led to a trend that experts have dubbed “rebundling.”

Fintech companies initially unbundled banking services. For instance, Stripe originally offered payment processing as an alternative for merchants tired of dealing with outdated banking payment gateways. However, as companies have matured and consumers have become conditioned to banking digitally, fintechs have begun including more services.

Product pricing options reveal the bundling-like strategy occurring behind the scenes. For example, Stripe now offers merchants the ability to incorporate a business based in the US with its Stripe Atlas service. As a type of “joint bundling,” the company charges a one-time $500 fee and automatically onboards customers to its payment processing platform.

Stripe offers several features, such as invoicing, data analysis, data connectors, tax audit trails, etc for incremental charges. Users can also opt for a custom plan by mixing and matching features to serve their needs. 

Rebundling its services like this has helped Stripe grow far beyond its payment gateway roots and morph into a one-stop solution for merchant needs. By rebundling its services and prices, Stripe gives its customers a wide range of choices and a cost-effective business administration option.

Much like traditional banks, Stripe and other fintechs are leveraging bundle pricing principles to present consumers with more choices in their ecosystem. Ramp is another example of a fintech that began as an expense management tool and has since rebundled to become a virtual card issuer, small business financer, and vendor management solution rolled into one.

Utility comes first

While price bundling is a great strategy, it isn't a silver bullet. If a fintech or bank offers a poor product experience or service, bundling isn't going to bring more customers. Utility, or the value consumers receive from the service, comes first.

Fintechs connect their pricing strategies to utility by offering customers a menu and calculating prices based on choices. For instance, Turbotax offers customers a range of choices and tailors prices accordingly. This strategy helps the company attract consumers who want to pay less while also incentivizing them to spend more.

Bundling prices and services like this encourages cross and upsells while presenting customers with valuable choices without coming across as pushy. Over time, bundle pricing also increases customer lifetime value (LTV), defined as the total revenue a company earns from a single customer.

LTV increases occur due to customers becoming embedded into an ecosystem. As they experience the convenience of a one-stop shop, they're more likely to return for more services, increasing revenues. Thus, while bundle pricing might reduce unit revenues, it leads to more volumes and business in the long run.

Customization and competitiveness

Price bundling is helping fintechs remain competitive in a challenging business landscape. With more startups emerging than ever before and banks becoming technologically savvy, fintech and financial services companies are relying on bundling to maintain their edge and deliver utility to consumers.