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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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Credit unions face unique challenges in today's digital landscape. As these member-focused financial institutions embrace technology solutions, they're confronted with an important decision: which pricing model makes the most sense for their SaaS investments? Usage-based pricing has emerged as a popular option, but is it always the right choice for credit union technology needs?
Let's explore when usage-based pricing creates value for credit unions adopting SaaS solutions—and when it might unexpectedly increase costs or create friction.
What is Usage-Based Pricing in the Credit Union SaaS Context?
Usage-based pricing (UBP) is exactly what it sounds like: you pay based on how much you use a particular software service. For credit unions, this might mean paying per transaction processed, per member served, or per gigabyte of data stored.
Unlike flat subscription models where you pay the same amount regardless of usage, UBP ties costs directly to consumption. This can appear attractive at first glance, especially for smaller credit unions with tighter technology budgets.
According to OpenView's 2022 SaaS Pricing Survey, 45% of SaaS companies now offer some form of usage-based pricing, up from just 34% in 2020. This trend has reached the financial services sector, with many credit union technology vendors embracing this approach.
When Usage-Based Pricing Benefits Credit Unions
1. Scalability for Growing Institutions
For credit unions experiencing membership growth, usage-based pricing can align costs with expansion. As your member base grows, your technology costs increase proportionally rather than requiring significant upfront investments.
"Usage-based pricing allows credit unions to start small and scale their technology investments as they grow," explains John Smith, CEO of Financial Technology Partners. "It reduces the initial barrier to adoption."
2. Predictability for Seasonal Operations
Credit unions often experience seasonal fluctuations—tax season, holiday lending periods, or back-to-school campaigns. Usage-based pricing allows institutions to pay less during slower periods and more during high-volume times.
3. Encouraging Innovation Through Lower Initial Costs
When implementing new digital services, usage-based pricing reduces the risk of major upfront investments. This can encourage credit unions to test innovative solutions with less financial commitment.
For example, a medium-sized credit union in the Midwest implemented a usage-based pricing model for their loan origination system. They were able to test the platform with a small segment of members before rolling it out institution-wide, paying only for actual usage during the pilot phase.
When Usage-Based Pricing Backfires for Credit Unions
1. Unexpected Cost Spikes During High Growth
While scaling costs can be beneficial, they can also create budget challenges. A credit union experiencing rapid growth might face unexpectedly high technology costs as usage surges, potentially negating the financial benefits of that growth.
According to a recent study by the Credit Union National Association (CUNA), 38% of credit unions reported experiencing unexpected technology cost increases when using usage-based pricing models during periods of high growth.
2. Complexity in Budget Planning
Usage-based pricing makes budget forecasting more challenging. Unlike fixed subscription costs, usage can fluctuate, making it difficult for credit unions to predict IT expenses accurately.
"The unpredictability of costs under usage-based models can create significant challenges for credit unions, where budget certainty is often paramount," notes Maria Johnson, CFO at Mid-Atlantic Federal Credit Union.
3. Member Experience Concerns
Perhaps most concerning is when usage-based pricing affects member experience. If a credit union becomes overly conscious of usage costs, they might inadvertently discourage member engagement with digital services to control expenses.
4. Compliance and Security Cost Considerations
Credit unions must maintain strict PCI DSS compliance for payment card security. When security and compliance features are priced on a usage basis, costs can escalate quickly as transaction volumes increase—potentially incentivizing dangerous cost-cutting in critical security areas.
Finding the Right Balance: Alternative Pricing Approaches
Value-Based Pricing
Rather than focusing solely on usage, value-based pricing aligns costs with the business outcomes generated. For credit unions, this might mean pricing based on loan volume facilitated or new members acquired through digital channels.
Tiered Pricing with Price Fences
Many credit union SaaS providers are now implementing tiered pricing structures with clear price fences. This approach establishes usage thresholds with predictable costs, giving credit unions the benefits of both subscription and usage models.
For example, a core banking provider might offer different tiers based on membership size ranges, with predefined feature sets at each level.
Enterprise Pricing for Larger Credit Unions
For larger credit unions, enterprise pricing agreements offer more predictability while still accounting for the institution's scale. These custom agreements typically include negotiated discounting based on committed usage volumes.
Practical Steps for Evaluating SaaS Pricing Models
When evaluating pricing models for credit union SaaS solutions, consider these steps:
Analyze your usage patterns: Review historical data to understand your typical usage volumes and fluctuations.
Calculate total cost of ownership: Look beyond the base price to understand all costs, including implementation, training, and potential growth.
Assess your growth trajectory: Fast-growing credit unions may benefit from fixed pricing, while stable institutions might save with usage-based models.
Prioritize member experience: Ensure the pricing model doesn't create incentives to limit valuable member services.
Consider compliance requirements: Factor in PCI DSS and other regulatory requirements when evaluating costs.
Conclusion: Finding Your Optimal Pricing Strategy
Usage-based pricing can be tremendously beneficial for credit unions in the right circumstances—particularly when starting new initiatives, managing seasonal fluctuations, or carefully scaling operations. However, it's not a universal solution.
The ideal pricing model balances predictability with flexibility, aligns with your growth strategy, and never creates incentives that might compromise member experience or security.
For most credit unions, a hybrid approach often works best—combining elements of subscription, tiered, and usage-based models to create a pricing structure that supports both operational efficiency and strategic growth.
What's your credit union's experience with different SaaS pricing models? Have you found certain approaches work better for specific types of technology solutions? The right answer likely depends on your unique institutional priorities, growth stage, and member needs.