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Building Profitable Relationshipswith Multichannel ConsumersFebruary 2011
The days of barbell profitability inretail banking are ending                                        The forgotten 80%    ...
Channel RationalizationOnline banking, bank-owned ATMs and branches are used mostfrequently           Percent of consumers...
Channel RationalizationEven if consumers don’t use them as much as they once did,branches increase perceived convenience  ...
Channel RationalizationThe majority of consumers are multi-channel and use a mix ofin-person and self-service banking chan...
Channel RationalizationThe majority of consumers use 2 – 4 banking channels         Number of channels used in past 30 day...
Channel RationalizationYounger generations (especially Gen Y) are driving the increasein number of channels used        Nu...
Channel RationalizationYounger generations fuel the growth of self-service channels,but still heavily use in-person channe...
Fee Income GenerationConsumers have been trained not to expect to pay monthly fees                                        ...
Fee Income GenerationMost consumers pay minimal (if any) fees for their primarychecking account                     Amount...
Fee Income GenerationEven a modest monthly fee increase could motivate switchingconsideration among a majority of consumer...
Wallet ConsolidationConsumers are willing to consolidate their bank products andservices to benefit from one-stop shopping...
Wallet ConsolidationAlthough consumers are motivated to consolidate, onlya small portion can bring meaningful deposit bala...
Wallet ConsolidationThere is substantial opportunity for the primary checkingaccount provider to gain wallet share        ...
Wallet ConsolidationRelationship-based product packaging is an essential tool toescape product commoditization            ...
Wallet ConsolidationSeveral variables can be configured to optimize a package’sprofitability and customer appeal          ...
Wallet Consolidation             Matching logical consumer segments with packaged             opportunities will optimize ...
Contact informationFIS delivers banking and payments technologies to more than 14,000 financial institutions and businesse...
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Building profitable relationships with multichannel consumers

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Transcript of "Building profitable relationships with multichannel consumers"

  1. 1. Building Profitable Relationshipswith Multichannel ConsumersFebruary 2011
  2. 2. The days of barbell profitability inretail banking are ending The forgotten 80% The small pool of high-end customers and extreme NSF-paying customers Fee Income will no longer subsidize the mass market Spread Fee Income Income Income Spread - 1 2 3 4 5 6 7 8 9 10 Illustrative Customer Profitability Deciles Channel Reduce branch network operating expense while increasing Rationalization investments in self-service delivery channels Fee Income Make up for lost NSF and debit card interchange revenues by Generation increasing fee pricing Wallet Encourage consumers to consolidate deposit, payment and Consolidation credit relationships 2
  3. 3. Channel RationalizationOnline banking, bank-owned ATMs and branches are used mostfrequently Percent of consumers reporting use of each channel in the past 30 days Online Banking 75% Bank owned ATM 67% Branch lobby transaction 65%Debit card cash back at POS 47% Foreign ATM 35% Live phone rep 33% Automated phone/IVR 30% n = 1,808 Source: FIS Enterprise Strategy, September 2010 3
  4. 4. Channel RationalizationEven if consumers don’t use them as much as they once did,branches increase perceived convenience Consumers who agree (Top-2 box: strongly agree and agree) I only want to go to a bank branch when I have a problem with my account(s) or need 47% to open a new account or apply for a loan I will only do business with a bank that provides services to automate my routine 63% activities and transactions It is very important to me that my bank’s branch locations are convenient 79% to my daily routine n = 1,808 4 Source: FIS Enterprise Strategy, September 2010
  5. 5. Channel RationalizationThe majority of consumers are multi-channel and use a mix ofin-person and self-service banking channels Heavily In-person customers • Conducted primarily in-Heavily Self-service person branch orcustomers telephone transactions Self-service In-person• Used only online, • Conducted no online or 20% 23% mobile and remote mobile interactions in channel transactions past 30 days• Conducted no in- • May use the ATM person branch transactions or phone Multi-channel customers calls to live service Mixed reps in past 30 days • Have used both in-person Channel and online/self-service• Used the ATM 57% channels within the past 30 days • Used ATM n = 1,808 Source: FIS Enterprise Strategy, September 2010 5
  6. 6. Channel RationalizationThe majority of consumers use 2 – 4 banking channels Number of channels used in past 30 days The eight channels included in this analysis 22% 22% • Branch • Bank-owned ATM 17% • Foreign ATM • Call to live phone rep 13% • Call to automated 10% phone/IVR 7% • Online banking 4% 4% 3% • Mobile banking • Remote deposit of check with mobile phone 0 1 2 3 4 5 6 7 8 n = 1,808 6 Source: FIS Enterprise Strategy, September 2010
  7. 7. Channel RationalizationYounger generations (especially Gen Y) are driving the increasein number of channels used Number of channels used in past 30 days by generation 30% More than five 25% channels used in More than five channels the past 30 days 20% 41% Gen Y 15% 28% Gen X Baby Boomers 15% 10% Mature 9% 5% 0% 0 1 2 3 4 5 6 7 8 n = 1,808 7 Source: FIS Enterprise Strategy, September 2010
  8. 8. Channel RationalizationYounger generations fuel the growth of self-service channels,but still heavily use in-person channels Percent of Average number of transactions/interactions in past 30 days transactions/ interactions that are in-person 3.8 Gen Y 18.1 * 17% 3.1 Gen X 15.5 17% 2.4 Baby Boomers 9.6 In Person 20% 2.5 Self Service Mature 7.6 25% n = 1,808 8 Source: FIS Enterprise Strategy, September 2010
  9. 9. Fee Income GenerationConsumers have been trained not to expect to pay monthly fees Consumers who agree (top-2 box: strongly agree/agree) I do not expect to pay any fees for my 82% checking account I believe the fees that banks charge 20% for their services are fair Large National Regional Community Bank Bank Bank Credit Union Customers Customers Customers Members I do not expect to pay any fees for my checking account 80% 88% 81% 83% I believe that the fees banks charge for their services are fair 19% 19% 27% 19% n = 1,808 9 Source: FIS Enterprise Strategy, September 2010
  10. 10. Fee Income GenerationMost consumers pay minimal (if any) fees for their primarychecking account Amount of fees for primary checking account in typical monthI don’t pay any fees 42% Less than $5.00 35% $5.00 - $9.99 9% Fees paid include: $10.00 - $19.99 3% • Monthly maintenance 18% • ATM $20.00 - $29.99 3% • Transaction or per-item fees • NSF/OD $30.00 or more 3% • Other n = 1,808 10 Source: FIS Enterprise Strategy, September 2010
  11. 11. Fee Income GenerationEven a modest monthly fee increase could motivate switchingconsideration among a majority of consumers Amount of monthly fee increase that could motivate switching consideration Less than $1.00 33% 60% $1.00 to $4.99 27% $5.00 - $9.99 23% 40% $10.00 or more 17% n = 1,808 11 Source: FIS Enterprise Strategy, September 2010
  12. 12. Wallet ConsolidationConsumers are willing to consolidate their bank products andservices to benefit from one-stop shopping Strongly Agree/Agree (Top-2 Box) I am willing to consolidate all of my money with one financial institution as long as it can provide all the 71% products and services I need I would trust my bank for all my financial needs 60% I would be very interested in having all of my bank accounts, from checking accounts to loans to 56% investment products, all from one financial institution I would consider moving all or most of my bank accounts to a financial institution that rewards me 54% for the amount of business I conduct with them n = 1,808 12 Source: FIS Enterprise Strategy, September 2010
  13. 13. Wallet ConsolidationAlthough consumers are motivated to consolidate, onlya small portion can bring meaningful deposit balances Likelihood of Bringing More Business Deposit Balances Could Consolidate to Current Provider to Avoid Fees to Avoid Fees (among those very/somewhat likely) 2% Not at all 2% Not too likely likely Less than $1,000 41% 14% Neither Likely $1,000 to $4,999 28% or Unlikely 35% Very Likely $5,000 to $9,999 13% 48% Somewhat $10,000 to $24,999 11% Likely 18% $25,000 or more 7% n = 1,808 n = 1,396 13 Source: FIS Enterprise Strategy, September 2010
  14. 14. Wallet ConsolidationThere is substantial opportunity for the primary checkingaccount provider to gain wallet share Where product relationships reside (for those consumers who own the product) 14% Own product with another financial 35% 39% institution 18% 46% 44% 60% 69% 65% 69% 75% 14% 11% Own product with 3% primary checking 21% account provider 4% and another FI 68% 2% 5% 3% 51% 51% 51% 2% 35% 35% 33% Own product with 26% 28% 23% primary checking account provider Savings CD Money Money IRA Home Credit Mortgage Auto Student Market Market Equity Card Loan Loan Account Mutual Fund Loan n = 1,808 Source: FIS Enterprise Strategy, September 2010 14
  15. 15. Wallet ConsolidationRelationship-based product packaging is an essential tool toescape product commoditization Benefits of Product Packages Deposits • More cost-effective than cross-selling the same product mix over time • More difficult for competitors to copy Loyalty Payments Program • More difficult for customers to comparison/price shop Loans • Improve customer longevity • More profitable Source: FIS Enterprise Strategy 15
  16. 16. Wallet ConsolidationSeveral variables can be configured to optimize a package’sprofitability and customer appeal Mass-market Package Relationship PackageMonthly maintenance High Low or none fees Minimum balance Low High threshold Consumer credit Short-term credit Long-term credit included in package (e.g., credit card) (e.g., mortgages) Consumer assets Short term assets Long-term assets included in package (e.g., deposits) (e.g., investments)“Free” channel access Self service only All channels included in package Loyalty program Significant & None or modest benefits relationship based Source: FIS Enterprise Strategy 16
  17. 17. Wallet Consolidation Matching logical consumer segments with packaged opportunities will optimize revenue Young, Tech Savvy Account ~ 25% of population Upwardly Self-directed Mass Affluent Mass Market, Saving Loyalty Account Mobile Families Gen X &Y Mature Bank Loyalists ~ 40% of populationIncome / Wealth Tech Savvy, Emerging Students & Borrowing Affluent Account Gen Y Families ~ 15% of population Retirement Income Survivors Account ~ 10% of population Age Prepaid Debit Account ~ 10% of population Source: FIS Enterprise Strategy 17
  18. 18. Contact informationFIS delivers banking and payments technologies to more than 14,000 financial institutions and businesses in over 100 countriesworldwide. FIS provides financial institution core processing, and card issuer and transaction processing services, including theNYCE® Network. FIS maintains processing and technology relationships with 40 of the top 50 global banks, including 9 of the top10. FIS is a member of Standard and Poors (S&P) 500 ® Index and consistently holds a leading ranking in the annual FinTech 100rankings. Headquartered in Jacksonville, Florida, FIS employs more than 30,000 on a global basis. FIS is listed on the New YorkStock Exchange under the “FIS” ticker symbol. For more information about FIS see www.fisglobal.com.This research was conducted by FIS Research and Thought Leadership, a key function of FIS’ Enterprise Strategy department. TheFIS Research & Thought Leadership team proactively manages market and client perceptions of FIS as a thought-leader andthought-partner by conducting high-quality primary research on critical industry issues and delivering interpretation andrecommendations to client organizations.The research team for this project include: Paul McAdam Mandy Putnam Senior Vice President Director Ph: 708-449-7742 Ph: 614-414-4207 Paul.Mcadam@fisglobal.com Mandy.Putnam@fisglobal.com James Gamble Chris Nay Director Senior Strategic Researcher Ph: 614-414-4213 Ph: 614-414-4218 James.Gamble@fisglobal.com Christopher.Nay@fisglobal.com 18
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