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QUARTERLY REVIEW 
october 2014 • financial services edition • kobie.com
contents 
TECH 
Empowering 
21st Century 
Digital Banking 
through Mobile 
Innovation 
by Nancy Berg 
02 
WELCOME 
ROADMAP...
Every quarter, Kobie meets with banking clients and 
financial institutions to discuss loyalty trends and 
innovative ways...
tech 
Empowering 21st Century Digital Banking through 
MOBILE INNOVATION 
by NANCY BERG 
Mobile penetration across consume...
“MOBILE PLATFORMS WILL REDEFINE THE CONSUMER RELATIONSHIP.” 
3 
KOBIE QUARTERLY REVIEW 5 
Customers already use financial ...
4 
BUILDING A 
ROADMAP FOR 
MOBILE 
by MATT STEIN 
QUARTERLY REVIEW OCTOBER 2014
With 58% of the U.S. adult population owning a smartphone and 44% using 
tablets on a regular basis, consumers clearly app...
Implement a ground-up strategy. 
Mobile is the newest and most 
advanced channel in today’s business 
landscape. To capita...
Solve complex problems 
before they happen. 
With real-time and predictive analytics, we can help you understand how membe...
8 
The worldwide population of 
smartphone users swelled 
past the 1 billion mark in 
2012, and today experts 
expect 1.75...
A T A G L A N C E 
KOBIE QUARTERLY REVIEW 11 
IN-APP MOBILE MESSAGING 
AND PUSH NOTIFICATIONS 
PROVIDE CUSTOMER 
INSIGHT 
...
F E A T U R E ANALYTICS AND SEGMENTATION: 
A FINANCIAL SERVICES PERSPECTIVE 
10
TARGETING 
AND 
REWARDING HIGH 
VALUE 
CUSTOMERS 
by DAVID ANDREADAKIS 
KOBIE QUARTERLY QUARTERLY REVIEW OCTOBER REVIEW 20...
12 
With bank revenue 
declines tied to 
persistently low 
interest rates, high 
compliance costs and the adoption 
of unc...
13 
KOBIE QUARTERLY REVIEW 15 
segment has a much greater potential 
to make a significant difference in bank 
revenue tha...
5 HURDLES 
THAT 
BANKS AND 
FINANCIAL 
INSTITUTIONS 
MUST 
OVERCOME 
creating a total 
relationship banking 
strategy beyo...
15 
KOBIE QUARTERLY REVIEW 17 
The Great Recession of the late 2000s 
undoubtedly challenged financial institutions 
to en...
16 
transactions. To convince siloed departments to accept 
this liability, FIs must ensure all participants understand th...
authors 
MICHAEL HEMSEY 
NANCY BERG 
President 
VP of Client Services and Partnerships 
As President of Kobie Marketing, M...
W E A R E K O B I E FIND OUT MORE AT INFO@KOBIE.COM 
Kobie Marketing is a global leader in loyalty marketing and an indust...
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Kobie Quarterly: Financial Services Edition, October 2014

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Every quarter, Kobie meets with banking clients and financial institutions to discuss loyalty trends and innovative ways to drive activation and usage, increase share of wallet and decrease churn while providing new
up-sell and cross-sell opportunities. And while new online-only banks, virtual currency and banking models continue to disrupt the FI industry, one thing remains the same and that is the need for consistent positive experiences that fully engage individuals with your brand. Enter mobile and digital banking.

Despite security concerns, mobile, social and online channels are the preferred channels for engaging with FIs. That’s why we dedicated most of this issue to the key considerations asked of us from financial institutions as they embark on building a roadmap for mobile or evolving their existing roadmap. You’ll find innovations and trends in mobile payment, mobile apps and the overall mobile experience as the hub of a two-way brand-consumer dialogue that support customer retention and other important key performance indicators.

We also cover the steps and considerations when building a total relationship banking strategy that go beyond acquisition and some of the top benefits of integrating your loyalty platform across enterprise banking solutions.

Using advanced analytics and segmentation strategies, we reveal how FIs can attract, understand and retain high-wealth customers.

We hope the Kobie Quarterly Review: Financial Services Edition broadens your appreciation for mobile and digital banking as a key part of your loyalty strategy.

Does your company have a successful mobile experience strategy? If so, we’d like to hear from you. Drop us a line at loyalty@kobie.com.

Published in: Economy & Finance
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Kobie Quarterly: Financial Services Edition, October 2014

  1. 1. QUARTERLY REVIEW october 2014 • financial services edition • kobie.com
  2. 2. contents TECH Empowering 21st Century Digital Banking through Mobile Innovation by Nancy Berg 02 WELCOME ROADMAP An Integrated Future for the Mobile and Financial Realm by Matt Stein 04 PERSPECTIVE Targeting and Rewarding High Value Customers by David Andreadakis 10 EXPERIENCE Banks and Financial Institutions Using Digital Wallets, GPS Technology and In-app Messaging to Boost Loyalty by Nicolle Schreiber 08 ABOUT About the Authors 17 From the President, Michael Hemsey 01 STRATEGY 5 Hurdles that Banks and Financial Institutions Must Overcome by Margaret Meraw 14 02 04 10 QUARTERLY REVIEW OCTOBER 2014
  3. 3. Every quarter, Kobie meets with banking clients and financial institutions to discuss loyalty trends and innovative ways to drive activation and usage, increase share of wallet and decrease churn while providing new up-sell and cross-sell opportunities. And while new online-only banks, virtual currency and banking models continue to disrupt the FI industry, one thing remains the same and that is the need for consistent positive experiences that fully engage individuals with your brand. Enter mobile and digital banking. Despite security concerns, mobile, social and online channels are the preferred channels for engaging with FIs. That’s why we dedicated most of this issue to the key considerations asked of us from financial institutions as they embark on building a roadmap for mobile or evolving their existing roadmap. You’ll find innovations and trends in mobile payment, mobile apps and the overall mobile experience as the hub of a two-way brand-consumer dialogue that support customer retention and other important key performance indicators. We also cover the steps and considerations when building a total relationship banking strategy that go beyond acquisition and some of the top benefits of integrating your loyalty platform across enterprise banking solutions. Using advanced analytics and segmentation strategies, we reveal how FIs can attract, understand and retain high-wealth customers. We hope the Kobie Quarterly Review: Financial Services Edition broadens your appreciation for mobile and digital banking as a key part of your loyalty strategy. Does your bank have a successful mobile experience strategy? If so, we’d like to hear from you. Drop us a line at loyalty@kobie.com. KOBIE QUARTERLY REVIEW 3 from the president MICHAEL HEMSEY President 1 QUARTERLY REVIEW OCTOBER 2014
  4. 4. tech Empowering 21st Century Digital Banking through MOBILE INNOVATION by NANCY BERG Mobile penetration across consumer segments has risen so rapidly that 87 PERCENT OF U.S. ADULTS NOW OWN A DEVICE – and half of that population has a smartphone. This aggressive new rate of adoption creates both unprecedented opportunity for and demands of financial institutions regarding their mobile products.
  5. 5. “MOBILE PLATFORMS WILL REDEFINE THE CONSUMER RELATIONSHIP.” 3 KOBIE QUARTERLY REVIEW 5 Customers already use financial institution apps for remote deposit capture, loan management, bill payment and account alerts. But data reveals a hunger for additional capabilities, even in the already-maturing world of mobile commerce. In fact, 57 percent of respondents in a recent smartphone user survey said they would be more inclined to purchase goods on the device if they could do so through their bank’s branded mobile app – particularly for expensive items. Forget future benefits – for financial institutions, viable revenue streams are already on the table waiting to be collected. All signs indicate the mobile revolution will expand and persist, and FIs are wise to embrace it. Never before have they had the chance, unfettered by the limiting legacies of established architecture and practice, to maximize ease-of-use and improve the customer experience in highly relevant ways. INTO THE MOBILE LOOKING GLASS: THE FINANCIAL FUTURE Though mobile technology has and will continue disrupting existing FI strategies, banks’ flexibility will be rewarded with a positive transformation of the way these financial institutions and their customers interact. Here are just a few of the ways mobile devices will impact the future of finance: Digital payments will change the way we think about money. Mobile advancements will render all but obsolete the need for brick-and-mortar branches, shifting attention instead to digital wallets and virtual currencies. As developers find new ways to mitigate concerns over mobile security and account fraud, digital currencies will move to the forefront of an industry-wide shift towards virtual payments that will operate primarily through the mobile channel. As payment trends across all industries evolve, traditional banks and financial institutions are warming to the many payment services and options that can be delivered through the mobile channel. Mobile platforms will redefine the consumer relationship. More than ever, banking customers today demand barrier-free access to their assets. The proliferation of smartphone technology has forever changed the future of financial institutions by putting banking and financial services at customers’ fingertips and establishing the mobile platform as a 24/7 access point that can address their every financial need. Mobile technology has put FIs ubiquitously at their fingertips – in the process uprooting the traditional customer relationship into a seamless, interactive electronic landscape. Linking financial institutions and customers will facilitate constant and transparent communication. At the core of any mobile strategy is the technology’s ability to facilitate an open and easy information exchange at any moment, anywhere. As financial institutions have taken advantage of functionalities like SMS and in-app mobile messaging to notify customers when their checks are deposited, when balances reach a certain level, of ATM withdrawals or when charges are incurred, more opportunities are being created to communicate with account holders, genuinely and transparently. Mobile’s transformation of banking services will continue to push FIs to innovate and provide more immediate and convenient ways to interact with customers and build stronger relationships. With this we will see much more personalized experiences based on the customers’ past behavior – having an opportunity to introduce marketing messages during key points of the buying process. This will open up a tremendous opportunity for building customer loyalty not only with the FI but also with their cobrand and merchant partners in ways that haven’t been available historically including at point-of-sale. Empowerment through collaboration–microfinance and crowdfunding demonstrate a broad shift in certain consumer segments from a “me culture” to a “we culture,” and FIs are adapting to serve it. At the core of this model is one that encompasses the “four P’s” of modern economics – profit, people, planet and purpose – proving that today, banks and financial institutions are determined to make a difference beyond revenue potential. Their mere presence in the equation, in addition to the required collaborations with other businesses, establishes a brand identity that appeals to young and cause-minded consumers. Mobile paves the way for financial growth. According to a recent J.D. Power & Associates survey, customer banking satisfaction has returned to pre-recession levels – due in part to the proliferation of smartphone technology and the financial sector’s adoption of new web and mobile strategies. To expand and retain market presence, financial service companies will have to carefully plan and continually improve their customers’ mobile experience. That requires foresight, testing and a careful ear to consumer concerns. But the rewards are extensive for those committed to the notion that the future is in their pockets. Buying in now means reduced operating costs, more durable long-term relevance and new opportunities to meet customers’ emerging needs for decades to come. QUARTERLY REVIEW OCTOBER 2014
  6. 6. 4 BUILDING A ROADMAP FOR MOBILE by MATT STEIN QUARTERLY REVIEW OCTOBER 2014
  7. 7. With 58% of the U.S. adult population owning a smartphone and 44% using tablets on a regular basis, consumers clearly appreciate the ubiquity and convenience of mobile devices. In just a few years, they’ve quickly incorporated technological leaps enabling consumers to complete everyday tasks from anywhere – be it a couch, restaurant or a seat on the commuter train. Mobile technology has so transformed consumer behavior that it now endangers the financial institutions that don’t have a mobile roadmap or strategy. According to a recent report, 60% of smartphone and tablet users who switched primary banking services cited mobile banking as “important” or “extremely important” in their decision. KOBIE QUARTERLY REVIEW 7 Financial institutions are looking for innovative ways to build relationships with a customer base that is constantly adapting to new technology trends and capabilities. Creating a mobile presence allows them to stay ahead of the curve, differentiate product offerings and inject convenience and immediacy into the consumer-institution relationship. It also provides an opportunity to improve customer retention through better loyalty and rewards engagement, reduce operational costs and produce a seamless banking experience that’s universally accessible. Today’s consumer requires definitive command of their assets through this channel, yet craves a simple mobile experience that instills confidence in their financial institution. For FIs, the technology is critical – but still new. The challenge is how to create a mobile strategy with a suite of capabilities so compelling the app embeds itself into consumers’ daily lives, yet ensures reliability and security throughout the process? FINANCIAL INSTITUTIONS VERSUS MOBILE: THE CHALLENGE As central as it has become to the modern business landscape, implementing a mobile strategy for financial institutions comes with its own set of challenges. While mobile commerce is growing, it still comprises a relatively small market share. An app may reduce operational costs, but the incremental revenue produced by each mobile transaction and split among various involved banks and mobile network operators may make it difficult to justify the investment necessary to create the platform. Banks and other financial institutions also need to consider whether the potential security risk is worth the financial reward. Providing mobile services, such as financial planning or the remote depositing of checks, risks the exposure of the extensive private account and customer data FIs keep. Theft mitigation could require limits on mobile deposits or a means of authentication, such as fingerprint recognition, password protection or voice activation. Further, FIs must provide proactive solutions to malware attacks, service interruptions and other potential security breaches. From a technical perspective, the legacy systems still in use by financial institutions may not be equipped to integrate with today’s mobile software. If they do, FIs may still be challenged to create apps for every mobile operating system (such as Android, Apple, Windows and Blackberry). In addition, successful mobile apps could cannibalize retail traffic – requiring financial institutions to find creative mobile solutions for the cross-sell and upsell of products and services. THE PERFECT MOBILE ROADMAP Given technology’s impact on purchasing decisions, an effective mobile roadmap is key to keeping FIs in line with current consumer trends. The following guidelines will help ensure FIs get the most out of their mobile platform. AN INTEGRATED FUTURE FOR THE MOBILE AND FINANCIAL REALM QUARTERLY REVIEW OCTOBER 2014 5
  8. 8. Implement a ground-up strategy. Mobile is the newest and most advanced channel in today’s business landscape. To capitalize on it, FIs should take care not to model their strategies on older access methods, such as desktops. Apps must also be scalable – able to adapt to consumers’ rapidly evolving needs – but capable of meeting immediate demands, such as mobile payments. Make it simple and intuitive. Credit and debit cards are today’s preferred forms of payment, and that won’t change unless another method with extensive advantages appears. When it comes to how they pay, consumers are looking for three things: convenience, low cost and security. Mobile banking, commerce and payment services should be widely accessible, limit transaction surcharges and raise confidence by accepting liability for fraudulent charges. Focus on pre- and post-payment. Financial institutions should offer an all-inclusive experience that incorporates customer support, loyalty program access, relevant additional purchase opportunities and GPS services with local offers and locations of branches and relevant merchants. FIs can achieve this by establishing a mobile commerce payment platform that supports other merchants, brands and service providers relevant to banking customers. Build a network for distribution and customer acquisition. Aside from promoting new mobile offerings directly to their customer base, FIs should establish partnerships enabling them to reach even consumers who don’t use the app. The platform can then be used for payments and account services, and additionally serve as an acquisition tool for partner loyalty programs and promotions. These partnerships, and others with mobile network providers, can also facilitate long-term success by creating a larger alliance more capable than single FIs of taking on dominant players, such as Google. Institutions must be careful to deal only with companies that meet industry standards in technology and offer their own partnerships (with credit card leaders, innovative platforms, etc.) that FIs can leverage with limited integration points. DESIGNING ROADMAPS FOR THE FUTURE Mobile technology has created an impressive channel for growth by changing the day-to-day interaction between consumers and banks. However, this “gift” is also wrapped in limitations, such as security concerns and challenges in cross-platform and network compatibility. Financial institutions must at once be both agile and carefully strategic. Those financial institutions who get mobile right – offering innovation, simplicity and convenience -- can enjoy new heights of loyalty and acquisition in an era when customer-centricity and relationship building have never been more important. MOBILE BANKING, COMMERCE AND PAYMENT SERVICES SHOULD BE WIDELY ACCESSIBLE, LIMIT TRANSACTION SURCHARGES AND RAISE CONFIDENCE BY ACCEPTING LIABILITY FOR FRAUDULENT CHARGES. “ ” 6 QUARTERLY REVIEW OCTOBER 2014
  9. 9. Solve complex problems before they happen. With real-time and predictive analytics, we can help you understand how members are behaving, anticipate how they will behave and inspire more loyal behaviors. We’ll help you make smarter decisions about complex business problems faster than your competition. Simple. Call 800-821-7892 or visit www.kobie.com to learn more. KOBIE QUARTERLY REVIEW 9
  10. 10. 8 The worldwide population of smartphone users swelled past the 1 billion mark in 2012, and today experts expect 1.75 billion users by the end of 2014. An estimated 73% of them want to access their financial accounts through a mobile app, and 53% want to use that same app to view their transaction history, and preferably their Rewards information in a completely integrated experience. Enterprise customers provide limitless possibility, but will require a different app integrating now-disparate components of their business. Mobile apps in the banking and financial services sectors reduce business costs and keep brands current by enhancing the overall customer experience. These apps offer capabilities like location-based discounts and rewards, in-app banking alerts, one-click bill pay, money transfers, authentication services and more. For financial institution brands looking for ways to interact with their customers and boost revenue, the mobile application platform presents a significant opportunity to present an innovative, engaging, convenient, and seamless banking experience. In addition, opportunities abound across consumer segments. Some 32 million U.S. households are expected to use mobile banking by 2016, while 64% of Millennials – a generation with $600 billion in purchasing power – already use mobile devices regularly to make purchases. Given their history as being part of an established financial system, with refundable transactions and government-backed insurance, banks have clear advantages over other platforms and virtual crypto-currencies. However, because they charge higher fees and are typically slower to adopt new technology, financial institutions encourage customer curiosity about emerging offerings. Even with a mobile app, FIs must continue exploring new strategies for engagement – creating new and relevant offers that provide choice and scalability to keep the undivided attention of the modern customer and fit seamlessly into his or her daily life. CUSTOMERS DON’T FIT MOBILE APPS – MOBILE APPS FIT THE CUSTOMER For financial institutions, a well-designed mobile app has the potential to establish a platform for relevant and meaningful brand-customer interactions, build consumer confidence in the brand and create opportunities for those brands to drive real customer loyalty. Focusing on emerging functionalities – such as digital wallets, geo-location services and push notifications – can help financial institutions offer a seamless and competitive retention strategy. DIGITAL WALLETS ARE THE FUTURE OF FINANCIAL SERVICES. As smartphone usage increases, so does the prevalence and acceptance of digital wallets. By 2017, industry experts predict 29 million North Americans will use mobile wallets, generating $44 billion in revenue. This surge in popularity is a product of more discriminating consumers, who seek the ability to carry fewer payment cards and prefer easy-to-use apps that support a variety of needs. Mobile wallets can entice loyalty by offering rewards tracking and integrating multiple virtual and loyalty currencies into a central location. Demand is already there, with 55% of consumers expressing interest in the use of rewards or points to make payments through their mobile wallet and businesses increasingly accepting the practice. However, both merchants and consumers are concerned with e-commerce security, from online banking to virtual currencies and beyond. The Federal Trade Commission warned in 2013 that free digital wallets, and even prepaid cards used online, lack the federal protection of limited liability attached to credit and debit cards. Consumers seem willing to pay for the use of systems that establish a comprehensive level of trust and security for mobile wallets. This puts nimble financial institutions and interchange networks uniquely in position to attract and retain new customers. by NICOLLE SCHREIBER QUARTERLY REVIEW OCTOBER 2014
  11. 11. A T A G L A N C E KOBIE QUARTERLY REVIEW 11 IN-APP MOBILE MESSAGING AND PUSH NOTIFICATIONS PROVIDE CUSTOMER INSIGHT While promotional email continues to hold strong as an effective means of marketing communication, the channel is unable to exploit perishable marketing opportunities with short publication cycles. In-app mobile messaging and push notifications enable financial institutions to enhance customer loyalty with techniques such as “flash sales,” which provide continuous opportunities for brand engagement. Of the 60% of consumers who download mobile apps, 70% have enabled push notifications, which can take the form of special sales, payment reminders and the status of a recently-placed order. Since push notifications use more in-depth analytics and provide access to data concerning the delivery, open rates, time and engagement of smartphone users, the technology can give banks and financial institutions more insight into how their customers behave. GEO-LOCATION SERVICES OFFER BOTH RELEVANCY AND PROTECTION From a messaging perspective, geo-location services enable brands to send customers relevant offers and information – as directed by transactional and CRM data – when consumers are near branches or other points of individual interest. The lifestyle data captured can curate partner merchandising offers, drive sales and measure how appealing brand efforts are to customers, or not. MAKING THE CASE FOR MOBILE APPLICATIONS According to a recent report on mobile phone app statistics, apps developed by FIs only constituted 3% of all downloads in 2013 – a surprising result given that 51% of all smartphone users have used mobile banking over the past year. For banks and financial services brands, the key to growing this statistic is developing a mobile app with more convenience and capabilities than in-person banking. The product’s value must be conspicuous – apps should operate on a simple user interface, incorporate clean design and assimilate seamlessly into customers’ daily lives. In addition, they should enhance the customer experience by offering in-app messaging, push notifications, geo-location services and digital wallets while ensuring user security. Integrating these solutions within a mobile app and evolving with customers’ needs empower financial brands to position themselves as an indispensable, effortless and central part of the consumer’s life. Which is exactly where they should be. 64% of Millennials already use mobile devices regularly to make purchases 55% of consumers express interest in the use of rewards or points to make payments Apps developed by FIs only constituted 3% of all downloads in 2013 51% of all smartphone users have used mobile banking over the past year 73% of smartphone users want to access their financial accounts through a mobile app 64% 55% 51% 3% Experts expect the population of smartphone users to increase to 1.75 billion by the end of 2014 32 million U.S. households are expected to use mobile banking by 2016 By 2017, experts predict 29 million North Americans will use mobile wallets 73% 100 0 01 02 03 QUARTERLY REVIEW OCTOBER 2014 9
  12. 12. F E A T U R E ANALYTICS AND SEGMENTATION: A FINANCIAL SERVICES PERSPECTIVE 10
  13. 13. TARGETING AND REWARDING HIGH VALUE CUSTOMERS by DAVID ANDREADAKIS KOBIE QUARTERLY QUARTERLY REVIEW OCTOBER REVIEW 2014 13 11
  14. 14. 12 With bank revenue declines tied to persistently low interest rates, high compliance costs and the adoption of unconventional banking methods (like PayPal and Google Wallet), financial institutions are seeking new ways to improve their bottom line. Loyalty programs are emerging as an attractive option, with recent research demonstrating most customers only align 46% of their deposit share with one FI brand and 70% of banks believe new customer acquisition is more expensive than retaining existing customers. Banks are shifting attention to their “most valuable” customers—a high-net-worth, loyal demographic with greater financial needs. Wealthy customers— those with assets valued anywhere from $1 million to $30 million--are six to ten times more profitable than regular customers. While they constitute no more than 30% of financial institutions’ customer bases, they are responsible for as much as 60% to 70% of total customer profits. The demographic has so much purchasing power that The Boston Consulting Group estimated those within the category worldwide had investible assets of some $122 trillion, enough to buy all New York Stock Exchange securities ten times over. No longer are large retirement savings pools or rapidly developing economies the most attractive places to find new, high-value capital. After the downturn, Bain Capital theorized wealthy investors’ new needs for diversification would be equally successful drivers. To convince these existing high-wealth customers to trust a given institution with even more of their assets, FIs need to find out what customers really want and need from their providers. Transitioning to this new revenue strategy will require a well-executed plan that emphasizes cross-sell, upsell and a return to data and analytics-driven segmentation. In today’s competitive market, FIs need clearly defined motivators for customer behaviors within different income brackets, particularly for those expected to have a high net worth in the future. HIGH-WEALTH CUSTOMERS ARE KEY TO REVENUE GROWTH While every customer is important, given the value of the assets they possess, the high wealth customer F E A T U R E ANALYTICS AND SEGMENTATION: WITH THIS SELECT CUSTOMER SEGMENT CONTRIBUTING MORE THAN 60% OF A BANK’S PROFITABILITY, THE STAKES ARE VERY HIGH A FINANCIAL SERVICES PERSPECTIVE QUARTERLY REVIEW OCTOBER 2014
  15. 15. 13 KOBIE QUARTERLY REVIEW 15 segment has a much greater potential to make a significant difference in bank revenue than lower-income segments. By using segmentation and the analysis of existing data to isolate this customer group, banks and financial services providers can get a much closer look into the individual customer profiles and take action to ensure the services they receive match their financial needs – or anticipate their future ones. To gain trust and capitalize on this investment, however, banks and financial services providers must identify the three or four attributes that differentiates their behavior and shape their relationships accordingly. TOO MUCH ATTENTION CAN GET TOO DIFFICULT Banks need to reach an unprecedented level of understanding for the preferences and motivations of wealthy customers. Delivering on them and connecting on a personal level motivates further engagement with the brand. Key to the equation is finding a balance between relevancy and practicality. In an effort to interact with customers on any level, many financial institutions waste time and resources offering incentives and rewards for products customers already intended to use – or even have. However, improved targeting and motivation are easier touted than implemented. Advances have improved analysis and segmentation across industries, but banks are limited by their historic reluctance to invest in new technologies. For high-wealth customers, large investments in an FI brand usually involve less risky, fixed-income securities with a pre-determined return on investment. Historically, banks only start courting these customers as the end of their term approaches—creating renewal opportunities, but limiting cross-sells and upsells. Instead, financial institutions should communicate with these customers on a regular basis, build a high-engagement relationship over time by learning whether needs are being met and whether they should address any core concerns about the brand. Instrument maturation dates are too late to operate on, as most customers will have already researched any next steps and alternative institutions. The key for FIs is to cultivate a situation in which a customer has been treated so well he or she feels a moral obligation to continue the relationship. WHAT DO HIGH WEALTH CUSTOMERS WANT? Following the late-2000s recession, wealthy customers, more than ever, demand to understand how their financial services providers are simultaneously protecting their assets and producing strong returns. They also seek an emotional component to their relationship with the bank —knowing they can trust a given brand, and perceive a direct interest from that bank in their well-being beyond wallet size. These customers also crave consistent follow-up and reassurance that their immediate needs are a priority for the bank to meet. They’re accustomed to concierge services and single points of service for all needs, be it ordering or cashing checks or purchasing new financial products. An example of this can be seen at BB&T private banking. A former employee said the bank made everything negotiable to high-net-worth clients, from interest rates on products ranging from CDs to checking and deposit accounts, bank fees and closing costs on mortgages or home-equity loans. For the best chance at retaining customers in this income bracket, FIs need targeted strategies that include efforts to enhance the overall customer experience, bridge the gap between older and more modern high-wealth customers and keep this demographic talking about the brand. From hotel stays to concierge services and personal shopping, customers of this status are used to receiving the highest levels of attention. FIs are no exception, and should strive to offer a holistic experience that includes asset allocation, insurance assistance, retirement/ tax planning and debt/trust fund management. HIGH VALUE, HIGH STAKES Future leaders in the financial sector will be those who understand that segmentation is not a one-time ordeal, but an ongoing process as is the analysis of customer behaviors and preferences found in their data. It will change as demographics, customer needs and technology change, and give financial institutions the tools they need to personalize products and services for high-wealth customers. So how can institutions prospect this valuable customer segment? We see it through the application of analytics to data and ongoing evaluation of currently held financial information. Wealthy clients are more likely to spread investments among advisors and various account types, to pay lower fees and have more fee-based accounts than mutual fund investments. The bottom line: With this select customer segment contributing more than 60% of a bank’s profitability, the stakes are very high. Banks simply can’t afford not to invest in analytics that will help them not only identify high-value (or potentially high-value) customers, but help them cater to their very exacting needs. QUARTERLY REVIEW OCTOBER 2014
  16. 16. 5 HURDLES THAT BANKS AND FINANCIAL INSTITUTIONS MUST OVERCOME creating a total relationship banking strategy beyond acquisition by MARGARET MERAW strategy QUARTERLY REVIEW OCTOBER 2014
  17. 17. 15 KOBIE QUARTERLY REVIEW 17 The Great Recession of the late 2000s undoubtedly challenged financial institutions to engineer new profit centers. With real estate loans impossibly risky, liquidity scarce and revenue lines from interchange fees crimped by regulators, many FIs went back to basics. The underlying goal was this: Build a comprehensive strategy that increases satisfaction and confidence among their best customers. With surveys indicating 63% of consumers still believe U.S. financial institutions are no more secure than they were prior to the recession, the industry has more work to do. The challenge for FIs is finding new ways to develop deeper relationships with customers and communicate how they’re adding value to consumers’ daily lives. The solution for some is total relationship banking, a philosophy that incorporates brand-encompassing loyalty programs with the core notion that customers should be the impetus for all business operations. Although the idea was first introduced in the early 2000s, it wasn’t until 2009 that FIs began to apply this philosophy to the integration of loyalty, mobile and online portals. When conceived and executed correctly, total relationship banking has demonstrated significant increases in cross-sell and upsell opportunities, reduced attrition and improved profit margins. TOTAL RELATIONSHIP BANKING PUTS THE CUSTOMER FIRST Historically, financial service companies have attracted customers with a products-based approach. Marketing collateral would variously emphasize benefits in home equity lines, interest rates and debit card fees. Business came, but it also went. Customers were persistently prone to flee if they lost interest in the feature that first attracted them. Conversely, a total relationship banking strategy seeks to build trust and deep ties with a consumer, nurturing a dynamic that culminates in the consolidation of entire financial need portfolios within an institution. The approach relies on high-level customer satisfaction, enticing rewards programs and even personalized products conceived out of the vast universe of customer data collected by FIs. Other points of potential friction include: 1. Integrating services under one customer I.D. Customers holding multiple accounts with the same bank are likely identified by separate IDs created at the point of sale and integrated with third-party solutions that, over time, have failed to communicate. Some financial institutions will find it challenging to pull them into a centralized location. 2. Extracting private data from separate departments. FIs protect personal information by storing it in separate departments. The implementation of a enterprise-wide loyalty program will require the consolidation of such data to provide appropriate rewards – not just initially, but on a continual basis. 3. Value propositions and liability acceptance. When FIs integrate across multiple products, each party involved needs to accept the liability that comes with awarding points for various QUARTERLY REVIEW OCTOBER 2014
  18. 18. 16 transactions. To convince siloed departments to accept this liability, FIs must ensure all participants understand the value of rewarding customers for their loans, mortgages and additional accounts. 4. Poor marketing in an era of distrust. Because total relationship banking involves the integration of multiple product groups into a single solution, and each group has its own marketing strategy, FIs often struggle to create a unified marketing approach. For example, some departments may wish to engage consumers through mobile and social media strategies, while others have no interest in those channels at all. 5. Government regulations and stricter protocols. The Credit Card Act of 2009 and Dodd-Frank legislation are changing the way FIs operate and disclose information to customers. The regulations apply even to loyalty programs, causing some banks to pause rewards program launches until they see how others within the sector are affected. IT’S A MARATHON, NOT A SPRINT Total relationship banking has the unique ability to simultaneously strengthen consumer confidence and increase profit. But it won’t happen overnight. True success is achieved when operations become so seamless that customers feel they are interacting with a unified company that appreciates and rewards their business – not disparate departments for each of their accounts. To achieve this goal, banks and financial services brands must conceive, evaluate and execute a strategy that analyzes results over several months, or even a year. It will take time to marry various customer initiatives, but it’s worth the effort. The following are best practices to consider when implementing a total relationship banking strategy: • Organize and integrate financial databases so customers can see their profiles and account history through one portal, in real time. • Establish a collective tone and standard of messaging to avoid confusion about the bank’s value proposition or the products and services it offers. • Develop a loyalty program which limits churn and leverages the data collected into behavior and preference insights. • Create opportunities for team members to collaborate with one another, ensuring employees understand the full scope of the products and services in use. THE GOAL: CUSTOMER ENGAGEMENT BEYOND ACQUISITION Unlike traditional banking, total relationship banking goes beyond the scope of acquisition and focuses on the big picture: long-term revenue growth. It starts with the simple premise of focusing on customers who have been most valuable – in this case, those who’ve interacted with the brand regularly and over an extended period of time. And it concludes in the transformation from a simple brand to an integral part of consumers’ financial lives and future planning. The approach also proves banks don’t have to discover new revenue streams to compete on Wall Street. They just need to keep the customers they already have. QUARTERLY REVIEW OCTOBER 2014
  19. 19. authors MICHAEL HEMSEY NANCY BERG President VP of Client Services and Partnerships As President of Kobie Marketing, Michael Nancy is responsible for all aspects is responsible for leading all facets of the of Account Management and building loyalty marketing organization including strategic and tactical marketing business development, IT initiatives, client partnerships that differentiate Kobie’s services, as well as the overall direction client programs. Nancy takes great pride of the Kobie brand. For 20 years, Michael in delivering against Kobie’s mantra that has cultivated a rich background in we will never sacrifice an existing client client services, product development, for a new business opportunity, and marketing, technology and operations that we will do what we say we will do through several key posts. Prior to Kobie each and every day. She is a strong and Marketing, Michael was Executive Vice trusted leader, that has nearly 20 years’ President of TSYS Loyalty (formerly ESC experience in Customer Loyalty Marketing Loyalty) and led the loyalty marketing working in several industry verticals with implementation and relationship top brands including Verizon, RBC Bank, management teams serving the world’s AMC Theatres, Hawaiian Airlines, Bank largest issuers and retailers. of America, Northwest Airlines, US Bank, Westin Hotels and others. MATT STEIN NICOLLE SCHREIBER VP of Customer Experience Director of Partnership Marketing and Agency Services Nicolle has 18 years’ experience the Matt serves as the head of Kobie’s in Partner/Vendor Relationship Customer Experience & Agency Services Management, including Retail purchasing, capabilities. With over 15 years of loyalty program management, and marketing experience in senior leadership product management. She developed an roles, he drives industry-leading loyalty interest in purchasing/product marketing engagement and marketing solutions after working in a retail store during her that span the online, mobile, social, print early years of college. Prior to joining and broadcast media channels as well Kobie Marketing, Nicolle worked in buying as the full customer journey from digital and product management at several channels to physical locations. companies including Bealls Inc. and FIS. about Notable is her 15 years as Buyer for Bealls Inc. Nicolle holds a Bachelor’s degree DAVID ANDREADAKIS from St Leo College. VP of Loyalty Strategy Andreadakis has extensive experience MARGARET MERAW analyzing the strategic and financial VP of Loyalty Operations aspects of loyalty strategy and program In her role at Kobie Marketing, Margaret development for clients and their is responsible for all aspects of the customers, as well as providing insights organization’s day-to-day operations that will help enhance Kobie’s design, including oversight of the Project analytical, behavioral and platform Management office, process management, offerings. Tier I and Tier II Call Center Operations, as well as management of internal and outsourced Fulfillment. This role is vital to the organization to ensure flawless execution and ongoing endurance of Kobie’s client’ programs. KOBIE QUARTERLY REVIEW 19 17 QUARTERLY REVIEW OCTOBER 2014
  20. 20. W E A R E K O B I E FIND OUT MORE AT INFO@KOBIE.COM Kobie Marketing is a global leader in loyalty marketing and an industry pioneer, delivering end-to-end strategy, technology and program management solutions. Kobie drives results and ROI through Kobie Alchemy®, a best-in-class loyalty marketing technology platform. Kobie Marketing, Inc. @Kobie_Marketing Kobie Marketing info@kobie.com

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