FIS 2011 Consumer Loyalty and Profitability Report

Profitable Customer Loyalty in Retail Banking

FIS Enterprise Strategy

November, 2011

© 2011 Fidelity National Information Services, Inc. and its subsidiaries

Table of contents

Introduction 3

Defining customer loyalty 8

Customer profitability and loyalty 14

Segments’ financial behaviors 18

Segment fees 31

Segment motivators 34

Strategies 42

Appendix: Segments by P$YCLE 50

2

Generating profitable bank customer loyalty

• Measuring customer loyalty to financial institutions (FIs) is complex.

– Consumers’ perceived costs of switching financial institutions are high.

– Our research shows that customers who merely stick with FIs because of the switching hassle aren’t loyal and don’t keep a large share of their deposits and/or loans with their primary checking account provider.

– A long-term customer doesn’t necessarily equal a loyal customer.

• Some customers are “loyal” in some aspects of their behaviors — e.g., they trust and would recommend their FI, they wouldn’t leave their FI — but their transactional behaviors aren’t aligned; many of them are not profitable customers. Having loyal customers helps, but doesn’t guarantee, profitable relationships.

– In order to maintain healthy relationships with customers, the FI needs both loyal and profitable customers.

• This presentation features recent research on elements that drive customer loyalty and how FIs can foster loyal relationships that, in turn, can increase their percentage of profitable customers.

3

Research objectives and methodology

• Study Objective:

– Determine strategies and tactics to support profitable consumer loyalty

• Segment customers based on financial institution loyalty and profitability

• Determine measures of loyalty most indicative of value creation

• Define strategies and tactics to engender consumer loyalty that leads to value creation

• Methodology:

– 44 question online survey

– Representative sample of 3,000 adults with checking accounts (and oversample of 345 community bank customers)

– Split evenly by gender (51% female; 49% male)

– Conducted in August, 2011

– Sample provided by Survey Sample International

4

Respondent pool is representative of the U.S. adult population with checking accounts

Generation

5

Annual Household Income

Average = 46 years Median = $50,059; Average = $60,071

* Read as: Gen Y respondents compose 23% of the survey respondent pool Source: FIS Enterprise Strategy, August 2011; n = 3,000

Gen Y 23%*

Gen X 29%

Younger Boomers

20%

Older Boomers

13%

Matures 15%

Under $30K 25%

$30K to $60K 35%

$60K to $90K 21%

$90K to $125K 12%

$125K+ 7%

Half of the respondents maintain their primary DDA relationship with large national banks

Type of Financial Institution for Primary DDA Relationship

6

Large national bank, 51%*

Regional bank, 17%

Community bank, 9%

Credit union, 19%

Internet-only bank, 2%

Other, 1%

* Read as: 51% of the survey respondent pool holds their primary DDA relationship with a large national bank Source: FIS Enterprise Strategy, August 2011; n = 3,000

Table of contents

7

Introduction 3




Segment fees 31


Strategies 42


Switching “costs” distort FIs’ perception of how loyal their customers are

8 * Read as: 20% of respondents strongly agree that “switching my primary checking account to a different financial institution is more hassle than it’s worth” Source: FIS Enterprise Strategy, August 2011; n = 3,000

Disagree 15%

Neutral 17% Agree 68%

"Switching my primary checking account to a different FI is more hassle than it's worth"

Strongly disagree 4%

Disagree 5%

Somewhat disagree 6%

Neither agree nor disagree 17%

Somewhat agree 25%

Agree 23%

Strongly agree 20%*

Consumers resist switching even when overcharged or offered better rates

9

Likely to switch to a different financial institution in your area if: (Top 2 box score on 7-point scales)

* Read as: 28% of respondents are likely to switch to a different checking account provider in their area if their current provider overcharged them. Source: FIS Enterprise Strategy, August 2011; n = 3,000

28%

18%

14%

10%

Your primary checking account provider overcharged you

They offered better interest rates

They offered a customized loyalty and rewards program based on your specific needs

They offered better online and mobile banking services

*

Consumer loyalty is multidimensional and segments overlap

10

• Functional: Superior products and/or services create value

– Trust in the brand’s products/services – Willingness to recommend

• Transactional: Concentrated spending with a brand

– Willingness to make repeat purchases – Share of wallet increases

• Emotional (most sought and least attained): Customers identify with the brand based on appealing to their values

– Personally relate to representatives of the brand – Switching is minimal

Transactional Emotional

Functional

Types of customer loyalty

Forty-five percent of FI customers exhibit at least one type of loyalty

11

Loyal customers showed all the measures of at least one loyalty type:

Functional measures:

• FI has the product /service expertise they need;

• Are willing to recommend the FI;

• Have made at least 2 recommendations; and

• Trust in the FI

Transactional measures:

• Prefer using the FI where they have their primary checking account to meet all of their financial needs; and

• Willing to make repeat purchases with FI

Emotional measures:

• Have personal relationships with FI employees; and

• Even if overcharged, would not defect from FI

Loyal vs. Non-Loyal Primary Checking Account Customers

* Read as: 45% of primary checking account customers exhibit at least one type of loyalty Source: FIS Enterprise Strategy, August 2011; n = 3,000

Loyal 45%* Non-loyal

55%

Functional and transactional loyalty dominate; only 7% indicate emotional loyalty

12 * Read as: 18% of primary checking account customers have both functional and transactional loyalty Source: FIS Enterprise Strategy, August 2011; n = 3,000

Functional only 10%

Transactional only 12%

Functional and

Transactional 18%*

Emotional only 2%

Functional and Emotional 1%

Transactional and Emotional <1%

All three 3%

Mix of loyalty types

Table of contents

13

Introduction 3




Segment fees 31


Strategies 42


39% of checking account customers maintain a relationship that is profitable to the primary FI; another 42% are potentially profitable

14

* Read as: 42% of primary checking account customers are potentially profitable to their primary checking account provider Source: FIS Enterprise Strategy, August 2011; n = 3,000

Profitable vs. Unprofitable Primary Checking Account Customers

Profitable 39%

Unprofitable 19%

Potentially Profitable

42%*

Our estimate of customer profitability is based on:

Revenues:

• Liability spread (Funds Transfer Price less interest rate) based on checking, savings, money market and certificate of deposit balances

• Net interest margin based on balances maintained on credit card, automobile, educational, residential mortgage and home equity loans maintained with the primary checking account provider

• Monthly fees paid on the primary checking account

• Debit card interchange

Expenses:

• Channel servicing costs for the primary checking account based on the number of channel interactions per month

• Payment servicing costs for the primary checking account based on the number of payment transactions per month

• An estimate of overhead for every checking account household

FI customers are divided into six segments based on loyalty and profitability

* Read as: 10% of consumers are in the “Unprofitable Non-loyals” segment. Source: FIS Enterprise Strategy, August 2011; n = 3,000 15

Loya

lty

to P

rim

ary

FI

Profitability to Primary FI Low High

Unprofitable Loyals 9%

Potentially Profitable Loyals 18%

Profitable Loyals 17%

Unprofitable Non-loyals 10%*

Potentially Profitable Non-loyals 24%

Profitable Non-loyals 22%

Low

H

igh

Profitable Loyals (17%)

• Well-educated married couples with higher incomes

• More Matures • More self-employed • Positive net worth

• More likely to stick with known brands • View switching as a hassle • Most confident about having comfortable

retirement

Profitable Non-loyals (22%)

• Well-educated married couples with higher incomes

• More employed for someone else • Positive net worth • Large bank customer

• More likely to switch FIs motivated by better online/mobile, overcharging, better interest rates

• Lack time and knowledge to manage financial affairs

Potentially Profitable Loyals (18%)

• Majority are females with less-than-average education and low to lower-middle income

• In debt

• More likely to stick with known brands • View switching as a hassle

Potentially Profitable Non-loyals (24%)

• Higher-than-average %s of students • Above average education • Average income • In debt

• More likely to switch FIs motivated by loyalty program, overcharging, better interest rates

• Lack time and knowledge to manage financial affairs

Unprofitable Loyals (9%)

• One-quarter retired • Tend to be single • Lowest income • Lowest education level • Low amount of assets and debt

• More likely to stick with known brands • View switching as a hassle • Don’t think loyalty programs offer enough

benefits to sign up

Unprofitable Non-loyals (10%)

• Gen Y or Gen X • Lower levels of education and income • Highest unemployed • Low amount of assets and debt

• More likely to switch FIs • Lack time and knowledge to manage

financial affairs

Segments differ demographically and attitudinally

16 Bolded characteristics indicate significant differences from other segments Source: FIS Enterprise Strategy, August 2011; n = 3,000

Table of contents

17

Introduction 3




Segment fees 31


Strategies 42


Large banks’ customers are more profitable but less loyal — more vulnerable to attrition

18

Profitable Loyals

16%

17%

18%

19%*

25%

20%

16%

17%

15%

19%

26%

24%

26%

26%

23%

21%

8%

11%

10%

12%

10%

7%

6%

8%

Large national bank

Regional bank

Community bank

Credit union

Profitable

Non-Loyals

Potentially

Profitable

Loyals

Potentially

Profitable

Non-Loyals

Unprofitable Loyals

Unprofitable

Non-Loyals

* Read as: 19% of consumers who hold their primary DDA relationship with a credit union are “Profitable Loyals” Source: FIS Enterprise Strategy, August 2011; n = 3,000

Profitable: 36% Loyal: 55%




-50

0

50

100

150

200

250

300

350

Profitability index to primary checking account provider Overall profitability index

Profitable segments also give more of their full financial wallet to their primary DDA providers

19

Profitable Loyals

Average = 100

Profitability Indices by Segments

Read as: “Profitable Loyals” are more than 3 times as (207% more) profitable to their primary DDA provider than average Source: FIS Enterprise Strategy, August 2011; n = 3,000

Profitable

Non-Loyals

Potentially

Profitable

Loyals

Potentially

Profitable

Non-Loyals

Unprofitable Loyals

Unprofitable

Non-Loyals

All non-profitable groups maintain modest balances with their primary DDA provider

20

* Read as: “Profitable Loyals” hold combined deposit and loan balances of $136,458 with their primary checking account provider. Note: Deposits include checking, savings, MMDA and CDs. Loans include first and second mortgages, credit card balances and auto and educational loans. Source: FIS Enterprise Strategy, August 2011; n = 3,000

Average Deposit and Loan Balances Held with Primary DDA Provider

$57,681

$38,606

$78,778

$79,484

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

Profitable Loyals Profitable Non-loyals

PotentiallyProfitable Loyals

PotentiallyProfitable Non-

loyals

Unprofitable Loyals Unprofitable Non-loyals

Loans Held with Primary DDA Provider

Deposits Held with Primary DDA Provider

$136,458*

$118,090

$6,658 $6,133 $3,095 $3,569

Primary FI gets more deposits from profitable segments and greater share from loyal segments

21

Deposit Balances by Segment

* Read as: the primary FI captures 82% share of deposit balances from “Profitable Loyals” Source: FIS Enterprise Strategy, August 2011; n = 3,000

82% 68%

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000




loyals


Total deposits

With primary checking account provider

82%*

68%

55% 26% 90% 84%

Credit unions have the highest deposit shares of potentially profitable customers

22

Primary Share of Deposit Balances

Read as: the primary large national bank FI captures 75% share of deposit balances from “Profitable Loyals” Source: FIS Enterprise Strategy, August 2011; n = 3,000

74%

94%

54%

60%

63%

89%

91%

94%

31%

54%

66%

85%

88%

89%

19%

36%

64%

83%

85%

90%

26%

60%

70%

75%*

Unprofitable Non-loyals

Unprofitable Loyals

Potentially profitable Non-Loyals

Potentially profitable Loyals

Profitable Non-loyals

Profitable LoyalsLarge national banks

Regional banks

Community banks

Credit unions

Primary FI captures a small volume of loans with all but profitable customer segments

23

Loan balances outstanding per segment

* Read as: the primary FI captures 45% share of loan balances from “Profitable Loyals” Source: FIS Enterprise Strategy, August 2011; n = 3,000

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000




loyals


Total loans and credit card debt

With primary checking account provider

45% 45%

4% 3%

34% 44%

Potentially profitable customers have almost no loans with their primary DDA providers

24

Primary Share of Loan Balances

*Read as: the primary large national bank FI captures 42% share of loan balances from “Profitable Loyals” Source: FIS Enterprise Strategy, August 2011; n = 3,000

58%

29%

4%

3%

27%

34%

26%

37%

0%

0%

44%

45%

65%

32%

4%

6%

54%

51%

36%

39%

3%

4%

47%

42%*


Unprofitable Loyals

Potentially profitable Non-Loyals

Potentially profitable Loyals


Profitable LoyalsLarge national banks

Regional banks

Community banks

Credit unions

Among profitable segments, large banks capture the most loans

25

.31 .23

0.28

.17

.15

.19 0.09

.14

.12 .11

0.15 .26

.04

.01 0.03

.03

.27

.13 .04

.16

Large Bank RegionalBank

CommunityBank

Credit Union

Credit card

Student loan

Auto loan

Home equity loan

First mortgage

.23 .20 .25

.15

.12 .10

.07

.08

.10

.09 .10

.17

.05

.02

.05 .03

.25

.16 .08 .15

Large Bank Regional Bank CommunityBank

Credit Union

*Read as: “Profitable Loyals” hold an average of .90 loans with their primary DDA provider Source: FIS Enterprise Strategy, August 2011; n = 3,000

.90*

.67

.59

.75 .74

.56 .55 .57

Profitable Loyals Avg. # of Loans Held with Primary DDA Provider

Profitable Non-Loyals Avg. # of Loans Held with Primary DDA Provider

.01 .01 .01

.01 .03 .01

.01 .02

.05

.09

.01

.01

.11

.06 .02

.08

Large bank Regional bank Communitybank

Credit union

.01 .01 .01

.01 .02 .03

.02

.03 .03

.03 .06 .01

.12

.05 .02

.09


Credit union

Credit card

Student loan

Auto loan

Home equity loan

First mortgage

Potentially profitable customers hold few loans; credit cards are most loans

26

.19*

.11

.09

.17

.15

.11

.09

.18

Potentially Profitable Loyals Avg. # of Loans Held with Primary DDA Provider

Potentially Profitable Non-loyals Avg. # of Loans Held with Primary DDA Provider

* Read as: “Potentially Profitable Loyals” hold an average of .19 loans with their primary DDA provider Source: FIS Enterprise Strategy, August 2011; n = 3,000

.06 .03 .04

.02

.01 .04 .04

.01

.07

.19

.01

.03

.13

.04

.15


Credit union

.05 .05 .03

.03

.04

.03 .04

.02

.02

.05 .06 .01

.13

.16

.07

.15

Large bank Regionalbank

Communitybank

Credit union

Credit card

Student loan

Auto loan

Home equity loan

First mortgage

Unprofitable loyals have more credit cards, though fewer resources to pay off debt

27

.23*

.21 .20

.28

.21

.06

.20

.40

* Read as: “Unprofitable Loyals” hold an average of .23 loans with their primary DDA provider Source: FIS Enterprise Strategy, August 2011; n = 3,000

Unprofitable Loyals Avg. # of Loans Held with Primary DDA Provider

Unprofitable Non-loyals Avg. # of Loans Held with Primary DDA Provider

7.5 7.8 8.5 7.8 9.8 10.1

2.6 2.4 2.1

2.1

3.0 3.5

1.6 1.6 1.9

1.6

2.7 2.9

2.1 1.7 2.0

1.7

2.3 2.3

0.6 0.5 0.5

0.5

0.7 0.6

0.8 0.7

1.0

0.7

1.3 1.3




loyals

UnprofitableLoyals


Automated/IVRcall

Telephone callwith live person

In-person trips

Mobile banking

Primary ATMtranactions

Online banking

Unprofitable segments have highest number of channel contacts and most expensive to service

28

Number of Channel Contacts with Primary Checking Account Holder in Past 30 Days

* Read as: on average, “Profitable Loyals “made 15.3 contacts with their primary checking account provider through all of these channels in the past 30 days Source: FIS Enterprise Strategy, August 2011; n = 3,000

15.3* 14.8 16.0

14.5

19.9 20.8

Loyal customers and unprofitable segments have higher payment transactions

Number of Payment Transactions per Month with Primary Checking Account Provider

29

7.0 6.6

9.5 7.4

12.9

8.6

6.3

4.7

3.8

3.9

3.1

2.8

4.3

4.2

3.7

3.8

3.4

5.5

4.8

3.5

3.0

2.9

3.6

4.0

2.5

2.2 1.9

2.1

2.2

1.8

2.3

2.2 2.0

2.0

2.3

1.9

1.5

1.5 1.2

1.2

2.1

1.8

0.8

0.8 0.5

0.8

1.0

0.9

0.6

0.7 0.6

0.6

0.5

0.7

0.6

0.6 0.3

0.3

0.7

0.7




loyals

UnprofitableLoyals

UnprofitableNon-loyals

Bank credit card for cashback

Electronic transfer of fundsto another FI

P2P payment

Bank debit card for cashback

Direct deposit into primarychecking account

Automatic bill pay

Bank credit card forpurchase

Online bill pay

Paper check

Bank debit card forpurchase

* Read as: on average, “Profitable Loyals “made 7.0 purchases with the debit card of their primary checking account in the past 30 days Source: FIS Enterprise Strategy, August 2011; n = 3,000

30.7*

27.0 26.6

25.1

28.6

27.7

Table of contents

30

Introduction 3




Segment fees 31


Strategies 42


Loyal segments are less likely to pay fees and pay lower fees; profitable segments pay the highest fees

31

Percentages Paying Fees and Average Monthly Fees with Primary Checking Provider

* Read as: 35% of “Profitable Loyals” pay fees to their primary checking account provider Source: FIS Enterprise Strategy, August 2011; n = 3,000

Perc

enta

ge p

ayin

g fe

es

- lo

yal

Average m

on

thly ch

ecking acco

un

t fees

Perc

enta

ge p

ayin

g fe

es

– n

on

-lo

yal

35%

45% 38%

42%

29%

47% $16.09 $17.01

$5.98 $6.75

$2.63 $4.07

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%




loyals

UnprofitableLoyals

UnprofitableNon-loyals

Percentage paying fees Average amount of fees

42% 39%

36% 39%

$11.35 $11.98

$2.33

$10.42

$0

$2

$4

$6

$8

$10

$12

$14

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Large national bank Regional bank Community bank Credit union

Community bank customers are least likely to pay fees and pay substantially less

32

Percentages Paying Fees and Average Monthly Fees with Primary Checking Provider

* Read as 42% of large national bank customers pay fees to their primary checking account provider Source: FIS Enterprise Strategy, August 2011; n = 3,000

Perc

enta

ge p

ayin

g fe

es

Average m

on

thly ch

ecking acco

un

t fees

Table of contents

33

Introduction 3




Segment fees 31


Strategies 42


Free services and delivery channel convenience drive FI choice across all FIs

34

Criteria for Selection of a Primary Checking Account Provider (multiple response)

* Read as: free services is an important criteria for FI selection among 44% of consumers Source: FIS Enterprise Strategy, August 2011; n = 3,000

13%

14%

15%

18%

22%

22%

37%

44%*

Low fees for services

Low minimum balance requirements

Previous experience with the financialinstitution

Reputation of the financial institution

ATMs at convenient locations

Online or mobile banking

Branches at convenient locations

Free services (checking, bill pay, etc.)• Potentially Profitable Loyals • Unprofitable Loyals

• Profitable Loyals • Unprofitable Loyals

• Profitable Loyals

• Profitable Non-loyals • Large bank customers

• Fewer credit union customers

• Credit union customers

Greatest appeal to…

Profitable customers are most likely to participate in checking and credit card rewards

35

25%*

34%

22%

24%

34%

21%

17%

18%

21%

13%

21%

17%

17%

16%

22%

17%

18%

19%

Checking account rewards separatefrom cards

Credit card rewards

Debit card rewards

Profitable Loyals


Potentially Profitable Loyals

Potentially Profitable Non-loyals

Unprofitable Loyals


Current Participation in FI Customer Loyalty Programs

* Read as: 25% of “Profitable Loyals” participate in checking account rewards programs Source: FIS Enterprise Strategy, August 2011; n = 3,000

Check account rewards

23%*

31%

26%

14%

15%

14%

13%

10%

10%

15%

20%

11%

Checking account rewards separate fromcards

Credit card rewards

Debit card rewards

Large banks

Regional banks

Community banks

Credit unions

Large bank customers are most likely to participate in rewards programs of any type

36

Current Participation in FI Customer Loyalty Programs

* Read as: 23% of large bank customers participate in checking account rewards programs Source: FIS Enterprise Strategy, August 2011; n = 3,000


Once enrolled in programs, loyal customers are more influenced by them to boost retention

37

Level of Influence on Where Maintain Primary Checking Account (top 2-box on 7-point scale)

* Read as: 49% of “Profitable Loyals” who participate in checking account rewards are influenced by them to maintain their primary checking account at their FI Source: FIS Enterprise Strategy, August 2011; n = 3,000

49%*

36%

44%

36%

34%

29%

39%

40%

30%

24%

28%

26%

51%

46%

42%

24%

21%

20%

Checking account rewardsseparate from cards

Credit card rewards

Debit card rewards

Profitable LoyalsProfitable Non-loyalsPotentially Profitable LoyalsPotentially Profitable Non-loyalsUnprofitable LoyalsUnprofitable Non-loyals


Loyal segments

Half of customers could be motivated to move more business to their primary DDA provider

38

Motivators to Bring More Business to Primary FI

* Read as: 51% of consumers are not interested any tradeoffs options to move more business to their primary checking account provider Source: FIS Enterprise Strategy, August 2011; n = 3,000

51%

4%

5%

12%

13%

16%

Not interested

Service fees

Branch staff

Interest

Self-service

RewardsCustomer loyalty program that offers me

the ability to design my own rewards program from a menu of options

Lower fees because I used self-service forms of banking

Preferred interest rates on my accounts based on total balances

The ability to conduct banking transactions at a branch with staff who

recognize and know me

Service fees based on what and how much I use my accounts instead of flat fee

uniformly charged to all customers

Not interested in any tradeoff options

Notes

• Greatest appeal to Potentially Profitable segments

• Greatest appeal to Non-loyal segments • Least appeal to community bank customers

• Greatest appeal to Profitable segments

Customers view cash-back rewards as the most valuable type of loyalty program

39

Top 5 Valuable Types of Loyalty Program Rewards (Select the 2 that are most valuable to you)

* Read as: 53% of consumers view cash-back rewards as most valuable Source: FIS Enterprise Strategy, August 2011; n = 3,000

9%

9%

11%

22%

53%*

• Potentially Profitable Loyals • Potentially Profitable Non-loyals

• Profitable Loyals • Profitable Non-loyals

• Profitable Non-loyals

• Profitable Non-loyals • Large bank customers

Greatest appeal to…

Cash back awards

Loyalty points that can be redeemed for gift cards

Preferred interest rates on deposits and/or loans at the bank

Travel awards (e.g., airline lines)

Loyalty points that can be redeemed for merchandise

Email and “snail mail” are most desired communication channels, but appeal varies

40

Preferred Method of Receiving New Product Information

* Read as: 51% of FI customers selected mail as a preferred way to learn about new products Source: FIS Enterprise Strategy, August 2011; n = 3,000

7%

12%

14%

15%

28%

36%

41%

49%

51%*

• Loyals • Community bank customers

• Potentially Profitable • Unprofitable Non-loyals

• Community bank customers

• Large bank customers

• Credit union customers

Greatest appeal to… Email sent to my email account

on my computer

Information mailed to me

At my bank’s online banking site (after I’ve logged in)

Email or text message sent to my mobile phone

At my bank’s ATM machine

I prefer NOT to be contacted by my bank about new products/services

At my bank’s website

Conversation with a representative at my local bank branch

Telephone call from my bank

Table of contents

41

Introduction 3




Segment fees 31


Strategies 42


Goal: Increase loyalty; deepen relationship

Goal: Increase loyalty and profitability Goal: Break even

Goal: Maintain and deepen relationship

Goal: Increase profitability

Select a target segment and create tactics to meet goals associated with the segment

42

Goal: Break even

Loya

lty

to P

rim

ary

FI

Low

High

Profitability to Primary FI Low High

Unprofitable Loyals 9%

Potentially Profitable Loyals 18%

Profitable Loyals 17%

Unprofitable Non-loyals 10%

Potentially Profitable Non-loyals 24%

Profitable Non-loyals 22%

Unprofitable Non-loyals Goal: Break even

• Risk of switching if fees increased:

– High (if they can find another FI)

• Fees — adjust according to usage

– Fees structured to migrate to self-service banking and away from high-cost channel usage

– Link fee increases to channel usage; limit the number of free high-cost transactions

– Increase requirements for fee waivers

• Credit card rewards for credit-worthy

– Basic offer: Cash back, merchant gift cards

43

Package configuration

“Basic” checking/savings with minimum balance and self service and/or checkless checking required to reduce fees

Revolving credit tied to checking/savings balances

Prepaid card program

Source: FIS Enterprise Strategy, August 2011; n = 3,000

Unprofitable Loyals Goal: Break even


– Low

• Fees — adjust according to usage

– Fees structured to migrate to self-service banking and away from high-cost channel usage

– Link fee increases to channel usage; limit the number of free high-cost transactions

– Increase requirements for fee waivers

• Credit card rewards for credit worthy


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“Basic” checking/savings with minimum balance and self service and/or checkless checking required to reduced fees

Revolving credit tied to checking/savings balances

Prepaid card program


Potentially Profitable Non-loyals Goal: Increase loyalty and profitability


– Relatively high

• Fees — use incentives to increase their profitability and mitigate fee increases

– Migrate loans to primary FI to avoid fee increases and obtain “preferred” interest rates

– Migrate to self-service banking through lower fee package option

– Increase minimum balances for combined checking/savings to get free checking

• Cross-sell opportunities

– MMDA & CD

– Mortgage

• Credit card rewards for credit-worthy


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“Basic Loyalty ” checking /savings with minimum balance required and/or self-service option for lower fees

Loyalty program incentive to move revolving credit card debt to bank card

Preferred rates on refinanced loans

– Home equity loan

– Credit card


Potentially Profitable Loyals Goal: Increase profitability


– Low

• Fees — use incentives to increase profitability and mitigate fee increases

– Migrate loans to primary FI to avoid fee increases and obtain “preferred” interest rates when possible

– Increase minimum balances for combined checking/savings to get free checking

• Cross-sell opportunities

– Mortgage

– Home equity loan

– Credit card

• Credit card rewards for credit worthy

– Basic offer: Cash back, gift cards

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“Basic Loyalty” checking /savings with minimum balance required and/or self-service option for lower fees

Loyalty program incentive to move revolving credit card debt to bank card

Assistance with loan refinancing (if qualify)


Profitable Non-loyals Goal: Retain and deepen relationship


– High

• Fees — do not increase; decrease for those bringing more assets/loans

– Free online/mobile and other self-service options

• Cross-sell opportunities (target investments and deposits)

– Strong emphasis on financial advice

• Money Market Mutual Fund

• Brokerage & mutual funds

• IRA

• 529 savings plan

• Credit card rewards (attraction and retention)

– Customized offer based on needs/wants (e.g., preferred interest rates and travel awards hold appeal in addition to cash back and gift cards)

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“Investor Checking” package bundled with other deposits and investment services. High minimum balance for preferred interest rates and other rewards.

Customized loyalty card program with preferred interest rates

Preferred interest rate incentives for moving more assets/loans to primary (e.g., mortgage refinancing)


Profitable Loyals Goal: Maintain and deepen relationship


– Relatively low

• Fees — do not increase; decrease for those bringing more assets/loans

– Offer free online/mobile and other self-service options

• Cross-sell services (target investments)

– Financial advisory services for investments

• Estate planning

• Brokerage & mutual funds

• IRA

• 529 savings plan

• Credit card rewards (retention)

– Customized offer based on needs/wants (e.g., preferred interest rates hold appeal in addition to cash back and gift cards)

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“Premier Checking” package bundled with other deposits and investment services. High minimum balance for preferred interest rates and other rewards.

Customized loyalty card program with preferred interest rates.

Preferred interest rate incentives and advisory services for moving more assets/loans to primary checking account provider.


Table of contents

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Introduction 3




Segment fees 31


Strategies 42


Six Segments Indexed by P$YCLE Lifestage Groups

Profitable Loyals


Potentially Profitable Loyals

Potentially Profitable Non-loyals

Unprofitable Loyals


Younger Years

UPWARDLY MOBILE 109 126 66 113 86 70

METRO MAINSTREAM 76 85 98 122 117 106

FISCAL FLEDGLINGS 68 60 129 103 175 109

Family Life

FLOURISHING FAMILIES

90 138 106 90 81 65

UPSCALE EARNERS 125 105 89 109 59 87

MASS MIDDLE CLASS 83 96 115 105 88 109

WORKING-CLASS USA 76 77 128 96 136 114

Mature Years

FINANCIAL ELITE 136 150 50 94 43 95

WEALTHY ACHIEVERS 142 124 62 81 81 113

UPSCALE EMPTY NESTS

124 114 89 108 44 82

MIDSCALE MATURES 119 89 111 80 121 98

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Green = Index ≥ 20%

Red = Index ≤ 20%

About FIS and the research team for this project

FIS delivers banking and payments technologies to more than 14,000 financial institutions and businesses in over 100 countries worldwide. FIS provides financial institution core processing, and card issuer and transaction processing services, including the NYCE® Network. FIS maintains processing and technology relationships with 40 of the top 50 global banks, including 9 of the top 10. FIS is a member of Standard and Poor's (S&P) 500® Index and consistently holds a leading ranking in the annual FinTech 100 rankings. Headquartered in Jacksonville, Florida, FIS employs more than 30,000 on a global basis. FIS is listed on the New York Stock 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. The FIS Research & Thought Leadership team proactively manages market and client perceptions of FIS as a thought-leader and thought-partner by conducting high-quality primary research on critical industry issues and delivering interpretation and recommendations to client organizations.

The research team for this project included:

Paul McAdam Mandy Putnam Senior Vice President Director Ph: 708-449-7743 Ph: 614-414-4207 [email protected] [email protected] James Gamble Chris Nay Director Senior Strategic Researcher Ph: 614-414-4213 Ph: 614-414-4218 [email protected] [email protected]

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