Getting to Know You Building a Customer-Centric Business Model for Retail Banks

Description
Getting to Know You Building a Customer-Centric Business Model for Retail Banks

Getting to Know You:
Building a Customer-Centric Business
Model for Retail Banks
A publication of PwC’s Financial Services Institute (FSI)
Contents
Section Page
1. Point of view 2
2. Current situation 10
3. Competitive intelligence 32
4. A framework for response 36
5. How PwC can help 49
6. Select qualifications 54
Section 1
Point of view
PwC
3
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Point of view
Retail banking in the United States is built largely around product silos—a model that is
creating serious problems in the current economic environment.
Innovations in retail banking over the past few decades typically have been launched and maintained in silos—
each with its own sales and distribution model, technology, and operational infrastructure.
The invention of the electronic demand deposit account decades ago triggered a revolution in retail banking. This was soon
followed by innovations such as the ATM, credit card, floating-rate mortgage, home equity line of credit (HELOC), and various
personal lending products. Each innovation was generally launched and maintained within its own silo, leading to the
operational models that we observe at US banks today.
This history, combined with numerous mergers and acquisitions over the years, has left the retail banking industry in the
following situation:
? While cross-selling has always been a goal, most banks do
not have an enterprise-wide cross-selling strategy, do not
provide incentives to cross sell, and/or do not have a high
level of brand loyalty.
? The credit card business is typically separate from the rest of
the retail business (mortgages, HELOCs, and other personal
lending products).
? Although mortgages have historically been considered
relationship products, banks have made little investment in
increasing mortgage customer satisfaction and retention.
? There are separate, often redundant technology platforms
and IT, operational, and support groups (e.g., risk
management, finance, HR) supporting each product silo.
? ?Brick and mortar? investments in branches are rarely
leveraged to the fullest extent.
? Timely aggregation and reporting of information for key
functions such as risk management, finance, regulatory,
business and customer analysis is difficult, if not impossible.
PwC
4
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Point of view
We do not view the shift to a customer-centric organization as optional. Rather, this shift will be necessary if
banks wish to maintain acceptable levels of profitability given significant changes in the regulatory
environment. Retail banks that are up to the challenge will quickly differentiate themselves from competitors
that cling to their silos.
Most of the cost cutting that took place during the financial crisis of 2007-2009 was of the ?slash and burn? variety. Staff were
quickly eliminated, projects cut, and salaries and perks reduced. Many banks have implemented web-based customer front ends,
shared call centers, data centers, networks, and even shared support functions such as finance, risk management, and human
resources. These efforts are a first step in the direction of cost rationalization, but they have had little or no impact on improving
the ability of banks to cross-sell products, break down product silos, or improve the customer experience.
With the advent of Basel III and new regulatory rules in the United States (such as the Dodd-Frank Wall Street Reform and
Consumer Protection Act and the Credit Card Accountability, Responsibility, and Disclosure Act), customer acquisition and
retention will become even more expensive. Worldwide, revenues of individual product lines are under assault by regulators and
consumer advocates. A longer-term reassessment of business models, particularly in the US, has been put on hold by most banks
pending clarification of the details related to new regulatory rules and structures. With the passage of Dodd-Frank in the US and
agreement on Basel III, financial institutions are establishing structures and working groups to consider the impact of the new
rules on compliance activities, overall business models, and cost structures.
A number of foreign banks that are expanding in the US have started to embrace the difficult changes in organization, technology,
and compensation required to dismantle product silos and become world class customer-centric organizations. They are
implementing these changes in their US businesses, posing a significant challenge to US-based financial institutions that have
just begun to embrace customer-centric models.
Retail banks that dismantle their product silos will quickly differentiate themselves from
competitors by staying profitable in an era of shrinking revenues and expanding regulation.
PwC
5
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Point of view
Positioning themselves for competitive advantage, leading retail banks are learning more
about their customers’ needs, wants, and expectations to help them boost sales.
Retail banks are striving to differentiate their products and services, develop a deeper understanding of
customer needs, and build customer relationships—at a price that is competitive but leaves room for profit.
Leading retail banks are positioning themselves for the recovery by staying connected with customers, even
those who have stopped buying or have deferred major purchases.
These banks are making the most of the economic lull by devoting resources to learning more about their customers’ needs,
wants, and expectations of their banking relationships. Many banks are investing in new technology to capture better data for
profiling customers, enabling these institutions to gain deeper insight into ways to build more loyal and profitable customer
relationships. Leading banks also are developing the next generation of products and services to meet the projected needs and
expectations of customers and prospects going forward.
Rather than investing in a high volume of advertising to the masses, leading banks are emphasizing
“contact optimization.”
This more scientific approach to advertising helps organizations decide whom to contact and when, which products and
services to discuss, which offers to make, and which channels to use—all in an effort to build more loyal, and profitable,
customer relationships.
Contact optimization can eliminate the risk that customers will be annoyed—a common problem with high-volume mass
advertising. Statistics show that the customer response rate decreases as the rate of contact increases, which ultimately can
diminish brand value and ROI. The key to successful contact optimization is a program of integrated marketing
communications—keeping careful tabs on how recently and how frequently companies engage customers, carefully
coordinating which channels are used, and systematically monitoring results.
Source: PwC Global Best Practices
PwC
6
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Point of view
Mobile technology and social media are presenting new opportunities and challenges for
retail banks. Customers have changing expectations and are sharing their experiences.
Banks must adapt to the era of ?anytime, anywhere, and right now.?
The use of the Internet to research and apply for
loans, mortgages, and credit cards is now a given
(see chart), whereas it was virtually unheard of 10
years ago.
Currently, the use of mobile devices for these
purposes is very small, but the uptake among
consumers is increasing rapidly as customers become
increasingly comfortable conducting mobile banking
transactions. The result is yet another new channel
for retail banks to maintain, secure, and operate.
Increasingly, customers are demanding that banking
services come to them, when and where they want
them, and they expect to receive an almost immediate
response to their requests.
Customers are sharing their experiences in real time. Banks with poor service have nowhere to hide.
The proliferation of social media has taken word-of-mouth marketing to exponential levels. Customers are using this platform to
actively spread the word in real time about their customer-service experiences. The average Facebook user has 150 friends who
can find out about a bad banking experience within seconds, and well-treated customers are becoming unofficial spokespeople
for certain brands.
Banks must respect the power of social media to build or tarnish reputations, and focus on delivering the quality of service they
will want to read about online. It is better to invest in processes that anticipate issues and address them immediately than to
learn about a problem after the fact in a blog.
Source: PwC survey of consumer retail banking, Feb 2011
21%
28%
32%
26%
47%
50%
2%
5%
4%
4%
3%
3%
63%
51%
49%
51%
30%
29%
1%
1%
1%
2%
2%
2%
13%
15%
14%
16%
19%
16%
Customer preferred channel
Local branch Telephone banking Internet Cell Phone/smartphone Other
Apply for a loan
Apply for a mortgage
Apply for a credit card
Research a loan
Research a mortgage
Research a credit card
PwC
7
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Point of view
In our view, the following three institutional impediments have decreased the ability of financial institutions
to embrace customer-centric operating models.
Personal risk—
Historically, the personal risk-reward ratio for key decision makers in the banking industry tilted in favor of the status quo. Each
product line operated in a silo and tended to be profitable. Consolidation meant lost jobs and, potentially, a reduction in job
responsibilities and authority of business-unit leaders. In addition, few institutions had the courage to invest in the systems
integration efforts needed to gain an enterprise-wide view of the customer. Instead, they focused resources on improving the
?product experience? and introducing new product variations and features to support revenue growth.
Integration complexity—
Consolidating the technology platforms and operations of multiple product lines is a highly complex process that is fraught with
execution risk. The more business units involved, the greater the complexity and risk. Designing shared processes, workflows,
forms, and technology necessitates reconciling the diverse and often conflicting business and technology requirements of
various product groups. Product features and functions are designed with the consumer experience in mind rather than the
needs of product managers. Individual business units lose absolute control over the product-development process in a multi-
product, customer-centric world.
Conflicting priorities across silos—
Product-line investments, revenue, and cost allocation models typically do not support multi-product or entity-level projects
that might improve operational efficiency and organizational profits (for example, shared underwriting and marketing processes
for credit cards, auto loans, and home loans). Instead, incentives tend to be tilted toward funding and implementing projects
within silos, thus driving the market share and profitability of each silo rather than of the organization as a whole.
Many US retail banks have resisted further moves toward a customer-centric model
because of personal incentives, integration challenges, and organizational structures.
PwC
8
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Point of view
In our view, banks should adopt a new, customer-centric model integrated around
customer needs.
The traditional banking model, structured around internal product groups (silos), is organization-centric. It prevents banks
from understanding which products and services their customers have purchased across the enterprise. In this difficult
economic environment, lending-product silos are struggling to stay profitable on a standalone basis, and the challenge will
only increase.
In our view, banks should adopt a new, customer-centric model that is integrated around the customer’s needs.
Traditional model organizational centric New model customer centric
R
e
t
a
i
l

b
a
n
k
i
n
g
M
o
r
t
g
a
g
e
F
u
l
l
-
S
e
r
v
i
c
e

b
r
o
k
e
r
a
g
e
I
n
v
e
s
t
m
e
n
t

m
a
n
a
g
e
m
e
n
t
H
o
m
e

e
q
u
i
t
y
C
r
e
d
i
t

c
a
r
d
Customers get what you can sell them
Products and
Channels
Customers
Checking
Savings
Mortgage
Money
market Brokerage
Agent/
broker/
advisor
Call center
Internet
Mobile
Integration around the customer
Customers get what they want
Products
Channels
Customers
PwC
9
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Point of view
Leading institutions are implementing customer-centric strategies by focusing on three
critical elements: breaking down product silos, understanding their customers, and
enhancing the customer’s experience.
Understand the
customer
Enhance the
customer
experience
Break down
the silos
In our view, there are three keys to developing a customer-centric retail banking strategy:
? Break down organizational silos and structure incentives to promote a customer-centric culture.
? Understand customer needs, behavioral drivers, and profitability.
? Deliver a consistently high-quality customer experience.
Each of these elements requires sound customer analytics and an approach to process improvement that focuses on the
customer.
Section 2
Current situation
PwC
11
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
The PwC survey of consumer retail banking preferences was conducted in late January/early February 2011.
? Consumers reported currently having relationships with an average of 3.2 financial institutions.
? The majority of respondents define their primary financial institution as the bank with which they have their checking
account. More than 37% of respondents indicated that their primary banking relationship is with a large national bank.
? The top six financial products purchased by consumers are checking, savings, credit card, insurance, mortgage, and IRAs.
? Consumers ranked competitive pricing, convenient branch/ATM locations and hours, online banking, and personalized
customer service as the most important bank features.
? Consumers hold an average of 3.3 products at their primary financial institution. Over 40 percent of survey respondents have
been customers with their existing primary financial institution for more than 10 years.
? Most respondents cited physical locations and low cost/fees as considerations in their decision about where to open a checking
account.
? Primary reasons for selecting a primary financial institution differ by respondent age. Of the consumers who indicated that
they define their primary financial institution as where they have their checking account, primary reasons for selecting an
institution have changed over time.
? Consumers are generally satisfied with the service that they receive from their primary financial institutions. However, of
those respondents with a specific recommendation as to what they would change about their primary financial institution, 27
percent cited better or more personalized customer service. Opinions as to what financial institutions should change differ by
income.
? Consumers prefer to apply for a loan or mortgage in-person but seem to be increasingly comfortable applying for a credit card
online.
? Bank customers continue to frequent bank branches, primarily to make deposits or withdrawals. The timing of consumers’ last
branch visits differs by respondent age. The usage of different branch service differs by total annual household income.
? Of those who reported refinancing a mortgage in the past 5 years, most cited interest rates or simplicity of the process as
factors in their decision.
PwC’s recent survey of US consumers reveals preferences and trends in retail banking.
Current situation—PwC survey of consumers
PwC
12
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Consumers reported currently having relationships with an average of 3.2 financial
institutions.
Consumers reported having relationships with an average of 3.2 financial institutions.
The median number of relationships with financial institutions was 2.
Current situation—PwC survey of consumers
Question: How many banks/financial institutions
do you currently have products with? (Examples
include checking account, savings account, credit
card, retail store credit card, home mortgage, auto
loan, installment loan, home equity line of credit,
student loan, retirement account, brokerage
account, and business loans).
6%
25%
21%
14%
9%
10%
5%
2%
2%
1%
2% 2%
0 1 2 3 4 5 6 7 8 9 10 More
than
10
3.2 average
P
e
r
c
e
n
t

o
f

r
e
s
p
o
n
d
e
n
t
s
Number of financial institutions
Percentile Value
10 1
25 1
50 (median) 2
75 4
90 6
PwC
13
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
The majority of respondents define their primary financial institution as the bank with
which they have their checking account.
Question: How do you define your primary financial institution? (Select all that apply.)
Current situation—PwC survey of consumers
6%
15%
24%
41%
75%
It’s where I have my checking account
It’s the bank I interact with for my daily banking
needs
It’s where I have the most products
It’s where I have my mortgage
Other
PwC
14
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
More than 37% of respondents indicated that their primary banking relationship is with a
large national bank.
Question: Which of the following best describes your primary financial institution? (Select one.)
Current situation—PwC survey of consumers
International
bank
8%
Large
national
bank
37%
Regional
bank
15%
Local
community
bank
17%
Credit union
14%
Unsure
9%
PwC
15
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
The top six financial products are checking, savings, credit card, insurance, mortgage, and
IRAs.
Percent of respondents indicating that they purchased each of the following products, either at their primary financial institution or
at another institution.
Current situation—PwC survey of consumers
7%
14%
18%
25%
26%
27%
27%
28%
29%
37%
42%
58%
68%
74%
91% Checking
Savings
Credit card
Insurance
Mortgage
Individual retirement account
Money market
Auto loan
Line of credit
Certificate of deposit
Brokerage account
Personal financial planning
Student loan
Personal/installment loan
Small business loan
91
Percent of
respondents who
indicated that they
have a checking
account, either with
their primary
financial institution or
elsewhere.
Checking and savings are the most
widely purchased products.
74
Percent of
respondents who
indicated that they
have a savings
account, either with
their primary
financial institution or
elsewhere.
PwC
16
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Competitive pricing (such as interest rates, fees)
Convenient branch/ATM locations and hours
Online banking
Personalized customer service
Ability to have all my financial products with one bank
Customized product offers
Breadth of products
Rewards programs (such as points, miles, cash back)
Mobile banking
Consumers ranked competitive pricing, convenient branch/ATM locations and hours,
online banking, and personalized customer service as the most important bank features.
Question: Please rate the importance of the following bank features.
Current situation—PwC survey of consumers
30%
18%
8%
8%
11%
4%
10%
9%
4%
12%
12%
9%
9%
7%
4%
4%
4%
3%
24%
29%
34%
34%
23%
19%
14%
11%
13%
17%
22%
30%
29%
27%
34%
24%
25%
29%
17%
19%
19%
20%
31%
39%
49%
51%
52%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Not important 2 3 4 Very important
Note: Percentages may not sum to 100 due to rounding.
PwC
17
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Consumers hold an average of 3.3 products at their primary financial institution. Credit
cards, insurance, and mortgages are more often obtained from financial institutions other
than the primary one.
Consumers reported purchasing an average of 3.3 products at their primary financial institution. Of the top six
products that consumers reported purchasing, two are held more often at primary financial institutions than
elsewhere: checking and savings.
Current situation—PwC survey of consumers
? Of those with checking accounts,
83% have them at their primary
financial institutions and 12% have
them at both their PFI and another
institution.
? Of those with savings accounts,
73% have them at their primary
financial institution, 15% at other,
and 12% at both.
? The other most commonly purchased
financial products are credit cards,
insurance, mortgage, and IRAs, all of
which are more often purchased from
financial institutions other than a
consumer’s primary financial
institution.
2%
2%
16%
0%
12%
12%
85%
66%
48%
57%
15%
5%
13%
32%
36%
42%
73%
83%
We asked respondents to indicate whether or not they had this type of product, and if so, whether
they had purchased it from their primary institution or another institution. The "number of products"
here is calculated based on whether or not the customer has that product, not the number of
accounts. For example, someone with 10 credit cards at institutions other than their primary financial
institution would, in this analysis, count as "1 product at other.”
Checking
Savings
Mortgage
Credit card
IRA
Insurance
Primary financial institution only
Other financial institution only
Both institutions
PwC
18
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Over 40 percent of survey respondents have been customers with their existing primary
financial institution for more than 10 years.
Question: How long have you been a customer at your primary financial institution? (Select one.)
Current situation—PwC survey of consumers
More than
10 years
40%
6 to 10
years
17%
4 to 5
years
16%
1-3 years
17%
Less than
one year
10%
40% of respondents indicated that they had been a
customer with their existing primary financial
institution for more than 10 years.
10% of respondents indicated that they had opened
accounts with their primary financial institution
less than one year ago.
PwC
19
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Physical locations (branch/ATM locations were convenient)
Low cost/fees
Convenience of online and/or mobile channels
Superior customer service
I already had other accounts with the financial institution
Referral from a friend or trusted source
Pays interest on everyday checking
Was offered at work
Unique product features
Loyalty program or gifts (such as airline miles)
Was offered on college campus
Was required when I opened a mortgage or other account
Other
Most respondents cited physical locations and low cost/fees as considerations in their
decision about where to open a checking account.
Question: You indicated above that you have a checking account. What were the main reasons you decided to open a checking
account at that particular institution (or institutions)? (Select all that apply.)
Current situation—PwC survey of consumers
7%
2%
4%
6%
7%
10%
16%
17%
20%
22%
24%
38%
57%
PwC
20
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Primary reasons for selecting a primary financial institution differ by respondent age.
Current situation—PwC survey of consumers
Questions: What was the most important factor when you selected your primary financial institution? (Select one.)
Which of the following categories best describes your age?
42
Percent of respondents aged
21-24 who indicated that branch location
close to home was the primary reason for
selecting that institution.
23
Percent of respondents aged
60-64 who indicated that branch location
close to home was the primary reason for
selecting that institution.
23%
28%
28%
32%
40%
36%
35%
30%
42%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
21-24
25-29
30-34
35-39
40-44
45-49
50-54
54-59
60-64
Offer by mail/e-mail to open an account
Offer with account opening of money
deposited/charitable contribution
Offer with account opening of miles or points
Branch closest to my home
Branch closest to my work
Bank with the most ATMs in the area
Bank with the lowest fees
Bank with the best customer service
Other
PwC
21
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Of the consumers who indicated that they define their primary financial institution as
where they have their checking account, primary reasons for selecting an institution have
changed over time.
Current situation—PwC survey of consumers
Years with primary
financial institution
Primary reason for selecting
primary financial institution
0-3 4-9
10 or
more
Branch closest to my home 31% 35% 41%
Bank with the best customer service 11% 10% 14%
Bank with the lowest fees 12% 10% 13%
Branch closest to my work 5% 4% 4%
Bank with the best online/mobile
banking capabilities
5% 6% 3%
Bank with the most ATMs in the area 5% 7% 2%
Best terms/lowest interest rate on
mortgage
1% 2% 2%
I received an offer by mail/e-mail to
open a free checking/savings account
10% 7% 1%
Special offer with account opening of
money deposited/charitable
contribution on your behalf
7% 3% 1%
Special offer with account opening of
miles or points
4% 3% 1%
Other 9% 12% 19%
41
Percent of
respondents with ten
or more years with
primary financial
institution who
indicated that
branch location
close to home was
the primary reason
for selecting that
institution.
31
Percent of
respondents with less
than three years
with primary
financial institution
who indicated that
branch location
close to home was
the primary reason
for selecting that
institution.
Branch closest to home not as
important as 10 years ago.
Special offers gaining in importance
PwC
22
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Consumers are generally satisfied with the service that they receive from their primary
financial institutions.
Question: Please indicate your level of agreement with the following statements.
Current situation—PwC survey of consumers
Note: Percentages do not sum to 100 because “neither agree nor disagree” was removed from responses for reporting purposes.
26
35
37
41
38
41
18
29
27
35
30
40
14
6
6
2
5
3
11
4
4
4
4
5
1 Overall, I am satisfied with the service I receive from
my primary financial institution.
2 My primary financial institution values my business.
3 My primary financial institution is helpful when I
have questions about my financial products.
4 My primary financial institution offers me products
that I need when I need them.
5 My primary financial institution understands me and
my financial needs.
6 It is difficult to switch financial providers.
%
Strongly disagree Disagree Agree Strongly agree
PwC
23
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Of those respondents with a specific recommendation as to what they would change about
their primary financial institution, most selected ATM locations and better customer
service.
Question: If you could change one thing about your primary financial institution, what would it be? (Select one.)
Current situation—PwC survey of consumers
Better or more
personalized
customer service,
27%
Products that
better suit my
needs, 23%
More ATM
locations, 41%
Better
online/mobile
banking offerings,
8%
PwC
24
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Less than $50,000 $75,000 – $99,999 $150,000 – $199,999 More than $250,000
Opinions as to what financial institutions should change differ by income.
Current situation—PwC survey of consumers
13%
9%
20%
3%
55%
15%
17%
25%
4%
39%
16%
22%
25%
16%
22%
29%
17%
17%
8%
29%
None of the above
Better online/mobile banking offerings
More ATM locations
Products that better suit my needs
Better or more personalized customer service
Questions: If you could change one thing about your primary financial
institution, what would it be?
Which of the following categories best describes your total annual
income?
29
Percent of respondents with income less
than $50,000 which indicated they would
like better or more personalized
customer service
13
Percent of respondents with income more
than $250,000 which indicated they
would like better or more personalized
customer service
Note: Percentages may not sum to 100 due to rounding.
PwC
25
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Consumers prefer to apply for a loan or mortgage in-person but seem to be increasingly
comfortable applying for a credit card online.
Question: Please indicate which channel you prefer to use for each of the following? (Select one for each row.)
Current situation—PwC survey of consumers
21%
28%
32%
26%
47%
50%
2%
5%
4%
4%
3%
3%
63%
51%
49%
51%
30%
29%
1%
1%
1%
2%
2%
2%
13%
15%
14%
16%
19%
16%
Customer preferred channel
Local branch Telephone banking Internet Cell Phone/smartphone Other
Apply for a loan
Apply for a mortgage
Apply for a credit card
Research a loan
Research a mortgage
Research a credit card
Note: Percentages may not sum to 100 due to rounding.
PwC
26
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Bank customers continue to frequent bank branches, primarily to make deposits or
withdrawals.
Question: When was the last time you visited a bank branch?
More than 60 percent of respondents indicated that
they had visited a branch in the past month.
Eighty percent had visited a branch within the
past 3 months.
Current situation—PwC survey of consumers
Less than
a month
ago
60.6%
Within the
last 1-3
months
19.1%
5%
7%
10%
17%
25%
27%
29%
64%
82%
Question: Which of the following banking services do
you use at the branch? (Select all that apply).
More than 3
months ago or
never
20.3%
Deposit and/or cash a check
Get cash/make a withdrawal
Check your account balance
Get a question answered
Transfer funds
Get cashier's check
Apply for a financial product/mortgage
Exchange currency
Other
PwC
27
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
The timing of consumers’ last branch visits differs by respondent age.
Current situation—PwC survey of consumers
44%
61%
58%
62%
66%
29%
17%
25%
13%
18%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
21-24
35-39
45-49
50-54
55-59
Less than a month ago
Within the last 1-3 months
Within the last 4-6 months
Within the last 7-12 months
More than one year ago
Not applicable. I have never visited a branch.
Questions: When was the last time you visited a bank branch?
Which of the following categories best describes your age?
66
Percent of respondents aged
21-24 who indicated that they have
visited a bank branch
within the past month.
44
Percent of respondents aged
55-59 who indicated that they have
visited a bank branch
within the past month.
PwC
28
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
The usage of different branch services differs by total annual household income.
Current situation—PwC survey of consumers
Questions: Which of the following banking services do you use at the branch? (Select all.)
Which of the following categories best describes your total annual household income for calendar year 2010
before taxes?
65
Percent of respondents with total household
annual income of less than $50,000
indicated that they deposit and/or cash a
check at their bank branch.
83
Percent of respondents with total household
annual income of more than $250,000
indicated that they deposit and/or cash a
check at their bank branch.
0%
20%
40%
60%
80%
100%
Deposit and/or cash a check Get cash/make a withdrawal Apply for a financial product/mortgage Check your account balance
Less than $50,000 $50,000 - $74,999 $75,000 - $99,999 $100,000 – $149,999 $150,000 - $199,999 $200,000 - $249,999 More than $250,000
PwC
29
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Bank customers continue to call their financial institutions’ customer service centers.
Question: When was the last time you called a financial institution's customer service center?
Current situation—PwC survey of consumers
I have never
called, 19%
More than one
year ago, 22%
Within the last
7-12 months,
9%
Within the last
4-6 months,
11%
Within the last
1-3 months,
16%
Less than a
month ago,
22%
49
Percent of
respondents who have
called their financial
institution’s customer
service center within
the past 6 months.
PwC
30
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Current situation—PwC survey of consumers
Yes, with
other bank,
24%
Yes, with
primary bank,
18%
No,
58%
Do you have a mortgage? Have you refinanced your
mortgage in the past 5 years?
Yes,
38%
No,
62%
Did you refinance with the same
financial institution?
No,
36%
Unsure, 1%
Yes,
63%
Main reason for refinancing with the same
financial institution
Main reason for not refinancing with same
financial institution
5.8%
8.7%
2.9%
35.0%
47.6%
20.7%
8.6%
51.7%
6.9%
5.2%
6.9%
The process was simple and streamlined
The institution had competitive
interest rates
The institution had competitive
closing costs
I was satisfied with the service
Other
I was not happy with customer
service and/or responsiveness
The original institution had limited
product offerings
I did not qualify for a refinance with the
existing financial institution
The financial institution had higher rates
than other institutions
The financial institution had higher
closing costs than other institutions
Other
Of those who reported refinancing a mortgage in the past 5 years, most cited interest rates
or simplicity of the process as factors in their decision.
PwC
31
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Within the last 12 months
Within the last 1-2 years
Within the last 3-6 year
7 or more years ago
I have never closed an account
with a financial institution
Survey results
23%
28%
21%
14%
15%
Question: When was the last time you closed an
account with a financial institution?
10%
2%
2%
3%
8%
12%
15%
20%
29%
Yes
13%
No
87%
Account was no longer needed
Moved to location where bank isn't located
Poor customer service
High cost/fees
Inconvenient physical branch/ATM locations
Low interest rates (on deposits)
Lack of, or poorly designed, online/mobile service offerings
Lack of unique product features
None of the above
Question: What was the primary reason for closing
that account?
Question: When you closed
the account, was there
anything that the bank could
have done that would have
made you change your mind?
When asked whether or not they had closed an
account with a financial institution, 29% of
respondents indicated that they had done so within
the past 2 years.
Of those who reported that they had closed an
account, 87% indicated there was nothing their
financial institution could have done
to prevent them from closing the account.
Consumers reported largely that there was nothing a financial institution could have done
differently when they closed their account.
Note: Percentages may not sum to 100 due to rounding.
Section 3
Competitive intelligence
PwC
33
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
In our experience, most banks follow a traditional or hybrid customer centricity strategy.
Almost none currently have a leading-edge strategy.
B
r
e
a
k

d
o
w
n

t
h
e

s
i
l
o
sLevel 1 – Traditional strategy Level 2 – Hybrid strategy Level 3 – Leading-edge strategy
? Marketing/business intelligence are the
only groups actively analyzing customer
data. Other groups are focused on product
or channel analysis.
? Typically no consistent customer strategy
defined at the parent level applied by all
lines of business.
? Some information is shared with
customer service and new product
development.
? Companies with different
origination/servicing platforms (such as
mortgage, credit cards, student loans) do
not have a single view of the customer
(portfolio of products, profitability,
tenure) so all the analysis is performed in
an ad-hoc basis.
? Company has not actively implemented a
universal customer identifier.
? Most retail banks lack a centralized
customer data warehouse that captures
customers’ activities across the enterprise
and can be used to analyze key data such
as customer profitability, preferred
interaction channels, and household
dynamics.
? Marketing, New Product
Development, BI, and Operations
groups are actively involved in
customer analytics discussions.
? Data is received from and shared
with customer service
representatives, loan officers and
other individuals that have direct
customer contact.
? Legacy systems might still prevent
the creation of a universal client
identifier. But company starts
tracking customers’ activities across
the enterprise through the creation
of a customer data repository.
? Customer information is available on
a monthly / quarterly basis and not
on a real time basis.
? While several banks link employee
incentives to customer satisfaction,
retention, and cross-selling efforts,
these incentives rarely represent a
significant portion of overall
compensation.
? Customer strategy becomes an
independent group that interacts
with marketing, strategic planning,
and credit risk management.
? Customer analytics and segments
are refined on a periodic basis and
include feedback from front office
and back office functions.
? Customer profitability and
customer retention become key
drivers of compensation.
? The universal client identifier is
included in all the systems.
? Information is updated daily or on a
real-time basis.
? All employees have access to a
?customer dashboard? that allows
different levels of the organization
to understand the customers’ needs
and wants.
Competitive intelligence—Break down the silos
PwC
34
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
In our experience, most banks follow a traditional or hybrid customer centricity strategy.
Almost none currently have a leading-edge strategy. (Continued)
U
n
d
e
r
s
t
a
n
d

y
o
u
r

c
u
s
t
o
m
e
rLevel 1 – Traditional strategy Level 2 – Hybrid strategy Level 3 – Leading-edge strategy
? Bank primarily segments customers by
product and credit score.
? Additional customer data points might be
captured at origination but are not used.
? Customer service metrics often are
tracked at the business unit level (such as
branch banking, mortgage servicing call
center, direct sales channel), and the
metrics usually focus on the efficiency of
the interaction (such as number of
customers served, average talk time)
rather than the quality or effectiveness of
the interaction (for example, first time
resolution of problems, customer effort
score).
? Front-line employees across different
lines of business do not have access to a
consolidated ?customer dashboard? that
would enable them to quickly identify
information such as products the
customer has purchased, the date of the
customer’s last interaction with the bank,
which products have been offered and
refused in the past.
? Company uses product attributes
(such as credit score, LTV,) as well as
basic customer attributes (age,
marital status, income) to define
segments.
? Third party information is also
incorporated into the segmentation
model.
? Bank starts tracking certain
customer metrics across different
channels.
? Bank uses product and customer
attributes to define segments but
also incorporates psychographic
elements (client dynamics
depending on the household
composition).
? Customer retention and cross-
selling information also becomes a
critical part of the segmentation
efforts.
? A customer dashboard can be
accessed by staff at the branch, the
call center and other groups in the
organization.
? Customer activities across the
organization are updated daily, or
in some cases, real-time.
Competitive intelligence—Understand your customer
PwC
35
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
In our experience, most banks follow a traditional or hybrid customer centricity strategy.
Almost none currently have a leading-edge strategy. (Continued)
E
n
h
a
n
c
e

t
h
e

c
u
s
t
o
m
e
r

e
x
p
e
r
i
e
n
c
eLevel 1 – Traditional strategy Level 2 – Hybrid strategy Level 3 – Leading-edge strategy
? Strategy is driven based on the asset class.
? Profitability is calculated only based on
actual results and on a product (not
customer) basis.
? A cross-selling benefit might be assumed,
but it is not measured.
? A well-defined customer strategy is not
shared with any C-suite executives.
? Retail banks generally do not have a
formal ?voice of the customer? program in
place to capture and respond to customer
feedback.
? Actual profitability numbers are
calculated on a customer basis.
Information is extrapolated to
calculate a customer lifetime value
that can be used for relative
comparisons across segments.
? Some information is shared with C-
suite executives and starts to be used
for new products/markets/service
offering decisions.
? While customer centricity is a
strategic priority at several banks,
this priority rarely is translated into
actionable plans that are
communicated throughout the
organization.
? Customer analytics are actively used
by the credit groups to analyze the
capacity and willingness to pay as
well as to assess the overall risk
exposure of a particular segment.
? Customer profitability and risk
results are shared with senior
executives and the information is
used to make pricing and other
strategic decisions.
Competitive intelligence—Enhance the customer experience
Section 4
A framework for response
PwC
37
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Identify and begin to address the barriers to implementing a customer-centric strategy,
including organizational and compensation structures.
A framework for response—Break down the silos
Short term (0-6 months) Medium term (1-2 years) Long term (>2 years)
? Analyze the existing barriers to
effective retention and cross-selling
efforts.
? Analyze changes required to make the
compensation structure customer-
centric.
? Implement robust retention and cross-
selling metrics.
? Make necessary changes to the
organizational structure.
? Implement a shared-services model
for activities such as online and mobile
banking, customer retention, and
customer analytics.
? Implement customer-centric employee
incentives enterprise-wide.
Roadmap activities
Key goals:
? Transitioning from an organizational/product to a customer view of the
portfolio.
? Aligning incentives with enterprise-wide value maximization rather than
rewarding individual business units for volume generated.
? Sharing of best practices across channels and customer-entry points.
Understand
your customer
Enhance the
customer
experience
Break down
the silos
PwC
38
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Integrate customer data across channels to create an enterprise view
of the customer.
A framework for response—Break down the silos
Understand
your customer
Enhance the
customer
experience
Break down
the silos
1
Source: TowerGroup. Retail Banking & Delivery Channels: Top 10 Technology Initiatives for 2011
Define data keys
Implement universal
client identifier
Integrate data across
channels
Gather data
continuously
A basic but frequently difficult
step in integration is creating
data keys—standardized data
points that are gathered
consistently across all customer
touch points. For example:
? Demographics—income, age,
location
? Customer-service patterns—
inquiries, complaints, praise,
suggestions
? Online behaviors—frequently
visited sites, social media
activity, posted links
? Transactions—number of
products with the
organization, payment
patterns, number of
transactions
In most retail banks, traditional
channels (branches, ATMs,
online banking, contact centers)
are not yet fully integrated.
Looking forward, the underlying
technology must support the
customer-centric strategy and
integrate across distribution
channels. For instance, a call-
center employee might not have
access to the online application
a customer is trying to complete.
To enhance the customer
experience, banks must
integrate data across channels—
including emerging channels
such as mobile banking, social
networking, and tablet
technology.¹
To meet customers’ expectations
for 24/7, personalized service,
deploy systems that
continuously gather customer
information from across product
lines, distribution channels, and
internal business divisions to
create an up-to-date, integrated
customer record.
Employees throughout the bank
then will have access to the
same enterprise view of the
customer, enabling them to
meet the customer’s needs
quickly and effectively.
Sophisticated customer
analytics requires a universal
customer identifier to track the
activities of individual
customers across the enterprise.
This unique customer
identification number is
assigned to every account that a
customer has across the
organization.
The number can be used to
extract customer information
from disconnected systems
across the enterprise, creating
an enterprise-wide view of the
customer from data that resides
in product or business-unit
silos.
The process of integrating customer data can catalyze organizational change because it brings various functions together to create
a common lexicon of consumer definitions and common goals for data gathering.
PwC
39
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Moving from a disjointed set of data repositories to an integrated system
that can provide an enterprise-wide view of the customer will not happen
overnight.
While having a reliable customer data set is challenging,
especially for institutions that rely on legacy systems that were
developed many years ago, it is always better to do analysis with
a limited amount of data than to do nothing until a robust
customer-data warehouse or CRM application is fully
implemented.
Be prepared to spend months building the required
data architecture. Developing an enterprise–wide view of the
customer is challenging because customer data may be housed in
multiple systems, divisions, departments, regions, and countries.
Be prepared to spend a considerable amount of time (possibly
years, depending on the size of the bank and the amount of data)
building the architecture required to consolidate customer data,
and to set overall goals for customer strategies.
Expect data integration to be a long-term project. Data
integration is a challenging, time-consuming project. It is a long-
term project that requires a thorough evaluation of integration
objectives, existing IT systems and security requirements, and an
ever-changing software market.
A framework for response—Break down the silos
Understand
your customer
Enhance the
customer
experience
Break down
the silos
Building a single view of the
customer is an iterative process—it
won’t be perfect right out of the gate,
but it should be reasonably sound
and can be refined over time.
Be careful to avoid a common pitfall of
segmentation—spending too much time in
the analysis stage in an attempt to obtain
perfect data.
The quest for perfection usually prevents
companies from moving forward to develop
products, services, and pricing because they
become stuck in a perpetual cycle of
analysis. Instead, target relative accuracy
when creating segments and determining
their lifetime value. Keep in mind that the
most successful segmentation programs are
agile and include the capability to monitor
and adapt to inevitable changes in the
business environment.
PwC
40
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Reshape incentives and performance metrics to reward
customer-focused behaviors.
A framework for response—Break down the silos
Develop a communications and
reporting strategy that
reinforces the customer culture.
? Leadership’s messaging about
customer focus should be
consistent, straight-forward,
and frequently heard by both
front-line and back-office
employees.
? Performance metrics should
include measures of customer
satisfaction and profitability.
Establish hiring, onboarding, and
training processes that support a
?customer-first? mindset.
? When hiring, focus on specific skill
sets that the bank needs to be
successful in deepening customer
relationships (e.g. sales,
communication skills).
? Use training to coach employees
on how to recognize customer life-
cycle triggers and suggest products
that are relevant.
Make employees accountable for achieving customer-related goals by linking compensation and rewards with realization of
those goals. For example, relationship managers may be responsible for achieving a certain rate of cross-selling for their
customers. Loan-operations staff may be rewarded for decreasing the error rate in the loan-boarding process.
Data integration alone cannot successfully bring about bank-wide collaboration and customer focus. Many banks’ organizational
structures, reporting lines, and incentive systems have been constructed over time around products, channels, and business
units. In order to truly promote customer centricity, bank leaders will need to realign employee behaviors by modifying the
organization, incentives, and reporting systems.
Understand
your customer
Enhance the
customer
experience
Break down
the silos
Communication
and reporting
Rewards and incentives
Talent
acquisition and
development
PwC
41
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Retail banks must understand their customers and their activities throughout
the organization.
A framework for response—Understand your customer
Understand
your customer
Enhance the
customer
experience
Break down
the silos
Short-term (0-6 months) Medium term (1-2 years) Long term (>2 years)
? Evaluate the effectiveness of customer
data being gathered across the
organization.
? If specific customer segments have not
yet been defined, then at a minimum,
group customers according to the
stages of the financial life cycle.
? Define the business rules to calculate
customer and household profitability,
and identify data sources.
? Define and implement enterprise-wide
rules for calculating customer
profitability.
? Map each customer to an individual
household.
? Begin to estimate customer lifetime
value for each customer and
household.
? Implement a system to capture and
analyze customer data across channels
(such as phone, branch, or social
media).
? Base pricing and product-
development decisions on maximizing
customer value, not sales volume.
Roadmap activities
Key goals:
? Clearly define your organizational goals as well as the customers you are
prepared to serve now and those you would like to serve in the future.
? Identify which customers and households generate the greatest current
and/or long-term value to the organization.
? Use robust customer analytics to support strategic decision making in
areas such as pricing, new products and services, and markets.
? Achieve clear visibility into the drivers of loyalty or attrition and
cross-selling.
PwC
42
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Capture and analyze the right customer data—those that provide insight
into customer needs.
A framework for response—Understand your customer
Understand
your customer
Enhance the
customer
experience
Break down
the silos
Traditional data
points analyzed
? Current assets
? Potential assets
? Income
? Credit score
? Current products
More insightful
data
? Marital status
? Birth date
? Address / geography
? Loan-to-value ratio
? Number and age of
dependents
? Preferred channel
? Transaction history
Capturing the right data exposes significant information about
customers’ purchasing habits, financial needs, and life stages—all
factors that drive their expected purchasing decisions. As customers
move through the various stages of their lives, their financial needs
change based not only on their own circumstances, but also on those
of the entire household.
Client ID 2
Head of household
Age 50
2
nd
Applicant on
Mortgages & C/C
HELOC
Loan ID 2
Reverse
mortgage
Loan ID 4
1
st
Mortgage
Loan ID 1
Credit
Card
Loan ID 3
Client ID 1
Daughter
Age 25
1
st
Applicant on
Mortgages
Client ID 3
Elderly parent
Age 73
Reverse mortgage
Household ID 1
Branch ID 1
Household ID 2
Gaining insight into the dynamics of a customer’s household is as
important as knowing and meeting the needs of the individual.
More households today are considered to be ?nontraditional?
(roommates, single parents, sons and daughters living with their
parents after college, etc.), and their needs should be assessed
accordingly.
Starting with the enterprise–wide view of the customer, create a
household view by aggregating information for all customers
residing at the same address. This will enable you to perform a
more sophisticated customer-value analysis by considering the
customer’s financial needs in a broader context.
PwC
43
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Estimate lifetime customer value by analyzing household as well as
individual customer dynamics.
Calculating an estimated customer- and household-lifetime value is a useful tool for performing comparisons across segments and
identifying segments where targeting efforts may yield more revenues. It also helps to justify investments in segments that might
not be profitable in the short term but have potential to be significant revenue drivers in the future (such as mobile banking
investments to accommodate the needs of millennial-generation customers).
When calculating lifetime value, consider the value of not only the expected immediate gain that current loan products will
generate, but also the potential value of future business opportunities that could arise from the existing relationship.
A framework for response—Understand your customer
Understand
your customer
Enhance the
customer
experience
Break down
the silos
Teenagers / students Single adults Childless couples Young families Established families Empty nesters Mature adults
Consumer financial planning life cycle
Investable assets
Debt
Initiate banking
relationship
(savings/checking
accounts)
Enter college, work
force (payment
vehicles – credit/
debit, auto loans)
Marriage (joint
checking accounts,
401K plans, CDs,
money market)
Birth of a child
(IRA plans, new
home mortgage,
loans, insurance,
529 education
plans)
School-aged
children (home
equity loans, 529
education plans,
insurance)
College bound
children
(investments,
education loans,
second mortgages)
Retirement
(investments,
reverse mortgage,
estate planning,
retirement plan
distribution)
Calculating customer
lifetime value involves
making educated
assumptions about a
customer’s behavior based
on historical data and likely
future needs using the
customer’s place in the
financial planning life cycle.
Key considerations:
? Assumptions should be based on historical customer data (e.g. likelihood that a customer
will adopt a product, average duration they will hold the product) and external market data
(e.g. probability that interest rates will rise or fall in the next 10 years).
? Start with one year of historical data and refine the model each year as more data is
collected. During the first few periods, it may only be possible to use the data on a relative
(rather than absolute) basis.
? Over time, the assumptions that were used initially can be replaced with actual historical
information, creating a more accurate and refined model.
PwC
44
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Target the right customers with the right products at the right price
using the right delivery channels.
A framework for response—Understand your customer
Understand
your customer
Enhance the
customer
experience
Break down
the silos
? Understand the drivers of loyalty and
attrition for each customer segment.
? Break down products into a set of
shared elements that can be easily
combined to create customized product
bundles. Bundle products based on
demands of the customer segment, the
type of product/feature growth desired,
and how well the products complement
each other.
? Provide simple messaging to enable
front-line employees to articulate the
value of bank products to customers in
a language that is easy to understand.
? Unify the system architecture such that
product bundles can be easily
customized and operated across
traditional product lines.
Once you have identified the most profitable customer segments and their needs and preferences, you can begin making
targeted offers when the time is right. Timing is critical—to avoid frustrating customers with offers that they don’t need, it’s
important to know how to identify life cycle triggers and to respond appropriately with only the products that address those
needs. There is no single right way to do this—but the following considerations can help banks organize their approaches.
Customize products Differentiate pricing Enhance cross-channel delivery
? Understand each customer
segment’s ?willingness to pay? for
a given product.
? Explore where customers may be
more flexible about rates and set
prices accordingly.
? Assign clear ownership and
responsibility for pricing decisions
to coordinate across marketing,
sales, and product groups.
? Develop customized delivery
channel strategies for each
customer segment.
? Strive to provide a consistent
experience across all channels
while directing customers to their
channels of choice.
? Develop channel-specific strategies
that capitalize on the distinct and
complementary role of each
channel; e.g. low-cost mobile and
internet for routine transactions
and higher-cost branch and call
center for developing new
relationships.
PwC
45
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Retail banking customers are increasingly looking for a customized experience. They can
now quickly communicate their dissatisfaction to their network.
A framework for response—Enhance the customer experience
Short term (0-6 months) Medium term (1-2 years) Long term (>2 years)
? Create journey maps for critical
processes /moments of truth.
? Design a basic (but formal) voice of
the customer (VOC) program and pilot
it in a business unit.
? Create an initial customer satisfaction
scorecard and begin to define key
customer KPIs.
? Implement a formal VOC program
across the organization.
? Make customer satisfaction scorecards
available to different levels of the
organization.
? Involve senior executives in the VOC
process by asking them to
listen to calls, visit branches, and
review customer complaints on a
periodic basis.
? Use VOC results to drive process
improvements across the organization
and to provide a consistent, high
quality customer experience.
? Make customer retention, satisfaction,
and profitability KPIs for all business
units and supporting groups.
Roadmap activities
Key goals:
? Ensuring a consistent high-quality experience regardless of the channel
? Having a formal process to solicit and respond positively to customer
feedback
? Being proactive in responding to customer needs and wants
Understand
your customer
Enhance the
customer
experience
Break down
the silos
PwC
46
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Develop a voice-of-the-customer program to gather feedback.
Create a program to gather customer feedback from a variety of sources—
An effective voice-of-the-customer (VOC) program can help you to gain an accurate, real-time understanding of customers;
enhance customer segmentation efforts; improve positioning and messaging to customers; provide insight into the most
profitable sources of revenue from current customers and their likely future needs; improve customer relationships; and
strengthen loyalty. VOC feedback can be solicited through formal customer surveys, focus groups, and unsolicited verbal or
written customer comments as well as through market studies, information provided by employees who have direct contact with
customers, and comments delivered by third parties such as credit counseling agencies and regulators. Increasingly, social
media is an important source of feedback.
A framework for response—Enhance the customer experience
Understand
your customer
Enhance the
customer
experience
Break down
the silos
Create
• Build a core competency around VOC
• Identify a dedicated, experienced
team to manage the customer
experience process
• Develop objectives of customer
experience program
• Develop an analytic competency
for analysis, insight generation,
and reporting
• Link VOC and customer-facing
activities
• Socialize VOC program to key internal
and external stakeholders
Gather/assess
• Solicit feedback from customers via:
– Website
– Social media
– Email
– Phone
– Focus groups
– Interviews
• Collect available data within the
organization (e.g., collect trends
through the normal course of work)
• Assemble available benchmarking
information from within and
outside industry
• Consolidate data into a single dataset
and interpret data to identify trends
or anomalies
• Compare data to available
benchmarks
• Develop actionable improvements
Implement/measure/respond
• Prioritize action plans according
to objectives
• Assign resources to implement and
measure action plans
• Review success and implement
continual improvement mechanisms
• Empower employees to collect and
share customer feedback with those
who can implement change
• Dedicate employees to monitor and
respond to social media comments
• Involve customers in piloting and
testing of new processes or products –
listen to and respond to their feedback
PwC
47
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Create customer-journey maps to identify inconsistencies and potential
sources of customer dissatisfaction.
Customer-journey maps describe a customer’s experience throughout a relationship with an organization. Creating journey maps
can help identify inconsistencies across products and/or channels as well as potential sources of customer dissatisfaction. The
findings from these analyses can help to identify specific actionable steps to improve the customer experience.
A framework for response—Enhance the customer experience
Example – Mortgage refinance process
Pre-application
? Customer receives an
unsolicited offer to
refinance mortgage.
? It is easy to find
refinance information
when accessing the
account online.
? It is difficult to find
refinance information
on the company’s
website, or it takes a
long time to get the
information via the
toll-free number.
Application
? All refinance steps are
clearly explained,
including what
information must be
submitted.
? Forms can be
completed online and
are user-friendly.
? Documents must be
submitted several
times, as instructions
were not clear.
? The application must
be filled out manually
and requires
information that the
bank already has.
Underwriting
? Customer receives
frequent status
updates and can access
the real-time status of
the refinance online.
? Due to capacity issues,
certain documents
?expire? and must be
resubmitted.
? Customer does not
receive status updates
unless he or she calls
to request them.
Updates provided are
not clear.
Closing
? E-signature is
available, so borrower
can complete the
process online or via a
mobile device.
? Refinance is
completed in the time
frame promised.
? Closing takes place in
four months (rather
than one month, as the
loan officer had
promised) due to
capacity issues and
processing errors.
Satisfaction
drivers
Dissatisfaction
drivers
Understand
your customer
Enhance the
customer
experience
Break down
the silos
PwC
48
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Develop metrics that measure the effectiveness of customer interactions,
not just their efficiency.
A framework for response—Enhance the customer experience
Understand
your customer
Enhance the
customer
experience
Break down
the silos
Timeframe Activities
Short term:
Start with the
basics
? Leverage existing reporting capabilities to start tracking call
reasons: percentage of calls being transferred, homeowners
calling multiple times in a specific period of time, percentage of
homeowners calling in the month prior to transfer as well as
during the transfer month.
? Perform a detailed analysis of root causes for customer inquiries.
? Develop satisfaction standards and include specific customer-
satisfaction criteria in quality assurance review.
Medium
term:
Involve the
client
? Start conducting more targeted customer surveys and acting on
customer feedback (see voice-of-the-customer section).
? Define specific satisfaction metrics that will be tracked.
? Benchmark customer satisfaction against other companies and
other industries.
Long term:
Become best-
in-class
? Make customer satisfaction a corporate key performance
indicator.
? Publish the customer-satisfaction scorecard across the
organization.
? Analyze unsolicited feedback (social media).
? Strive for real-time responsiveness to critical issues or
complaints.
The traditional metrics that most banks use to track customer interactions are of limited use in measuring employees’ success in
addressing customer needs.
Traditional metrics measure
efficiency
? Average talk time
? Abandon rate
? Average speed of answer
Better metrics measure
effectiveness
? Net promoter score—how likely
are customers to recommend
the company to others?
? Customer-effort score—how
much effort the customer felt
he/she needed to put in to get
his/her issue resolved
? First-contact resolution
? Channel switching
PwC
49
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
A traditional shared-services assessment evaluates candidate processes based on three criteria: business
impact, difficulty of implementation, and potential cost savings. The focus has generally been on cost
reduction rather than enhancing the customer experience. Banks should evaluate candidate processes using a
fourth dimension: impact on customer experience.
Business impact is assessed by answering questions
such as:
? How critical or core is the function to the business?
? What is the acceptable level of risk?
? Which risks can be mitigated and at what cost?
? Which functions have associated risks that are too great and
cannot be mitigated such that consolidating in a shared-services
environment is not a viable option?
Implementation difficulty is assessed by answering
questions such as:
? How standardized are the processes and systems within a
function?
? What is potential adverse impact on ongoing operations?
? Are there significant barriers to implementation (e.g., ongoing
initiative, regulatory requirements)?
Customer impact should be assessed by understanding:
? How will this change impact customer-service levels and customer
satisfaction?
? What will be the potential impact on customer retention?
? Is a proactive social-media campaign necessary to communicate
the change?
? Do the people interacting with customers understand why the
change is being made and what they need to communicate to
clients?
Consider the impact on customer satisfaction of moving processes
to shared service centers.
A framework for response—Enhance the customer experience
Note: Size of circle indicates cost reductions
and savings opportunity
(1) Loan Servicing
(2) Collections
(3) Quality Assurance
(4) Information Services
(5) Secondary Marketing
(6) Marketing
(7) Legal
(8) Facilities
Business impact High
D
i
f
f
i
c
u
l
t
y

o
f

i
m
p
l
e
m
e
n
t
a
t
i
o
n
H
i
g
h
L
o
w
1
8
7
4
3
5
6
2
Low
Additional evaluation required
Recommendation
Not shared-services candidate
Viable shared-services candidate
Recommendations
Candidate processes
Low
3
2
1
Examine potential
impact on
customer
satisfaction and
retention.
Understand
your customer
Enhance the
customer
experience
Break down
the silos
Section 5
How PwC can help
PwC
51
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
How PwC can help
Core competencies
Breaking down the silos ? Perform an analysis on the existing barriers to effective retention and cross-selling efforts.
? Analyze required changes to the compensation structure to make it customer-centric.
Understanding your
customers
? Perform an assessment of customer data being captured across the organization and provide
recommendations on how to leverage this data to perform enhanced customer analytics.
? Assist in the development of customer segments that can be used to better understand the
existing customer base and to refine the bank’s targeting efforts.
? Work with clients in the definition of business rules to calculate customer/household
profitability and identify data sources.
Enhancing the customer
experience
? Create an initial customer-satisfaction scorecard and assist in the definition of key customer
performance indicators.
? Creation of journey maps for critical processes.
? Assist in the design of a formal VOC program and pilot it in one of the business units.
PwC
52
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Client needs and issues
How PwC can help
Client needs Issues we help clients to address
Innovate and
grow
profitably
? Reshaping the IT function into a source of innovation
? Transforming business information to drive insight and fact-based decision making
? Evaluating acquisition and divestiture strategies to position for the future
? Realizing deal synergy and value
? Developing sustainability programs that add value
Build
effective
organizations
? Rethinking strategy in terms of markets, geographies, channels, and clients
? Restructuring organizational models in terms of structures, policies, and roles
? Establishing effective strategic sourcing and procurement
? Transforming the close and consolidation process to work for rather than against you
Manage risk,
regulation,
and financial
reporting
? Building a risk-resilient organization
? Implementing and realizing the benefits of ERM
? Managing ERP investment and project execution risk
? Safeguarding the currency of business; keeping sensitive data out of the wrong hands
? Affirming capital project governance and accountability
? Assessing and mitigating corruption risk in your global business operations
? Accounting and financial reporting
? Third-party assurance
? Compliance with tax law and regulation
Reduce costs ? Driving efficiency through shared services
? Redesigning finance to realize efficiency and competitive advantage
? Taking control of cost through effective spend management and cash forecasting
practices
? Driving sustainable cost reduction
Leverage
talent
? Defining and implementing an effective HR organization
? Rethinking pivotal talent
We look across the entire organization—focusing on strategy, structure, people, process, and technology—to help our clients improve
business processes, transform organizations, and implement technologies needed to run the business.
Innovate
and grow
profitably
Build
effective
organizations
Manage risk,
regulation, and
financial
reporting
Reduce
costs
Leverage
talent
Client
needs
PwC
53
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
How PwC can help
Our Financial Services practice
Accountability
and cost
effectiveness
Trusted brand
Global
footprint
We offer a truly independent view, without prejudice or favor regarding specific vendors, solutions, or
approaches. We approach each situation and develop the most appropriate solutions depending upon
the client’s individual circumstances.
Our comprehensive approach to serving our clients provides them with a single point of accountability,
which creates an efficient and effective day-to-day working arrangement and, most importantly, best
positions our clients for success. We have significant experience in helping to drive complex programs
and feel strongly that we can work successfully in a cost-effective manner to meet your organization’s
needs and objectives.
PwC works in a globally integrated manner. This benefits clients in terms of consistent service delivery
and quality by taking advantages of the best ideas, resources, and solutions from around the world.
PwC is an advisor to 44 of the world’s top 50 banks and 46 of the world’s top 50 insurance companies, and is the leading service
provider to investment managers, pension funds, and hedge funds around the world. This diverse client base provides us with
unique access to develop peer insights and to understand from experience what works in specific client circumstances. In the
United States alone, we are able to call upon our 800-person Financial Services Advisory practice and over 3,000 financial services
professionals.
PwC
54
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
How PwC can help
For further information, please contact:
John Garvey [email protected]
+1 646 471 2422
Peter Pollini [email protected]
+1 617 530 7408
Roberto Hernandez [email protected]
+1 940 367 2386
David Hoffman [email protected]
+ 1 703 918 3856
Americas
Section 6
Select qualifications
PwC
56
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Select qualifications
Customer analytics—Top-five US retail bank
Issues The client requested assistance in developing a methodology to calculate expected lifetime value profitability at
the customer and household levels.
Approach PwC performed an analysis to determine the gap between current and desired loan-customer profitability. We
identified the revenue and cost data points required to calculate customer and household value (current and
future), and helped to develop business requirements for creating a customer-profitability platform. We also
worked with management to define customer segments, calculate retention, and evaluate cross-selling efforts
for each of the segments.
Benefits By the end of the engagement, the client was able to begin designing incentive programs that were based on
customer profitability, not just volume. The bank also identified households that were under-penetrated and
therefore presented significant opportunities for cross-selling. With this information, the client began to tailor
offers to the customer segments with the greatest profit potential.
PwC
57
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Select qualifications
Customer experience—Leading US mortgage company
Issues The client needed assistance in identifying ways to enhance the end-to-end customer experience.
Approach PwC analyzed existing documentation (welcome letter/package, additional written correspondence, website
information, IVR structure, call scripts, policies, procedures, customer strategies, etc.). We provided
observations and recommendations for enhancing the customer experience, improving employee awareness of
the importance of customer interaction, tracking results, and other relevant opportunities.
Working closely with the client, PwC also:
? Developed "journey maps" designed to identify the customer’s expected experience in selected areas
? Assisted in the development of a customer-experience metrics dashboard, which was then used to measure
customer satisfaction using direct and indirect sources
? Assisted in the development of a VOC framework
Benefits Based on PwC’s recommendations, the client made several changes to its loan-boarding process, which resulted
in greater customer satisfaction and lower costs due to a reduction in call volumes and the number of complaint
letters. The client also implemented a customer-satisfaction survey, began capturing customer feedback about
?pain points? relayed by employees who have direct contact with customers, and began monitoring indirect
customer feedback on social-media sites. The journey maps PwC developed were leveraged to link operational
processes with customer experience benchmarks, enabling a consistent set of expectations for customers and
operational employees.
PwC
58
Getting to Know You:
Building a Customer-Centric Business Model for Retail Banks
Select qualifications
Customer experience—Leading independent Canadian consumer-finance institution
Issues The client sought to implement a business-intelligence solution for a leading Canadian mortgage company,
which would allow them to gain an enterprise-wide view of customers’ relationships with the organization.
Approach PwC helped to develop a customer segmentation strategy and a methodology for calculating customer
profitability. This included a prototype model that was used to allocate revenue and cost information down to
the customer level. We developed a methodology for calculating lifetime value for each customer segment.
Finally, PwC helped to create detailed customer profiles and broker scorecards to be used in strategic planning
and default management, as well as for refining marketing campaigns.
Benefits After PwC’s analysis revealed that the products were increasing customer churn, the client decided to eliminate
two of what it had considered its most profitable products. The client also decided to launch a direct origination
channel as a result of PwC’s identification of underserved segments with significant profit potential.
www.pwc.com
© 2011 PwC. All rights reserved. "PwC" and "PwC US" refer to PricewaterhouseCoopers LLP,
a Delaware limited liability partnership, which is a member firm of PricewaterhouseCoopers
International Limited, each member firm of which is a separate legal entity. This document is
for general information purposes only, and should not be used as a substitute for consultation
with professional advisors.
“Getting to Know You: Building a Customer-Centric Business Model for Retail Banks,” PwC FS
Viewpoint, April 2011.

doc_613586567.pdf