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