Measuring customer loyalty to financial institutions (FIs) differs from measuring customer loyalty to most other institutions, products or services. Banks sometimes keep customers because of the perceived hassle factor associated with switching to a new FI. Slightly more than two-thirds (68 percent) of FI customers agree that “switching my primary checking account to a different financial institution is more hassle than it’s worth.” But our research with 3,000 consumers shows that customers who merely stick with their FIs due to inertia 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. And, a loyal customer is not necessarily a profitable one.

1. Research Brief
Achieving Profitable Customer Loyalty
January 2012
Paul McAdam, SVP of Research and Thought Leadership, FIS
Mandy Putnam, Director of Research and Thought Leadership, FIS
©2012 FIS and/or its subsidiaries. All Rights Reserved.

2. Introduction
Measuring customer loyalty to financial institutions (FIs) differs from measuring customer loyalty to most other
institutions, products or services. Banks sometimes keep customers because of the perceived hassle factor
associated with switching to a new FI. Slightly more than two-thirds (68 percent) of FI customers agree that
“switching my primary checking account to a different financial institution is more hassle than it’s worth.” But
our research with 3,000 consumers shows that customers who merely stick with their FIs due to inertia 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. And, a loyal customer is not necessarily a
profitable one.
More than six out of 10 loyal customers are unprofitable, and about one-quarter of loyal
customers are unlikely to ever be profitable.
Some customers are “loyal” in their banking behaviors − e.g., they trust and would recommend their FI, or they
probably wouldn’t change their FI under less than extraordinary circumstances − but they aren’t putting their
money where their mouth is, either. When transactional behaviors aren’t aligned with other aspects of loyalty,
customers are not likely to be profitable. 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 brief features recent research on elements that drive customer loyalty and insights into how FIs can
leverage the findings to foster loyal relationships that, in turn, can increase the percentage of profitable patrons
among their customer bases.
Customer Loyalty: Multi-dimensional and Overlapping
Forty-five percent of FI customers exhibit at least one dimension of customer loyalty:
• Functional loyalty, which is typically created by offering superior products and/or services that
consumers trust and are willing to recommend to others
• Transactional loyalty, which is reflected in concentrated spending with a brand and repeat purchasing
behavior
• Emotional loyalty, which is generally the most sought after, but the least attained by branding gurus;
customers who exhibit emotional loyalty identify with the values that the brand conveys and view the
brand as differentiated sufficiently from others in its class to pay more for its products and services
2
©2012 FIS and/or its subsidiaries. All Rights Reserved.

3. Loyal FI customers typically have functional and/or transactional loyalty but do not have emotional loyalty
(Figure 1).
Customer Loyalty and Profitability Segments
Segmenting FI customers based on the dimensions of loyalty − functional, transactional and/or emotional − and
profitability produces six segments of FI customers:
Profitable Loyals (17 percent) tend to be well-educated married couples with higher incomes and
positive net worth. This group has proportionately more matures (born prior to 1946) and self-
employed individuals. Of all the segments, they are most confident about enjoying a comfortable
retirement.
Profitable Non-loyals (22 percent) also tend to be well-educated married couples with higher
incomes and positive net worth. This segment includes above-average percentages of large-bank
customers and people who are employed by someone else. Profitable Non-loyals often lack the
time and knowledge to manage their financial affairs, which − along with their positive net worth
– make them desirable targets of financial advisors.
Potentially Profitable Loyals (18 percent) tend to be females with lower levels of education and
low- to lower-middle incomes. Their loan balances make them potentially profitable to the FI.
3
©2012 FIS and/or its subsidiaries. All Rights Reserved.

4. Potentially Profitable Non-loyals (24 percent) have average incomes but above-average
educations. This group has proportionately more students and their loan balances make them
potentially profitable to the FI.
Unprofitable Loyals (9 percent) have very limited means to become profitable to the FI. They
have the lowest incomes and education levels and an above-average percentage of them (one-
quarter) are retired.
Unprofitable Non-loyals (10 percent) have lower levels of education, low incomes and the highest
unemployment rate among the segments.
FI goals for the segments range from employing retention strategies to increase loyalty and share of wallet, to
just breaking even with unprofitable customers whose resources are limited (Figure 2).
• The goal for Profitable Loyals is to maintain and deepen the relationship.
• The goal for Profitable Non-loyals is to increase their loyalty and, in turn, retain and hopefully deepen
the relationship.
• The goal for Potentially Profitable Loyals is to shift their behaviors toward those that increase
profitability through lowering the costs of servicing them and/or increasing the revenue garnered
from them.
• The goal for Potentially Profitable Non-loyals is twofold: increase both loyalty and profitability. Without
an increase in loyalty, profitability will be difficult to achieve.
• The goal for both unprofitable segments is simple: shift them from unprofitable to break-even status.
Some tactics used for switching their behavior could cost relationships, especially with Unprofitable
Non-loyals. This would boost average customer profitability, but carries risks associated with, in essence,
“firing” customers. Given today’s “Occupy Wall Street” climate and the backlash associated with the
attempt of large FIs to impose debit fees on this group, it’s critical to craft a strategy that provides
options for unprofitable customers to control their FI costs through modifying their financial behaviors.
4
©2012 FIS and/or its subsidiaries. All Rights Reserved.

5. Strategies for achieving goals
Goal: Maintain and deepen relationships with Profitable Loyals
Profitable Loyals already have larger shares of their financial wallets with their primary
DDA provider than most of the other segments. But, there is still opportunity to identify
cross-sell opportunities through data mining and analytics. For example:
• This segment has a higher percentage of self-employed individuals with needs for
small business financial services.
• Many individuals in this segment are members of more mature generations
(seniors and older baby boomers) and need financial advisory services (e.g., estate
planning, brokerage and mutual funds, IRAs and 529 savings plans).
Currently, larger banks are capturing more loans from Profitable Loyals than smaller banks, which underscores
the opportunity for smaller banks and credit unions to deepen their credit relationships with Profitable Loyals.
Profitable Loyals also are more likely to be motivated to deepen their relationships with providers that offer
preferred interest rates.
FIs can strengthen their relationships with this desirable segment through rewards programs. Profitable
segments are more likely to participate in checking account and credit card rewards programs, but participation
rates remain relatively low (Figure 3). The “stickiness” of Profitable Loyals is increased by checking account
5
©2012 FIS and/or its subsidiaries. All Rights Reserved.

6. rewards programs. About one-half (49 percent) agree or strongly agree that their checking account rewards
program has an influence on where they maintain their primary checking account.
A package configured for this segment could look like:
• “Premier Checking” package bundled with other deposit and investment services; preferred interest
rates and other rewards for high minimum balances
• 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
Goal: Increase loyalty to retain and deepen relationship with
Profitable Non-loyals
Profitable Non-loyals have smaller shares of their financial wallets with their primary DDA
provider than Profitable Loyals. Increasing loyalty within this segment could boost the
amount of assets or loans held with their primary FI.
One likely reason why Profitable Non-loyals are not loyal is that they pay higher fees to
their primary DDA provider than other segments (Figure 4). Forty-four percent are paying fees and those paying
fees are paying on average $17.01 per month. Lowering their fees could boost their loyalty and their profitability
if lower fees are used as an incentive to move a greater share of deposit balances to the primary DDA provider.
6
©2012 FIS and/or its subsidiaries. All Rights Reserved.

7. Profitable Non-loyals’ primary DDA provider is more likely to be a large national bank, which is only capturing
about two-thirds (68 percent) of their deposit balances (as opposed to 82 percent for Profitable Loyals) and 45%
of their loan balances (the same 45 percent for Profitable Loyals). This provides an opportunity to deepen the
relationship with these customers on both the deposit and loan sides of the ledger, especially on the deposit
side.
Another potential opportunity to grow business with this customer is through offering financial advisory services.
Individuals in this segment admit they do not have the time or expertise to manage their money and have needs
for financial advisory services.
Profitable Non-loyals also are more likely to deepen their relationships with providers whose benefits emphasize
financial rewards (e.g., cash back on loyalty programs, preferred interest rates) and convenience (e.g., free
online/mobile banking, ATMs at convenient locations).
A package configured for this segment could look like:
• “Premium Checking” package bundled with other deposit and investment services; preferred interest
rates and other rewards for high minimum balances
• Customized loyalty card program with preferred interest rates or cash back rewards
• Preferred interest rate incentives for moving more assets/loans to primary (e.g., mortgage refinancing)
7
©2012 FIS and/or its subsidiaries. All Rights Reserved.

8. Goal: Increase profitability of Potentially Profitable Loyals
Potentially Profitable Loyals don’t have a very large financial wallet and most of it is
composed of debt − most commonly credit card debt and auto loans. Very little of
their debt is held by the primary DDA provider, which is the main reason they aren’t
currently profitable.
Another reason Potentially Profitable Loyals aren’t profitable is they don’t pay very much
in fees (Figure 4). Half of them selected their current FI because free services were offered.
Many Potentially Profitable Loyals could be motivated to bring more business to their primary FI via a customer
loyalty program. Credit card consolidation could provide a vehicle for qualified Potentially Profitable Loyals to
shift their status from unprofitable to profitable.
A package configured for this segment could look like:
• “Basic Loyalty” checking/savings with minimum balance required and/or self-service option for
lower fees
• Loyalty program incentive to consolidate revolving credit card debt to bank card
• Assistance with loan refinancing (if qualified)
Goal: Increase loyalty and profitability of Potentially Profitable Non-loyals
Potentially Profitable Non-loyals, like the Potentially Profitable Loyals, don’t have a very
large financial wallet and most of it is composed of debt − most commonly credit card
debt and auto loans. And, like their loyal counterparts, very little of their debt is held by
the primary DDA provider, which is the main reason they aren’t currently profitable.
Unlike their loyal counterparts, Potentially Profitable Non-loyals have substantial future
earning potential, reflected by their above-average educations and higher-than-average student status.
Like Potentially Profitable Loyals, they don’t pay very much in fees (Figure 4). But, this segment could more
easily migrate to self-service banking to retain their low fees.
Many Potentially Profitable Non-loyals could be motivated to bring more business to their primary FI through a
customized rewards program with options to choose the type of rewards offered. Credit card consolidation
could be offered to qualified Potentially Profitable Non-loyals.
A package configured for this segment could look like:
• “Basic Loyalty” checking /savings with minimum balance required and/or self-service option for
lower fees
• Loyalty program incentive to consolidate revolving credit card debt to bank card
• Assistance with loan refinancing (if qualified)
8
©2012 FIS and/or its subsidiaries. All Rights Reserved.

9. Goal: Break even with unprofitable segments
Unprofitable segments are unlikely to become profitable for a financial institution. The best
the FI can hope is to: 1) reduce their channel usage, and/or 2) collect fees that are sufficient
to cover incremental costs of servicing them.
Among the six segments, Unprofitable Loyals and Non-loyals have the highest channel usage −
roughly one-third more transactions than the other four segments (Figure 5). Part of the
reason these customers are unprofitable is that the cost to serve them is higher.
In general, loyal segments are less likely to pay fees to their provider and, on average, to pay lower fees than
non-loyal segments (Figure 4). A majority (71 percent) of Unprofitable Loyals pays no fees and the ones who pay
fees pay only $2.63, on average, in fees monthly − less than any other segment. Unprofitable Non-loyals are
much more likely to pay fees but pay very low fees, on average, compared with profitable and potentially
profitable segments.
9
©2012 FIS and/or its subsidiaries. All Rights Reserved.

10. A package configured for these segments could look like:
• “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
Conclusion
Our research shows that customers who get free services do, indeed, feel more loyal to their FIs. But promoting
free services indiscriminately results in a lot of loyal but unprofitable customers. In fact, more than six out of 10
loyal customers are unprofitable, and about one-quarter of loyal customers are unlikely to ever be profitable.
We also know from our research that profitable customers who are loyal to their primary DDA provider
consolidate a greater share of their assets with their FI than profitable customers who aren’t loyal. Promoting
loyalty among profitable customers pays off. We strongly suspect that many of the profitable, but non-loyal,
customers would move more of their financial wallet to their primary DDA provider if their FIs developed
specific promotions targeted toward the profitable non-loyal customer. Money talks with this segment, and so
does convenience.
Although the same packages could be offered to transform potentially profitable customers into profitable ones,
the way “calls to action” are crafted and conveyed to shift behaviors would differ depending upon the segment.
Potentially Profitable Loyals differ both attitudinally and demographically − e.g., income and education − from
Potentially Profitable Non-loyals and will vary in their responses to messages and media.
It’s important to remember that appeals that usually do the best job of engaging some customer segments are
often viewed as irrelevant or even “turn-offs” by other segments. The FI must determine whether it wants to be
“all things to all people” or home in on specific segments that could produce a more profitable outcome in the
long term, but alienate non-targeted segments to the point of attrition in the short term.
10
©2012 FIS and/or its subsidiaries. All Rights Reserved.

11. About the Research
Achieving Profitable Customer Loyalty is part of a series of Consumer Insight Briefs based on primary research
conducted by FIS Enterprise Strategy. The research findings herein are based on a 44-question online survey
completed by a representative sample of 3,000 adults with checking accounts with an oversample of 345
community bank customers in August 2011. The survey was fielded by FIS Enterprise Strategy to a consumer
panel maintained by Survey Sampling International.
The study’s primary objective was to determine strategies and tactics to support profitable customer loyalty.
Three supporting study objectives included: 1) segmenting customers based on financial institution loyalty and
profitability, 2) determining measure of loyalty most indicative of value creation, and 3) defining strategies and
tactics to engender consumer loyalty that leads to value creation.
About FIS
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® Payments Network. FIS maintains processing and technology
relationships with 40 of the top 50 global banks, including nine of the top 10. FIS is a member of Standard and
Poor's (S&P) 500® Index and is currently ranked No. 1 in the annual FinTech 100 rankings. Headquartered in
Jacksonville, Florida, FIS employs more than 33,000 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.
Achieving Profitable Customer Loyalty was authored by Paul McAdam, SVP of Research and Thought Leadership
at FIS and Mandy Putnam, Director of Research and Thought Leadership at FIS.
Please contact the authors if you have questions about the research or how the results apply to your financial
institution.
Paul McAdam
Ph: 708.449.7743
paul.mcadam@fisglobal.com
Mandy Putnam
Ph: 614.414.4207
mandy.putnam@fisglobal.com
11
©2012 FIS and/or its subsidiaries. All Rights Reserved.