Kobie Quarterly: Financial Services Edition, October 2014

QUARTERLY REVIEW
october 2014 • financial services edition • kobie.com

contents
TECH
Empowering
21st Century
Digital Banking
through Mobile
Innovation
by Nancy Berg
02
WELCOME
ROADMAP
An Integrated
Future for the
Mobile and
Financial Realm
by Matt Stein
04
PERSPECTIVE
Targeting and
Rewarding High
Value Customers
by David
Andreadakis
10
EXPERIENCE
Banks and
Financial
Institutions
Using Digital
Wallets, GPS
Technology
and In-app
Messaging to
Boost Loyalty
by Nicolle
Schreiber
08
ABOUT
About the
Authors
17
From the
President,
Michael Hemsey
01
STRATEGY
5 Hurdles
that Banks
and Financial
Institutions Must
Overcome
by Margaret
Meraw
14
02
04
10
QUARTERLY REVIEW OCTOBER 2014

Every quarter, Kobie meets with banking clients and
financial institutions to discuss loyalty trends and
innovative ways to drive activation and usage, increase
share of wallet and decrease churn while providing new
up-sell and cross-sell opportunities. And while new
online-only banks, virtual currency and banking models continue
to disrupt the FI industry, one thing remains the same and that
is the need for consistent positive experiences that fully engage
individuals with your brand. Enter mobile and digital banking.
Despite security concerns, mobile, social and online channels
are the preferred channels for engaging with FIs. That’s why we
dedicated most of this issue to the key considerations asked of us
from financial institutions as they embark on building a roadmap for
mobile or evolving their existing roadmap. You’ll find innovations
and trends in mobile payment, mobile apps and the overall mobile
experience as the hub of a two-way brand-consumer dialogue that
support customer retention and other important key performance
indicators.
We also cover the steps and considerations when building a total
relationship banking strategy that go beyond acquisition and some
of the top benefits of integrating your loyalty platform across
enterprise banking solutions.
Using advanced analytics and segmentation strategies, we reveal
how FIs can attract, understand and retain high-wealth customers.
We hope the Kobie Quarterly Review: Financial Services Edition
broadens your appreciation for mobile and digital banking as a key
part of your loyalty strategy.
Does your bank have a successful mobile experience strategy? If so,
we’d like to hear from you. Drop us a line at loyalty@kobie.com.
KOBIE QUARTERLY REVIEW 3
from the president
MICHAEL HEMSEY
President
1

tech
Empowering 21st Century Digital Banking through
MOBILE INNOVATION
by NANCY BERG
Mobile penetration across consumer segments has risen so rapidly that
87 PERCENT OF U.S. ADULTS NOW OWN A DEVICE – and half of that
population has a smartphone. This aggressive new rate of adoption
creates both unprecedented opportunity for and demands of financial
institutions regarding their mobile products.

“MOBILE PLATFORMS WILL REDEFINE THE CONSUMER RELATIONSHIP.”
3
Customers already use financial
institution apps for remote deposit
capture, loan management, bill payment
and account alerts. But data reveals
a hunger for additional capabilities,
even in the already-maturing world of
mobile commerce. In fact, 57 percent
of respondents in a recent smartphone
user survey said they would be more
inclined to purchase goods on the
device if they could do so through their
bank’s branded mobile app – particularly
for expensive items. Forget future
benefits – for financial institutions, viable
revenue streams are already on the table
waiting to be collected.
All signs indicate the mobile
revolution will expand and persist, and
FIs are wise to embrace it. Never before
have they had the chance, unfettered
by the limiting legacies of established
architecture and practice, to maximize
ease-of-use and improve the customer
experience in highly relevant ways.
INTO THE MOBILE LOOKING GLASS:
THE FINANCIAL FUTURE
Though mobile technology has
and will continue disrupting existing
FI strategies, banks’ flexibility will be
rewarded with a positive transformation
of the way these financial institutions
and their customers interact.
Here are just a few of the ways
mobile devices will impact the future of
finance:
Digital payments will change the
way we think about money. Mobile
advancements will render all but
obsolete the need for brick-and-mortar
branches, shifting attention instead to
digital wallets and virtual currencies. As
developers find new ways to mitigate
concerns over mobile security and
account fraud, digital currencies will
move to the forefront of an industry-wide
shift towards virtual payments
that will operate primarily through the
mobile channel. As payment trends
across all industries evolve, traditional
banks and financial institutions are
warming to the many payment services
and options that can be delivered
through the mobile channel.
Mobile platforms will redefine the
consumer relationship. More than ever,
banking customers today demand
barrier-free access to their assets. The
proliferation of smartphone technology
has forever changed the future of
financial institutions by putting banking
and financial services at customers’
fingertips and establishing the mobile
platform as a 24/7 access point that can
address their every financial need.
Mobile technology has put FIs
ubiquitously at their fingertips – in
the process uprooting the traditional
customer relationship into a seamless,
interactive electronic landscape.
Linking financial institutions and
customers will facilitate constant and
transparent communication. At the
core of any mobile strategy is the
technology’s ability to facilitate an
open and easy information exchange
at any moment, anywhere. As financial
institutions have taken advantage of
functionalities like SMS and in-app
mobile messaging to notify customers
when their checks are deposited,
when balances reach a certain level, of
ATM withdrawals or when charges are
incurred, more opportunities are being
created to communicate with account
holders, genuinely and transparently.
Mobile’s transformation of banking
services will continue to push FIs to
innovate and provide more immediate
and convenient ways to interact
with customers and build stronger
relationships. With this we will see
much more personalized experiences
based on the customers’ past behavior
– having an opportunity to introduce
marketing messages during key points
of the buying process. This will open
up a tremendous opportunity for
building customer loyalty not only with
the FI but also with their cobrand and
merchant partners in ways that haven’t
been available historically including at
point-of-sale.
Empowerment through
collaboration–microfinance and
crowdfunding demonstrate a broad shift
in certain consumer segments from a
“me culture” to a “we culture,” and FIs
are adapting to serve it. At the core
of this model is one that encompasses
the “four P’s” of modern economics
– profit, people, planet and purpose –
proving that today, banks and financial
institutions are determined to make a
difference beyond revenue potential.
Their mere presence in the equation, in
addition to the required collaborations
with other businesses, establishes a
brand identity that appeals to young
and cause-minded consumers.
Mobile paves the way for financial
growth. According to a recent J.D.
Power & Associates survey, customer
banking satisfaction has returned to
pre-recession levels – due in part to the
proliferation of smartphone technology
and the financial sector’s adoption of
new web and mobile strategies.
To expand and retain market
presence, financial service companies
will have to carefully plan and
continually improve their customers’
mobile experience. That requires
foresight, testing and a careful ear to
consumer concerns. But the rewards
are extensive for those committed to
the notion that the future is in their
pockets. Buying in now means reduced
operating costs, more durable long-term
relevance and new opportunities
to meet customers’ emerging needs for
decades to come.

4
BUILDING A
ROADMAP FOR
MOBILE
by MATT STEIN

With 58% of the U.S. adult population owning a smartphone and 44% using
tablets on a regular basis, consumers clearly appreciate the ubiquity and
convenience of mobile devices. In just a few years, they’ve quickly incorporated
technological leaps enabling consumers to complete everyday tasks from anywhere
– be it a couch, restaurant or a seat on the commuter train.
Mobile technology has so transformed consumer behavior that it now endangers
the financial institutions that don’t have a mobile roadmap or strategy. According
to a recent report, 60% of smartphone and tablet users who switched primary
banking services cited mobile banking as “important” or “extremely important”
in their decision.
Financial institutions are looking for
innovative ways to build relationships
with a customer base that is constantly
adapting to new technology trends
and capabilities. Creating a mobile
presence allows them to stay ahead
of the curve, differentiate product
offerings and inject convenience
and immediacy into the consumer-institution
relationship. It also provides
an opportunity to improve customer
retention through better loyalty
and rewards engagement, reduce
operational costs and produce a
seamless banking experience that’s
universally accessible.
Today’s consumer requires definitive
command of their assets through this
channel, yet craves a simple mobile
experience that instills confidence in
their financial institution.
For FIs, the technology is critical –
but still new. The challenge is how to
create a mobile strategy with a suite
of capabilities so compelling the app
embeds itself into consumers’ daily
lives, yet ensures reliability and security
throughout the process?
FINANCIAL INSTITUTIONS VERSUS
MOBILE: THE CHALLENGE
As central as it has become to
the modern business landscape,
implementing a mobile strategy for
financial institutions comes with its
own set of challenges.
While mobile commerce is growing,
it still comprises a relatively small
market share. An app may reduce
operational costs, but the incremental
revenue produced by each mobile
transaction and split among various
involved banks and mobile network
operators may make it difficult to
justify the investment necessary to
create the platform.
Banks and other financial
institutions also need to consider
whether the potential security risk is
worth the financial reward. Providing
mobile services, such as financial
planning or the remote depositing
of checks, risks the exposure of the
extensive private account and customer
data FIs keep. Theft mitigation could
require limits on mobile deposits or
a means of authentication, such as
fingerprint recognition, password
protection or voice activation. Further,
FIs must provide proactive solutions to
malware attacks, service interruptions
and other potential security breaches.
From a technical perspective, the
legacy systems still in use by financial
institutions may not be equipped to
integrate with today’s mobile software.
If they do, FIs may still be challenged
to create apps for every mobile
operating system (such as Android,
Apple, Windows and Blackberry). In
addition, successful mobile apps could
cannibalize retail traffic – requiring
financial institutions to find creative
mobile solutions for the cross-sell and
upsell of products and services.
THE PERFECT MOBILE ROADMAP
Given technology’s impact on
purchasing decisions, an effective
mobile roadmap is key to keeping FIs
in line with current consumer trends.
The following guidelines will help
ensure FIs get the most out of their
mobile platform.
AN INTEGRATED FUTURE
FOR THE MOBILE AND
FINANCIAL REALM
5

Implement a ground-up strategy.
Mobile is the newest and most
advanced channel in today’s business
landscape. To capitalize on it, FIs
should take care not to model their
strategies on older access methods,
such as desktops. Apps must also be
scalable – able to adapt to consumers’
rapidly evolving needs – but capable of
meeting immediate demands, such as
mobile payments.
Make it simple and intuitive. Credit
and debit cards are today’s preferred
forms of payment, and that won’t
change unless another method with
extensive advantages appears. When it
comes to how they pay, consumers are
looking for three things: convenience,
low cost and security. Mobile banking,
commerce and payment services
should be widely accessible, limit
transaction surcharges and raise
confidence by accepting liability for
fraudulent charges.
Focus on pre- and post-payment.
Financial institutions should offer an
all-inclusive experience that
incorporates customer support, loyalty
program access, relevant additional
purchase opportunities and GPS
services with local offers and locations
of branches and relevant merchants.
FIs can achieve this by establishing a
mobile commerce payment platform
that supports other merchants, brands
and service providers relevant to
banking customers.
Build a network for distribution
and customer acquisition. Aside from
promoting new mobile offerings
directly to their customer base, FIs
should establish partnerships enabling
them to reach even consumers who
don’t use the app. The platform can
then be used for payments and account
services, and additionally serve as an
acquisition tool for partner loyalty
programs and promotions. These
partnerships, and others with mobile
network providers, can also facilitate
long-term success by creating a larger
alliance more capable than single FIs
of taking on dominant players, such as
Google. Institutions must be careful to
deal only with companies that meet
industry standards in technology
and offer their own partnerships
(with credit card leaders, innovative
platforms, etc.) that FIs can leverage
with limited integration points.
DESIGNING ROADMAPS
FOR THE FUTURE
Mobile technology has created
an impressive channel for growth by
changing the day-to-day interaction
between consumers and banks.
However, this “gift” is also wrapped in
limitations, such as security concerns
and challenges in cross-platform
and network compatibility. Financial
institutions must at once be both agile
and carefully strategic.
Those financial institutions who
get mobile right – offering innovation,
simplicity and convenience -- can enjoy
new heights of loyalty and acquisition
in an era when customer-centricity and
relationship building have never been
more important.
MOBILE BANKING,
COMMERCE AND
PAYMENT SERVICES
SHOULD BE WIDELY
ACCESSIBLE, LIMIT
TRANSACTION
SURCHARGES AND
RAISE CONFIDENCE BY
ACCEPTING LIABILITY
FOR FRAUDULENT
CHARGES.
“
”
6

Solve complex problems
before they happen.
With real-time and predictive analytics, we can help you understand how members
are behaving, anticipate how they will behave and inspire more loyal behaviors.
We’ll help you make smarter decisions about complex business problems faster
than your competition. Simple.
Call 800-821-7892 or visit www.kobie.com to learn more.

8
The worldwide population of
smartphone users swelled
past the 1 billion mark in
2012, and today experts
expect 1.75 billion users
by the end of 2014. An estimated 73%
of them want to access their financial
accounts through a mobile app, and
53% want to use that same app to
view their transaction history, and
preferably their Rewards information
in a completely integrated experience.
Enterprise customers provide limitless
possibility, but will require a different
app integrating now-disparate
components of their business.
Mobile apps in the banking and
financial services sectors reduce
business costs and keep brands current
by enhancing the overall customer
experience. These apps offer capabilities
like location-based discounts and
rewards, in-app banking alerts, one-click
bill pay, money transfers, authentication
services and more. For financial
institution brands looking for ways to
interact with their
customers and boost
revenue, the mobile
application platform
presents a significant
opportunity to
present an innovative,
engaging, convenient,
and seamless banking
experience.
In addition,
opportunities abound
across consumer
segments. Some
32 million U.S.
households are
expected to use
mobile banking by
2016, while 64% of
Millennials – a generation
with $600 billion in
purchasing power – already
use mobile devices
regularly to make
purchases.
Given their history
as being part of an established financial
system, with refundable transactions
and government-backed insurance,
banks have clear advantages over other
platforms and virtual crypto-currencies.
However, because they charge higher
fees and are typically slower to adopt
new technology, financial institutions
encourage customer curiosity about
emerging offerings. Even with a mobile
app, FIs must continue exploring new
strategies for engagement – creating
new and relevant offers that provide
choice and scalability to keep the
undivided attention of the modern
customer and fit seamlessly into his or
her daily life.
CUSTOMERS DON’T FIT MOBILE APPS
– MOBILE APPS FIT THE CUSTOMER
For financial institutions, a well-designed
mobile app has the potential
to establish a platform for relevant and
meaningful brand-customer interactions,
build consumer confidence in the brand
and create opportunities for those
brands to drive real customer loyalty.
Focusing on emerging functionalities
– such as digital wallets, geo-location
services and push notifications – can
help financial institutions offer a
seamless and competitive retention
strategy.
DIGITAL WALLETS ARE THE FUTURE
OF FINANCIAL SERVICES.
As smartphone usage increases, so
does the prevalence and acceptance
of digital wallets. By 2017, industry
experts predict 29 million North
Americans will use mobile wallets,
generating $44 billion in revenue. This
surge in popularity is a product of more
discriminating consumers, who seek the
ability to carry fewer payment cards and
prefer easy-to-use apps that support a
variety of needs.
Mobile wallets can entice loyalty
by offering rewards tracking and
integrating multiple virtual and loyalty
currencies into a central location.
Demand is already there, with 55%
of consumers expressing interest in
the use of rewards or points to make
payments through their mobile wallet
and businesses increasingly accepting
the practice.
However, both merchants and
consumers are concerned with
e-commerce security, from online
banking to virtual currencies and
beyond. The Federal Trade Commission
warned in 2013 that free digital
wallets, and even prepaid cards used
online, lack the federal protection of
limited liability attached to credit and
debit cards. Consumers seem willing
to pay for the use of systems that
establish a comprehensive level of
trust and security for mobile wallets.
This puts nimble financial institutions
and interchange networks uniquely
in position to attract and retain new
customers.
by NICOLLE SCHREIBER

A T A G L A N C E
IN-APP MOBILE MESSAGING
AND PUSH NOTIFICATIONS
PROVIDE CUSTOMER
INSIGHT
While promotional email
continues to hold strong
as an effective means of
marketing communication,
the channel is unable to
exploit perishable marketing
opportunities with short
publication cycles. In-app
mobile messaging and
push notifications enable
financial institutions to
enhance customer loyalty
with techniques such as
“flash sales,” which provide
continuous opportunities for
brand engagement.
Of the 60% of consumers
who download mobile apps,
70% have enabled push
notifications, which can
take the form of special
sales, payment reminders
and the status of a recently-placed
order. Since push
notifications use more in-depth
analytics and provide
access to data concerning
the delivery, open rates,
time and engagement of
smartphone users, the
technology can give banks
and financial institutions
more insight into how their
customers behave.
GEO-LOCATION SERVICES
OFFER BOTH RELEVANCY
AND PROTECTION
From a messaging
perspective, geo-location
services enable brands to
send customers relevant
offers and information – as
directed by transactional
and CRM data – when
consumers are near branches
or other points of individual
interest. The lifestyle data
captured can curate partner
merchandising offers, drive
sales and measure how
appealing brand efforts are
to customers, or not.
MAKING THE CASE FOR
MOBILE APPLICATIONS
According to a recent
report on mobile phone app
statistics, apps developed
by FIs only constituted 3%
of all downloads in 2013 – a
surprising result given that
51% of all smartphone users
have used mobile banking
over the past year. For
banks and financial services
brands, the key to growing
this statistic is developing
a mobile app with more
convenience and capabilities
than in-person banking.
The product’s value must
be conspicuous – apps
should operate on a simple
user interface, incorporate
clean design and assimilate
seamlessly into customers’
daily lives. In addition,
they should enhance the
customer experience by
offering in-app messaging,
push notifications, geo-location
services and digital
wallets while ensuring user
security.
Integrating these
solutions within a mobile
app and evolving with
customers’ needs empower
financial brands to
position themselves as an
indispensable, effortless
and central part of the
consumer’s life. Which is
exactly where they should
be.
64% of
Millennials
already
use mobile
devices
regularly
to make
purchases
55% of
consumers
express
interest in
the use of
rewards
or points
to make
payments
Apps
developed
by FIs only
constituted
3% of all
downloads
in 2013
51% of all
smartphone
users have
used mobile
banking
over the
past year
73% of
smartphone
users want
to access
their
financial
accounts
through a
mobile app
64%
55%
51%
3%
Experts expect the population of
smartphone users to increase to
1.75 billion by the end of 2014
32 million U.S. households are
expected to use mobile banking by
2016
By 2017, experts predict 29 million
North Americans will use mobile
wallets
73%
100
0
01
02
03
9

F E A T U R E ANALYTICS AND SEGMENTATION:
A FINANCIAL SERVICES PERSPECTIVE
10

TARGETING
AND
REWARDING HIGH
VALUE
CUSTOMERS
by DAVID ANDREADAKIS
KOBIE QUARTERLY QUARTERLY REVIEW OCTOBER REVIEW 2014
13
11

12
With bank revenue
declines tied to
persistently low
interest rates, high
compliance costs and the adoption
of unconventional banking methods
(like PayPal and Google Wallet),
financial institutions are seeking new
ways to improve their bottom line.
Loyalty programs are emerging as an
attractive option, with recent research
demonstrating most customers only
align 46% of their deposit share with
one FI brand and 70% of banks believe
new customer acquisition is more
expensive than retaining existing
customers.
Banks are shifting attention to their
“most valuable” customers—a high-net-worth,
loyal demographic with greater
financial needs. Wealthy customers—
those with assets valued anywhere
from $1 million to $30 million--are six to
ten times more profitable than regular
customers. While they constitute no
more than 30% of financial institutions’
customer bases, they are responsible
for as much as 60% to 70% of total
customer profits.
The demographic has so much
purchasing power that The Boston
Consulting Group estimated those
within the category worldwide had
investible assets of some $122 trillion,
enough to buy all New York Stock
Exchange securities ten times over.
No longer are large retirement
savings pools or rapidly developing
economies the most attractive places
to find new, high-value capital. After
the downturn, Bain Capital theorized
wealthy investors’ new needs for
diversification would be equally
successful drivers.
To convince these existing high-wealth
customers to trust a given
institution with even more of their
assets, FIs need to find out what
customers really want and need from
their providers.
Transitioning to this new revenue
strategy will require a well-executed
plan that emphasizes cross-sell, upsell
and a return to data and analytics-driven
segmentation. In today’s
competitive market, FIs need clearly
defined motivators for customer
behaviors within different income
brackets, particularly for those expected
to have a high net worth in the future.
HIGH-WEALTH CUSTOMERS
ARE KEY TO REVENUE GROWTH
While every customer is important,
given the value of the assets they
possess, the high wealth customer
F E A T U R E ANALYTICS AND SEGMENTATION:
WITH THIS SELECT
CUSTOMER SEGMENT
CONTRIBUTING MORE
THAN 60% OF A BANK’S
PROFITABILITY, THE STAKES
ARE VERY
HIGH
A FINANCIAL SERVICES PERSPECTIVE

13
segment has a much greater potential
to make a significant difference in bank
revenue than lower-income segments.
By using segmentation and the analysis
of existing data to isolate this customer
group, banks and financial services
providers can get a much closer look
into the individual customer profiles and
take action to ensure the services they
receive match their financial needs – or
anticipate their future ones. To gain
trust and capitalize on this investment,
however, banks and financial services
providers must identify the three or
four attributes that differentiates their
behavior and shape their relationships
accordingly.
TOO MUCH ATTENTION
CAN GET TOO DIFFICULT
Banks need to reach an
unprecedented level of understanding
for the preferences and motivations of
wealthy customers. Delivering on them
and connecting on a personal level
motivates further engagement with the
brand. Key to the equation is finding
a balance between relevancy and
practicality.
In an effort to interact with
customers on any level, many financial
institutions waste time and resources
offering incentives and rewards for
products customers already intended
to use – or even have. However,
improved targeting and motivation
are easier touted than implemented.
Advances have improved analysis
and segmentation across industries,
but banks are limited by their historic
reluctance to invest in new technologies.
For high-wealth customers, large
investments in an FI brand usually
involve less risky, fixed-income securities
with a pre-determined return on
investment. Historically, banks only start
courting these customers as the end of
their term approaches—creating renewal
opportunities, but limiting cross-sells
and upsells. Instead, financial institutions
should communicate with these
customers on a regular basis, build a
high-engagement relationship over time
by learning whether needs are being
met and whether they should address
any core concerns about the brand.
Instrument maturation dates are too late
to operate on, as most customers will
have already researched any next steps
and alternative institutions.
The key for FIs is to cultivate a
situation in which a customer has been
treated so well he or she feels a moral
obligation to continue the relationship.
WHAT DO HIGH WEALTH
CUSTOMERS WANT?
Following the late-2000s recession,
wealthy customers, more than ever,
demand to understand how their
financial services providers are
simultaneously protecting their assets
and producing strong returns. They also
seek an emotional component to their
relationship with the bank —knowing
they can trust a given brand, and
perceive a direct interest from that bank
in their well-being beyond wallet size.
These customers also crave consistent
follow-up and reassurance that their
immediate needs are a priority for the
bank to meet. They’re accustomed to
concierge services and single points
of service for all needs, be it ordering
or cashing checks or purchasing new
financial products.
An example of this can be seen
at BB&T private banking. A former
employee said the bank made
everything negotiable to high-net-worth
clients, from interest rates on products
ranging from CDs to checking and
deposit accounts, bank fees and closing
costs on mortgages or home-equity
loans.
For the best chance at retaining
customers in this income bracket,
FIs need targeted strategies that
include efforts to enhance the overall
customer experience, bridge the gap
between older and more modern
high-wealth customers and keep this
demographic talking about the brand.
From hotel stays to concierge services
and personal shopping, customers of
this status are used to receiving the
highest levels of attention. FIs are no
exception, and should strive to offer
a holistic experience that includes
asset allocation, insurance assistance,
retirement/ tax planning and debt/trust
fund management.
HIGH VALUE, HIGH STAKES
Future leaders in the financial
sector will be those who understand
that segmentation is not a one-time
ordeal, but an ongoing process as is
the analysis of customer behaviors and
preferences found in their data. It will
change as demographics, customer
needs and technology change, and give
financial institutions the tools they need
to personalize products and services for
high-wealth customers.
So how can institutions prospect this
valuable customer segment? We see
it through the application of analytics
to data and ongoing evaluation of
currently held financial information.
Wealthy clients are more likely to spread
investments among advisors and various
account types, to pay lower fees and
have more fee-based accounts than
mutual fund investments.
The bottom line: With this select
customer segment contributing more
than 60% of a bank’s profitability, the
stakes are very high. Banks simply can’t
afford not to invest in analytics that will
help them not only identify high-value
(or potentially high-value) customers,
but help them cater to their very
exacting needs.

5 HURDLES
THAT
BANKS AND
FINANCIAL
INSTITUTIONS
MUST
OVERCOME
creating a total
relationship banking
strategy beyond
acquisition
by MARGARET MERAW
strategy

15
The Great Recession of the late 2000s
undoubtedly challenged financial institutions
to engineer new profit centers. With real estate
loans impossibly risky, liquidity scarce and
revenue lines from interchange fees crimped
by regulators, many FIs went back to basics. The underlying
goal was this: Build a comprehensive strategy that increases
satisfaction and confidence among their best customers.
With surveys indicating 63% of consumers still believe
U.S. financial institutions are no more secure than they
were prior to the recession, the industry has more work to
do. The challenge for FIs is finding new ways to develop
deeper relationships with customers and communicate how
they’re adding value to consumers’ daily lives. The solution
for some is total relationship banking, a philosophy that
incorporates brand-encompassing loyalty programs with
the core notion that customers should be the impetus for
all business operations.
Although the idea was first introduced in the early
2000s, it wasn’t until 2009 that FIs began to apply this
philosophy to the integration of loyalty, mobile and online
portals. When conceived and executed correctly, total
relationship banking has demonstrated significant increases
in cross-sell and upsell opportunities, reduced attrition and
improved profit margins.
TOTAL RELATIONSHIP BANKING
PUTS THE CUSTOMER FIRST
Historically, financial service companies have attracted
customers with a products-based approach.
Marketing collateral would variously
emphasize benefits in home equity
lines, interest rates and debit card
fees. Business came, but it also went. Customers were
persistently prone to flee if they lost interest in the feature
that first attracted them.
Conversely, a total relationship banking strategy seeks
to build trust and deep ties with a consumer, nurturing
a dynamic that culminates in the consolidation of entire
financial need portfolios within an institution. The approach
relies on high-level customer satisfaction, enticing rewards
programs and even personalized products conceived out of
the vast universe of customer data collected by FIs.
Other points of potential friction include:
1. Integrating services under one customer I.D.
Customers holding multiple accounts with the same
bank are likely identified by separate IDs created at the
point of sale and integrated with third-party solutions that,
over time, have failed to communicate. Some financial
institutions will find it challenging to pull them into a
centralized location.
2. Extracting private data from separate departments.
FIs protect personal information by storing it in separate
departments. The implementation of a enterprise-wide
loyalty program will require the consolidation of such data
to provide appropriate rewards – not just initially, but on a
continual basis.
3. Value propositions and liability acceptance.
When FIs integrate across multiple products, each
party involved needs to accept the liability
that comes with awarding
points for various

16
transactions. To convince siloed departments to accept
this liability, FIs must ensure all participants understand the
value of rewarding customers for their loans, mortgages and
additional accounts.
4. Poor marketing in an era of distrust.
Because total relationship banking involves the integration
of multiple product groups into a single solution, and each
group has its own marketing strategy, FIs often struggle to
create a unified marketing approach. For example, some
departments may wish to engage consumers through mobile
and social media strategies, while others have no interest in
those channels at all.
5. Government regulations and stricter protocols.
The Credit Card Act of 2009 and Dodd-Frank legislation
are changing the way FIs operate and disclose information to
customers. The regulations apply even to loyalty programs,
causing some banks to pause rewards program launches until
they see how others within the sector are affected.
IT’S A MARATHON, NOT A SPRINT
Total relationship banking has the unique ability to
simultaneously strengthen consumer confidence and increase
profit. But it won’t happen overnight. True success is achieved
when operations become so seamless that customers feel
they are interacting with a unified company that appreciates
and rewards their business – not disparate departments for
each of their accounts.
To achieve this goal, banks and financial services brands
must conceive, evaluate and execute a strategy that analyzes
results over several months, or even a year. It will take time to
marry various customer initiatives, but it’s worth the effort.
The following are best practices to consider when
implementing a total relationship banking strategy:
• Organize and integrate financial databases so customers
can see their profiles and account history through one portal,
in real time.
• Establish a collective tone and standard of messaging
to avoid confusion about the bank’s value proposition or the
products and services it offers.
• Develop a loyalty program which limits churn and
leverages the data collected into behavior and preference
insights.
• Create opportunities for team members to collaborate
with one another, ensuring employees understand the full
scope of the products and services in use.
THE GOAL: CUSTOMER ENGAGEMENT
BEYOND ACQUISITION
Unlike traditional banking, total relationship banking goes
beyond the scope of acquisition and focuses on the big
picture: long-term revenue growth.
It starts with the simple premise of focusing on customers
who have been most valuable – in this case, those who’ve
interacted with the brand regularly and over an extended
period of time. And it concludes in the transformation from a
simple brand to an integral part of consumers’ financial lives
and future planning.
The approach also proves banks don’t have to discover
new revenue streams to compete on Wall Street. They just
need to keep the customers they already have.

authors
MICHAEL HEMSEY
NANCY BERG
President
VP of Client Services and Partnerships
As President of Kobie Marketing, Michael
Nancy is responsible for all aspects
is responsible for leading all facets of the
of Account Management and building
loyalty marketing organization including
strategic and tactical marketing
business development, IT initiatives, client
partnerships that differentiate Kobie’s
services, as well as the overall direction
client programs. Nancy takes great pride
of the Kobie brand. For 20 years, Michael
in delivering against Kobie’s mantra that
has cultivated a rich background in
we will never sacrifice an existing client
client services, product development,
for a new business opportunity, and
marketing, technology and operations
that we will do what we say we will do
through several key posts. Prior to Kobie
each and every day. She is a strong and
Marketing, Michael was Executive Vice
trusted leader, that has nearly 20 years’
President of TSYS Loyalty (formerly ESC
experience in Customer Loyalty Marketing
Loyalty) and led the loyalty marketing
working in several industry verticals with
implementation and relationship
top brands including Verizon, RBC Bank,
management teams serving the world’s
AMC Theatres, Hawaiian Airlines, Bank
largest issuers and retailers.
of America, Northwest Airlines, US Bank,
Westin Hotels and others.
MATT STEIN
NICOLLE SCHREIBER
VP of Customer Experience
Director of Partnership Marketing
and Agency Services
Nicolle has 18 years’ experience
the Matt serves as the head of Kobie’s
in Partner/Vendor Relationship
Customer Experience & Agency Services
Management, including Retail purchasing,
capabilities. With over 15 years of
loyalty program management, and
marketing experience in senior leadership
product management. She developed an
roles, he drives industry-leading loyalty
interest in purchasing/product marketing
engagement and marketing solutions
after working in a retail store during her
that span the online, mobile, social, print
early years of college. Prior to joining
and broadcast media channels as well
Kobie Marketing, Nicolle worked in buying
as the full customer journey from digital
and product management at several
channels to physical locations.
companies including Bealls Inc. and FIS.
about Notable is her 15 years as Buyer for Bealls
Inc. Nicolle holds a Bachelor’s degree
DAVID ANDREADAKIS
from St Leo College.
VP of Loyalty Strategy
Andreadakis has extensive experience
MARGARET MERAW
analyzing the strategic and financial
VP of Loyalty Operations
aspects of loyalty strategy and program
In her role at Kobie Marketing, Margaret
development for clients and their
is responsible for all aspects of the
customers, as well as providing insights
organization’s day-to-day operations
that will help enhance Kobie’s design,
including oversight of the Project
analytical, behavioral and platform
Management office, process management,
offerings.
Tier I and Tier II Call Center Operations,
as well as management of internal and
outsourced Fulfillment. This role is vital
to the organization to ensure flawless
execution and ongoing endurance of
Kobie’s client’ programs.
KOBIE QUARTERLY REVIEW 19 17

W E A R E K O B I E FIND OUT MORE AT INFO@KOBIE.COM
Kobie Marketing is a global leader in loyalty marketing and an industry pioneer, delivering end-to-end strategy, technology and program
management solutions. Kobie drives results and ROI through Kobie Alchemy®, a best-in-class loyalty marketing technology platform.
Kobie Marketing, Inc. @Kobie_Marketing Kobie Marketing info@kobie.com

Kobie Quarterly: Financial Services Edition, October 2014

Recommended

Recommended

More Related Content

Recently uploaded

Recently uploaded (20)

Featured

Featured (20)

Kobie Quarterly: Financial Services Edition, October 2014