FIS 2011 Consumer Loyalty and Profitability Report

Profitable Customer Loyalty in
Retail Banking
FIS Enterprise Strategy
November, 2011

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

Table of contents

Introduction 3

Defining customer loyalty 8

Customer profitability and loyalty 14

Segments’ financial behaviors 18

Segment fees 31

Segment motivators 34

Strategies 42

Appendix: Segments by P$YCLE 50

2

Generating profitable bank customer loyalty

• Measuring customer loyalty to financial institutions (FIs) is complex.
– Consumers’ perceived costs of switching financial institutions are high.
– Our research shows that customers who merely stick with FIs because of the switching hassle
aren’t loyal and don’t keep a large share of their deposits and/or loans with their primary
checking account provider.
– A long-term customer doesn’t necessarily equal a loyal customer.
• Some customers are “loyal” in some aspects of their behaviors — e.g., they trust and
would recommend their FI, they wouldn’t leave their FI — but their transactional
behaviors aren’t aligned; many of them are not profitable customers. Having loyal
customers helps, but doesn’t guarantee, profitable relationships.
– In order to maintain healthy relationships with customers, the FI needs both loyal and
profitable customers.
• This presentation features recent research on elements that drive customer loyalty
and how FIs can foster loyal relationships that, in turn, can increase their percentage
of profitable customers.

3

Research objectives and methodology

• Study Objective:
– Determine strategies and tactics to support profitable consumer loyalty
• Segment customers based on financial institution loyalty and profitability
• Determine measures of loyalty most indicative of value creation
• Define strategies and tactics to engender consumer loyalty that leads to value creation

• Methodology:
– 44 question online survey
– Representative sample of 3,000 adults with checking accounts (and oversample of 345
community bank customers)
– Split evenly by gender (51% female; 49% male)
– Conducted in August, 2011
– Sample provided by Survey Sample International

4

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

Generation Annual Household Income

$125K+
7%
Matures $90K to
15% Gen Y $125K
12% Under $30K
23%*
Older 25%
Boomers
13% $60K to
$90K
Younger 21%
Gen X $30K to
Boomers 29% $60K
20% 35%

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

* Read as: Gen Y respondents compose 23% of the survey respondent pool
Source: FIS Enterprise Strategy, August 2011; n = 3,000 5

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

Type of Financial Institution for Primary DDA Relationship
Internet-only bank, Other, 1%
2%

Credit union,
19%

Large national
Community bank, 51%*
bank, 9%

Regional bank,
17%

* Read as: 51% of the survey respondent pool holds their primary DDA relationship with a large national bank

Table of contents

Introduction 3




Segment fees 31


Strategies 42


7

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

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

Strongly disagree 4%
Disagree 15%
Disagree 5%

Somewhat disagree 6%

Neutral 17% Neither agree nor disagree 17%
Agree 68%
Somewhat agree 25%

Agree 23%

Strongly agree 20%*

* Read as: 20% of respondents strongly agree that “switching my primary checking account to a different financial institution is more hassle than it’s worth”

Consumers resist switching even when
overcharged or offered better rates

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

Your primary checking account
provider overcharged you
28% *

They offered better interest rates 18%

They offered a customized loyalty and rewards
14%
program based on your specific needs

They offered better online and mobile
banking services
10%

* Read as: 28% of respondents are likely to switch to a different checking account provider in their area if their current provider overcharged them.

Consumer loyalty is multidimensional and
segments overlap

Types of customer loyalty

• Functional: Superior products and/or services
create value
– Trust in the brand’s products/services
– Willingness to recommend
• Transactional: Concentrated spending with a Functional
brand
– Willingness to make repeat purchases
– Share of wallet increases
• Emotional (most sought and least attained):
Customers identify with the brand based on Transactional Emotional
appealing to their values
– Personally relate to representatives of the brand
– Switching is minimal

10

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

Loyal vs. Non-Loyal Loyal customers showed all the measures
Primary Checking Account Customers of at least one loyalty type:
Functional measures:
• FI has the product /service expertise they need;
• Are willing to recommend the FI;
• Have made at least 2 recommendations;
and
• Trust in the FI
Loyal Transactional measures:
Non-loyal 45%* • Prefer using the FI where they have their primary
checking account to meet all of their financial needs;
55% and
• Willing to make repeat purchases with FI
Emotional measures:
• Have personal relationships with FI employees;
and
• Even if overcharged, would not defect from FI

* Read as: 45% of primary checking account customers exhibit at least one type of loyalty

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

Mix of loyalty types
Functional only
10%

Functional
and
Transactional
18%*
Functional and Emotional
1%
All three
3%
Transactional only Emotional
12% only
2%
Transactional and Emotional
<1%

* Read as: 18% of primary checking account customers have both functional and transactional loyalty

Table of contents

Introduction 3




Segment fees 31


Strategies 42


13

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

Profitable vs. Unprofitable Primary Our estimate of customer profitability is based on:
Checking Account Customers Revenues:
• Liability spread (Funds Transfer Price less interest rate)
based on checking, savings, money market and
certificate of deposit balances
• Net interest margin based on balances maintained on
Unprofitable credit card, automobile, educational, residential
19% mortgage and home equity loans maintained with the
primary checking account provider
Profitable • Monthly fees paid on the primary checking account
39%
• Debit card interchange
Expenses:
Potentially • Channel servicing costs for the primary checking account
Profitable based on the number of channel interactions per month
42%* • Payment servicing costs for the primary checking account
based on the number of payment transactions per month
• An estimate of overhead for every checking account
household

* Read as: 42% of primary checking account customers are potentially profitable to their primary checking account provider

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

Unprofitable Loyals Potentially Profitable Loyals Profitable Loyals
9% 18% 17%
Loyalty to Primary FI

Unprofitable Non-loyals Potentially Profitable Non-loyals Profitable Non-loyals
10%* 24% 22%
Low

Low High
Profitability to Primary FI
* Read as: 10% of consumers are in the “Unprofitable Non-loyals” segment.

Segments differ demographically and
attitudinally
Profitable • Well-educated married couples with higher • More likely to stick with known brands
Loyals incomes • View switching as a hassle
• More Matures • Most confident about having comfortable
(17%) • More self-employed retirement
• Positive net worth
Profitable • Well-educated married couples with higher • More likely to switch FIs motivated by
incomes better online/mobile, overcharging, better
Non-loyals • More employed for someone else interest rates
(22%) • Positive net worth • Lack time and knowledge to manage
• Large bank customer financial affairs

Potentially Profitable • Majority are females with less-than- • More likely to stick with known brands
Loyals average education and low to lower-middle • View switching as a hassle
income
(18%) • In debt
Potentially Profitable • Higher-than-average %s of students • More likely to switch FIs motivated by
Non-loyals • Above average education loyalty program, overcharging, better
• Average income interest rates
(24%) • In debt • Lack time and knowledge to manage
financial affairs

Unprofitable • One-quarter retired • More likely to stick with known brands
Loyals • Tend to be single • View switching as a hassle
• Lowest income • Don’t think loyalty programs offer enough
(9%) • Lowest education level benefits to sign up
• Low amount of assets and debt

Unprofitable • Gen Y or Gen X • More likely to switch FIs
Non-loyals • Lower levels of education and income • Lack time and knowledge to manage
• Highest unemployed financial affairs
(10%) • Low amount of assets and debt

Bolded characteristics indicate significant differences from other segments

Table of contents

Introduction 3




Segment fees 31


Strategies 42


17

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

Profitable Profitable Potentially Potentially Unprofitable Unprofitable
Loyals Non-Loyals Profitable Profitable Loyals Non-Loyals
Loyals Non-Loyals

Profitable: 36%
Credit union 19%* 17% 24% 21% 12% 8%
Loyal: 55%

Profitable: 34%
Community bank 18% 16% 26% 23% 10% 6% Loyal: 54%

Profitable: 37%
Regional bank 17% 20% 19% 26% 11% 7%
Loyal: 47%

Profitable: 41%
Large national bank 16% 25% 15% 26% 8% 10% Loyal: 39%

* Read as: 19% of consumers who hold their primary DDA relationship with a credit union are “Profitable Loyals”

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

Profitability Indices by Segments

350
Profitable Profitable Potentially Potentially Unprofitable Unprofitable
Loyals Non-Loyals Profitable Profitable Loyals Non-Loyals
300 Loyals Non-Loyals

250

200

150

Average = 100
100

50

0

-50 Profitability index to primary checking account provider Overall profitability index

Read as: “Profitable Loyals” are more than 3 times as (207% more) profitable to their primary DDA provider than average

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

Average Deposit and Loan Balances Held with Primary DDA Provider
$160,000

$140,000 $136,458*

$118,090
$120,000

$100,000
$78,778

$80,000 $79,484
Loans Held with Primary DDA Provider
$60,000
Deposits Held with Primary DDA Provider

$40,000
$57,681
$20,000 $38,606
$6,658 $6,133 $3,095 $3,569
$0
Profitable Loyals Profitable Non- Potentially Potentially Unprofitable Loyals Unprofitable Non-
loyals Profitable Loyals Profitable Non- loyals
loyals

* Read as: “Profitable Loyals” hold combined deposit and loan balances of $136,458 with their primary checking account provider.
Note: Deposits include checking, savings, MMDA and CDs. Loans include first and second mortgages, credit card balances and auto and educational loans.
20
Source: FIS Enterprise Strategy, August 2011; n = 3,000

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

Deposit Balances by Segment
$70,000

Total deposits
$60,000 With primary checking account provider

$50,000

$40,000 82%*

$30,000
82% 68%
68%

$20,000

$10,000

90% 84%
$0 55% 26%
loyals
* Read as: the primary FI captures 82% share of deposit balances from “Profitable Loyals”
21

Credit unions have the highest deposit shares
of potentially profitable customers

Primary Share of Deposit Balances
75%*
Profitable Loyals 83% Large national banks
85%
89% Regional banks
70% Community banks
Profitable Non-loyals 64%
66% Credit unions
63%

60%
Potentially profitable Loyals 36%
54%
60%

26%
Potentially profitable Non-Loyals 19%
31%
54%

90%
Unprofitable Loyals 89%
94%
94%

85%
Unprofitable Non-loyals 88%
91%
74%

Read as: the primary large national bank FI captures 75% share of deposit balances from “Profitable Loyals” 22

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

Loan balances outstanding per segment
$180,000

$160,000
Total loans and credit card debt
$140,000 With primary checking account provider

$120,000

$100,000

$80,000

$60,000
45% 45%
$40,000

$20,000
34% 44%
$0 4% 3%
loyals

* Read as: the primary FI captures 45% share of loan balances from “Profitable Loyals”

Potentially profitable customers have almost no
loans with their primary DDA providers
Primary Share of Loan Balances

42%*
Profitable Loyals 51% Large national banks
45%
34% Regional banks
47% Community banks
Profitable Non-loyals 54%
44% Credit unions
27%

4%
Potentially profitable Loyals 6%
0%
3%

3%
Potentially profitable Non-Loyals 4%
0%
4%

39%
Unprofitable Loyals 32%
37%
29%

36%
Unprofitable Non-loyals 65%
26%
58%

*Read as: the primary large national bank FI captures 42% share of loan balances from “Profitable Loyals” 24

Among profitable segments, large banks
capture the most loans
Profitable Loyals Profitable Non-Loyals
Avg. # of Loans Held with Primary DDA Provider Avg. # of Loans Held with Primary DDA Provider
.90*

.75 .74
.27
.67 Credit card
.16
.59 .25
.04 .13 .56 .55 .57
.04 .03
.01 0.03 Student loan
.12 .08 .15
.11 .05 .16
0.15 .26 .05
.10 .02 .03
.15 Auto loan .10
.09
.19 0.09 .17
.12 .07
.14 .10
Home equity loan .08
.31 0.28
.23 .23 .25
.17 .20
.15
First mortgage

Large Bank Regional Community Credit Union Large Bank Regional Bank Community Credit Union
Bank Bank Bank

*Read as: “Profitable Loyals” hold an average of .90 loans with their primary DDA provider
25

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

Potentially Profitable Loyals Potentially Profitable Non-loyals

.19*
.17 .18

.15
.08
.12 .11 .09
Credit card .11
.09
.05 .11 .09
.02 Student loan
.06 .02
.01 .03 Auto loan .01 .09
.06
.03
.03
Home equity loan .01 .02
.03 .01 .05
.01 .02
.02 .01 .03 .01
.01 .01 .01 First mortgage .01 .01 .01
Large bank Regional bank Community Credit union Large bank Regional bank Community Credit union
bank bank

* Read as: “Potentially Profitable Loyals” hold an average of .19 loans with their primary DDA provider
26

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

Unprofitable Loyals Unprofitable Non-loyals

.40
.28

.15
.23*
.21
.20 .15 Credit card

.21
.13 .07 Student loan .20

.16 .04
Auto loan .19
.05 .06 .13
.01 .07
.02
Home equity loan
.03 .03 .01 .06
.04 .01 .04
.02 .01
First mortgage
.03 .04
.05 .04 .05 .06 .04
.03 .03 .02
Large bank Regional Community Credit union Large bank Regional bank Community Credit union
bank bank bank

* Read as: “Unprofitable Loyals” hold an average of .23 loans with their primary DDA provider
27

Unprofitable segments have highest number of
channel contacts and most expensive to service
Number of Channel Contacts with Primary Checking Account Holder
in Past 30 Days

20.8 Automated/IVR
19.9 call
1.3
1.3 0.6
0.7
2.3 Telephone call
16.0 2.3 with live person
15.3* 14.8 1.0 14.5
0.8 0.5 2.9
0.6 0.7 0.7 2.7
0.5 2.0 0.5 In-person trips
2.1 1.7 1.7
1.9 3.5
1.6 3.0
1.6 1.6
2.1 Mobile banking
2.6 2.4 2.1

Primary ATM
9.8 10.1 tranactions
7.8 8.5 7.8
7.5

Online banking

Profitable Loyals Profitable Non- Potentially Potentially Unprofitable Unprofitable Non-
loyals Profitable Loyals Profitable Non- Loyals loyals
loyals
* Read as: on average, “Profitable Loyals “made 15.3 contacts with their primary checking account provider through all of these channels in the past 30 days

Loyal customers and unprofitable segments
have higher payment transactions
Number of Payment Transactions per Month with Primary Checking Account Provider
28.6
30.7* 0.7 Bank credit card for cash
0.5
0.6 1.0 27.7 back
0.6
0.8
27.0 26.6 2.1 0.7 Electronic transfer of funds
1.5 0.7
0.6 25.1 0.9 to another FI
2.3 0.7 0.3
0.6 2.3
0.8 0.5 1.8
1.2 0.3
0.6
P2P payment
1.5 2.2
2.5 0.8 1.9
2.0 1.2
2.2
1.8 Bank debit card for cash
1.9 2.0 3.6
4.8 2.2 back
2.1 4.0
3.0 Direct deposit into primary
3.4
3.5
2.9 checking account
4.3 3.7
3.1 5.5
Automatic bill pay
4.2 3.8

3.8 Bank credit card for
6.3 2.8 purchase
4.7 3.9
Online bill pay
12.9
9.5 8.6 Paper check
7.0 6.6 7.4

Bank debit card for
purchase
Profitable Loyals Profitable Non- Potentially Potentially Unprofitable Unprofitable
loyals Profitable Loyals Profitable Non- Loyals Non-loyals
loyals
* Read as: on average, “Profitable Loyals “made 7.0 purchases with the debit card of their primary checking account in the past 30 days

Table of contents

Introduction 3




Segment fees 31


Strategies 42


30

Loyal segments are less likely to pay fees and
pay lower fees; profitable segments pay the
highest fees
Percentages Paying Fees and Average Monthly Fees with
Primary Checking Provider
50% $17.01 $18
$16.09 47%
Percentage paying fees – non-loyal

45% $16
42%

Average monthly checking account fees
45%
Percentage paying fees - loyal

40% 38% $14
35%
35%
$12
29%
30%
$10
25%
$5.98 $6.75 $8
20%
$6
15%

$2.63 $4
10%
$4.07
5% $2

0% $0
Profitable Loyals Profitable Non- Potentially Potentially Unprofitable Unprofitable
loyals Profitable Loyals Profitable Non- Loyals Non-loyals
loyals
Percentage paying fees Average amount of fees

* Read as: 35% of “Profitable Loyals” pay fees to their primary checking account provider

Community bank customers are least likely to
pay fees and pay substantially less
Percentages Paying Fees and Average Monthly Fees with Primary Checking Provider
100% $14

90% $11.98
$11.35 $12

Average monthly checking account fees
80%
$10.42

70% $10
Percentage paying fees

60%
$8

50%
42%
39% 39% $6
40% 36%

30% $4

20%
$2
$2.33
10%

0% $0
Large national bank Regional bank Community bank Credit union

* Read as 42% of large national bank customers pay fees to their primary checking account provider

Table of contents

Introduction 3




Segment fees 31


Strategies 42


33

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

Criteria for Selection of a Primary Checking Account Provider
(multiple response)
Greatest appeal to…

• Potentially Profitable Loyals
Free services (checking, bill pay, etc.) 44%*
• Unprofitable Loyals

Branches at convenient locations 37% • Fewer credit union customers

Online or mobile banking 22%

• Profitable Non-loyals
ATMs at convenient locations 22%
• Large bank customers

• Profitable Loyals
Reputation of the financial institution 18%
• Unprofitable Loyals

Previous experience with the financial
15% • Profitable Loyals
institution

Low minimum balance requirements 14%

Low fees for services 13% • Credit union customers

* Read as: free services is an important criteria for FI selection among 44% of consumers

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

Current Participation in FI Customer Loyalty Programs

25%* Profitable Loyals
24%
Checking account rewards separate 17% Profitable Non-loyals
Check account rewards
from cards 13% Potentially Profitable Loyals
17%
Potentially Profitable Non-loyals
17%
Unprofitable Loyals
34% Unprofitable Non-loyals
34%
18%
Credit card rewards
21%
16%
18%

22%
21%
21%
Debit card rewards
17%
22%
19%

* Read as: 25% of “Profitable Loyals” participate in checking account rewards programs

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

Current Participation in FI Customer Loyalty Programs

23%* Large banks
Checking account rewards separate from 14% Regional banks
Check account rewards
cards 13% Community banks
15% Credit unions

31%
15%
Credit card rewards
10%
20%

26%
14%
Debit card rewards
10%
11%

* Read as: 23% of large bank customers participate in checking account rewards programs

Once enrolled in programs, loyal customers are
more influenced by them to boost retention
Level of Influence on Where Maintain Primary Checking Account
(top 2-box on 7-point scale)

49%* Profitable Loyals
Profitable Non-loyals
36%
Potentially Profitable Loyals
Checking account rewards
Check account rewards 39% Potentially Profitable Non-loyals
separate from cards 24% Unprofitable Loyals
51% Unprofitable Non-loyals
24%
Loyal segments

36%
34%
40%
Credit card rewards
28%
46%
21%

44%
29%
30%
Debit card rewards
26%
42%
20%

* Read as: 49% of “Profitable Loyals” who participate in checking account rewards are influenced by them to maintain their primary checking
account at their FI 37

Half of customers could be motivated to move
more business to their primary DDA provider
Motivators to Bring More Business to Primary FI
Notes
Customer loyalty program that offers me
the ability to design my own Rewards
rewards 16% • Greatest appeal to Potentially Profitable segments
program from a menu of options

Lower fees because I used self-service
Self-service
• Greatest appeal to Non-loyal segments
13%
forms of banking • Least appeal to community bank customers

Preferred interest rates on my accounts
Interest
based on total balances
12% • Greatest appeal to Profitable segments

The ability to conduct banking
transactions at a branch with staff staff
Branch who 5%
recognize and know me

Service fees based on what and how
much I use my accounts instead of flatfees
Service fee 4%
uniformly charged to all customers

Not interested in any tradeoff options
Not interested 51%

* Read as: 51% of consumers are not interested any tradeoffs options to move more business to their primary checking account provider

Customers view cash-back rewards as the most
valuable type of loyalty program
Top 5 Valuable Types of Loyalty Program Rewards
(Select the 2 that are most valuable to you)

53%*
• Profitable Non-loyals
Cash back awards
• Large bank customers

Loyalty points that can be redeemed • Potentially Profitable Loyals
22%
for gift cards • Potentially Profitable Non-loyals

Preferred interest rates on deposits 11%
• Profitable Loyals
and/or loans at the bank • Profitable Non-loyals

Travel awards (e.g., airline lines) 9% • Profitable Non-loyals

Loyalty points that can be redeemed 9%
for merchandise

* Read as: 53% of consumers view cash-back rewards as most valuable

Email and “snail mail” are most desired
communication channels, but appeal varies
Preferred Method of Receiving New Product Information
Email sent to my email account
on my computer 51%*

Information mailed to me 49% • Community bank customers

At my bank’s online banking site
(after I’ve logged in)
41%

At my bank’s website 36% • Credit union customers
Conversation with a representative at • Loyals
28%
my local bank branch • Community bank customers
Email or text message sent to my mobile
phone
15% • Large bank customers

At my bank’s ATM machine 14%

Telephone call from my bank 12%

I prefer NOT to be contacted by my bank
7% • Potentially Profitable
about new products/services • Unprofitable Non-loyals

* Read as: 51% of FI customers selected mail as a preferred way to learn about new products

Table of contents

Introduction 3




Segment fees 31


Strategies 42


41

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

High

Unprofitable Loyals Potentially Profitable Loyals Profitable Loyals
9% 18% 17%

Goal: Increase Goal: Maintain and
Loyalty to Primary FI

Goal: Break even profitability deepen relationship

Unprofitable Non-loyals Potentially Profitable Non-loyals Profitable Non-loyals
10% 24% 22%

Goal: Increase loyalty Goal: Increase loyalty;
Goal: Break even and profitability deepen relationship
Low

Low High
Profitability to Primary FI

42

Unprofitable Non-loyals
Goal: Break even

• Risk of switching if fees increased:
– High (if they can find another FI)
• Fees — adjust according to usage
– Fees structured to migrate to self-service banking and away from
high-cost channel usage
– Link fee increases to channel usage; limit the number of free high-
cost transactions
Package configuration
– Increase requirements for fee waivers
“Basic” checking/savings with
• Credit card rewards for credit-worthy minimum balance and self
service and/or checkless
– Basic offer: Cash back, merchant gift cards
checking required to reduce
fees
Revolving credit tied to
checking/savings balances
Prepaid card program

43

Unprofitable Loyals
Goal: Break even

– Low
• Fees — adjust according to usage
– Fees structured to migrate to self-service banking and away from
high-cost channel usage
– Link fee increases to channel usage; limit the number of free high-
cost transactions
Package configuration
– Increase requirements for fee waivers
“Basic” checking/savings with
• Credit card rewards for credit worthy minimum balance and self
service and/or checkless
– Basic offer: Cash back, merchant gift cards
checking required to reduced
fees
Revolving credit tied to
checking/savings balances
Prepaid card program

44

Potentially Profitable Non-loyals
Goal: Increase loyalty and profitability

– Relatively high
• Fees — use incentives to increase their profitability and
mitigate fee increases
– Migrate loans to primary FI to avoid fee increases and obtain
“preferred” interest rates
– Migrate to self-service banking through lower fee package option Package configuration
– Increase minimum balances for combined checking/savings to get
“Basic Loyalty ” checking
free checking
/savings with minimum
• Cross-sell opportunities balance required and/or self-
service option for lower fees
– MMDA & CD – Home equity loan
– Credit card Loyalty program incentive to
– Mortgage move revolving credit card
• Credit card rewards for credit-worthy debt to bank card

– Basic offer: Cash back, merchant gift cards Preferred rates on refinanced
loans

45

Potentially Profitable Loyals
Goal: Increase profitability

– Low
• Fees — use incentives to increase profitability and mitigate
fee increases
– Migrate loans to primary FI to avoid fee increases and obtain
“preferred” interest rates when possible
– Increase minimum balances for combined checking/savings to get Package configuration
free checking
“Basic Loyalty” checking
• Cross-sell opportunities /savings with minimum
– Mortgage balance required and/or self-
service option for lower fees
– Home equity loan
Loyalty program incentive to
– Credit card move revolving credit card
• Credit card rewards for credit worthy debt to bank card

– Basic offer: Cash back, gift cards Assistance with loan
refinancing (if qualify)

46

Profitable Non-loyals
Goal: Retain and deepen relationship

– High
• Fees — do not increase; decrease for those bringing more
assets/loans
– Free online/mobile and other self-service options
• Cross-sell opportunities (target investments and deposits)
– Strong emphasis on financial advice Package configuration
• Money Market Mutual Fund “Investor Checking” package
bundled with other deposits and
• Brokerage & mutual funds
investment services. High
• IRA minimum balance for preferred
• 529 savings plan interest rates and other rewards.

• Credit card rewards (attraction and retention) Customized loyalty card program
with preferred interest rates
– Customized offer based on needs/wants (e.g., preferred interest Preferred interest rate incentives
rates and travel awards hold appeal in addition to cash back and for moving more assets/loans to
gift cards) primary (e.g., mortgage
refinancing)

47

Profitable Loyals
Goal: Maintain and deepen relationship

– Relatively low
• Fees — do not increase; decrease for those bringing more
assets/loans
– Offer free online/mobile and other self-service options
• Cross-sell services (target investments)
– Financial advisory services for investments Package configuration
• Estate planning “Premier Checking” package
bundled with other deposits and
• Brokerage & mutual funds
investment services. High
• IRA minimum balance for preferred
• 529 savings plan interest rates and other rewards.

• Credit card rewards (retention) Customized loyalty card program
with preferred interest rates.
– Customized offer based on needs/wants (e.g., preferred interest Preferred interest rate incentives
rates hold appeal in addition to cash back and gift cards) and advisory services for moving
more assets/loans to primary
checking account provider.

48

Table of contents

Introduction 3




Segment fees 31


Strategies 42


49

Six Segments Indexed by P$YCLE Lifestage
Groups
Profitable Profitable Potentially Potentially Profitable Unprofitable Unprofitable
Loyals Non-loyals Profitable Loyals Non-loyals Loyals Non-loyals

Younger Years

UPWARDLY MOBILE 109 126 66 113 86 70

METRO MAINSTREAM 76 85 98 122 117 106

FISCAL FLEDGLINGS 68 60 129 103 175 109
Family Life
FLOURISHING
90 138 106 90 81 65
FAMILIES
UPSCALE EARNERS 125 105 89 109 59 87

MASS MIDDLE CLASS 83 96 115 105 88 109

WORKING-CLASS USA 76 77 128 96 136 114
Mature Years
FINANCIAL ELITE 136 150 50 94 43 95

WEALTHY ACHIEVERS 142 124 62 81 81 113
UPSCALE EMPTY
124 114 89 108 44 82
NESTS
MIDSCALE MATURES 119 89 111 80 121 98

Green = Index ≥ 20%
Red = Index ≤ 20% 50

About FIS and the research team for this
project

FIS delivers banking and payments technologies to more than 14,000 financial institutions and businesses in over 100 countries
worldwide. FIS provides financial institution core processing, and card issuer and transaction processing services, including the
NYCE® Network. FIS maintains processing and technology relationships with 40 of the top 50 global banks, including 9 of the top
10. FIS is a member of Standard and Poor's (S&P) 500® Index and consistently holds a leading ranking in the annual FinTech 100
rankings. Headquartered in Jacksonville, Florida, FIS employs more than 30,000 on a global basis. FIS is listed on the New York
Stock Exchange under the “FIS” ticker symbol. For more information about FIS see www.fisglobal.com.

This research was conducted by FIS Research and Thought Leadership, a key function of FIS’ Enterprise Strategy department. The
FIS Research & Thought Leadership team proactively manages market and client perceptions of FIS as a thought-leader and
thought-partner by conducting high-quality primary research on critical industry issues and delivering interpretation and
recommendations to client organizations.

The research team for this project included:

Paul McAdam Mandy Putnam
Senior Vice President Director
Ph: 708-449-7743 Ph: 614-414-4207
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

51

FIS 2011 Consumer Loyalty and Profitability Report

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