1-to-1 Banking in a Digital World

© 2014 Merkle. All Rights Reserved. Confidential
Marketing Insights
1:1 Banking in a Digital World
Special Edition
September 2014

Commentary
“With the rapid growth of digital channels, consumer behavior is changing faster than ever as customers have
access to convenience and immediacy in nearly every aspect of their lives. No less is expected from their bank. As
the marketplace is changing, the cost of maintaining full-service branches is becoming harder to justify, and the
role of the branch is being redefined to reflect the new digital reality. The focus becomes less on the physical
structure, and more towards banking that can be done at a time and place most convenient to the customer.
The competitive environment is also shifting. The emergence of new technologies, non-bank competitors,
partnerships and underserved segments has also created great risk and opportunity for banks. With technology
widely available at a marginal cost, digital disruptors are adopting new business models that often let them
bypass any regulatory hurdles and deliver superior customer experiences at a fraction of the cost.
Despite these challenges, banks posses a competitive advantage in the digital world given their vast amounts of
customer and transactional data, large customer bases and irreplaceable experience in payments, security and
compliance. However, simply “being more digital” will not be enough to confront new and non-traditional threats.
With so many new players in the industry impacting the way people view financial services, banks must be willing
to embrace change to remain on top of the rapidly evolving needs of their customers. To confront new and non-
traditional threats, traditional banks must focus on playing a deeper role in the lives of their customers. This
encompasses introducing a new form of engagement and experience that leverages the potential of big data for
better 1:1 interactions and more powerful marketing. While control may have shifted to consumers, financial
institutions that have the appropriate infrastructure in place will create competitive advantage.”
© 2014 Merkle Inc. All Rights Reserved. Confidential. 2
- Diana Tummillo
Vice President, Banking & Finance
- Alison Berman
Senior Market Research Manager

2015 Trends
• The digital revolution is disrupting the competitive landscape. Disruption in banking has become the new
reality as technologies dissolve the boundaries between industry sectors, and non-bank competitors look to
expand the customer experience in other traditional areas of banking.
• The rapid growth of digital channels and changing customer preferences are redefining the roles played by
branches. As customers continue to migrate to digital channels, banking has become less dependent on a
physical structure and is more focused on how banking can be done at a time and place most convenient to the
customer. Many banks are reconfiguring traditional branches to reflect this new digital reality.
• The marketplace has changed significantly around how consumers are engaging with their financial
institutions. Consumers are more likely to determine their banking partners by ease of accessibility and trust
over branch network and capital adequacy, as was once the case.
• Mobile wallets threaten to disrupt the relationship between customers and their primary financial institution
at the point of sale. Relationships, revenue and visibility of transactional data are all at stake, depending on
whether wallets move to hide the funding source behind the wallet provider.
• Social media has introduced a new form of engagement that harnesses the power of the internet without
sacrificing a personal touch. In the age of social media, the balance of value has tipped back in favor of the
consumer. Consumers are assessing brands with a social lens that now lets them make decisions based on
recommendations from the “crowd.”
• Despite these challenges, banks possess innate competitive advantages in the digital world. Banks have the
ability to leverage big data for better 1:1 interactions and more powerful marketing.
3

Merkle’s POV
4
 This will require a massive refocus on honing skill sets, intellectual property,
experience, technology and data
 Organizations will get back to basics in customer segmentation, have a better
understanding of customer behavior and adjust value propositions accordingly
 It will require capabilities for inbound and outbound engagement and
consolidation of the customer view among all offline and online touch points
 Organizations will be able to understand customer value, maximize customer
interactions and better manage customer relationships
 Customers will experience a seamless delivery as they move fluidly on their
journey through the consideration and buying process
To facilitate a true 1:1 approach to customer engagement, banks
must rapidly respond by embracing new capabilities that are driven
by more customer centric marketing strategies.

Contents
• Changing Consumer Behavior and Impact on Channel Usage
• The Core Function of the Branch and Evolution of Self-Service
• The New Age of Digital Commerce and Alternative Banking
• The New Age of Social Media
• Customer Engagement
• Merkle’s POV
5

Changing Consumer Behavior and
Impact on Channel Usage

Channel Preferences and Usage Patterns Shift to Digital
The marketplace has changed significantly around how consumers are engaging with their
financial institutions. As consumers shift to digital channels and online banking capability
improves, customers have greater control and choice on how they access their bank.
7
Sources: King, Brett. Bank 3.0: Why Banking Is No Longer Somewhere You Go But Something You Do. Wiley; 1 edition (December 26, 2012).
“Rethinking Multichannel Strategy,” CEB TowerGroup Research, April 2013; https://thefinancialbrand.com/33346/bank-checking-account-customers-research/
Average No. of Transactions Per Channel Each Month
Source: TD Bank Checking Experience Index, 2013
Delivery Channel Transaction Volume
(in Millions) Source: CEB TowerGroup Research
Nearly 80% of checking account holders use
online banking as their primary channel.
Of the total number of transactions checking account holders
conduct each month, 6 out of 15 transactions occur online.

Consumers Expect Quick Access and Immediacy
The drive to visit the branch continues to diminish in importance as customers rely on the
online channels as their primary access point for opening accounts and making transactions.
8
*Data from 1,000,000+ applications from a sample of customers January 2010 – December 2012. Sources: “The Future of Account Opening,” Andera, January 2014;
“How Consumers Select and Purchase Financial Products,” Andera/Novarica; http://info.andera.com/rs/andera/images/How_To_Hook_A_Moneyhawk_Andera.pdf
Online Applications Accessed via Mobile Device (%)
Online Applications: Tablet vs. Smartphone (%)*
Banking applications via a
mobile device increased more
than 800% from 2010-2013.
Percent of Consumers Who Applied to Open Accounts in Past Year
In 2013, 88.5M people attempted to open a financial account either
online or via mobile. Credit card applications topped the list, with 21%
of consumers applying via online or mobile channels.

Consumers Access Online Banking Across Multiple Devices
Online banking queries are present across devices, with rapid growth occurring via mobile.
This makes websites and mobile even more important as consumers are driving to landing
pages from various platforms.
9
Sources: “The Future of Account Opening,” Andera, January 2014; “How Consumers Select and Purchase Financial Products,” Andera/Novarica.
Number of Banking Users
(millions) Source: Nielsen Panel, March 2013
% of Time Spent
Banking by Device
Source: Nielsen, March 2013
Online and Mobile Banking Users
Source: Pew Research

The Mobile Experience is a Game-Changing Competitive Factor
According to the below statistics from Google, it is highly apparent that the customer
experience within the mobile channel has increasingly become a game-changing
competitive factor for marketers.
10
Sources: Google Financial Insights; Google Our Mobile Planet Study 2012; Google “What Users Want From Mobile” Study 2012.

Consumers Want Convergence of Online and Mobile Offerings
In addition to the rapid adoption of mobile banking and proliferation of mobile devices
and platforms, there is a growing customer need for a mobile banking experience that is
consistent with their online banking experience in terms of functionality and ease of use.
11
Sources: “Trends in Retail Banking Channels: Opportunities in a Changing Landscape,” Capgemini, 2013; Google Our Mobile Planet Study 2012; Google “What Users
Want From Mobile” Study 2012.
• Online banking queries are present
across devices, making websites and
mobile even more important as
consumers are driving to landing pages
from various platforms.
• Customers use mobile for quick answers
and are leveraging search and videos to
obtain information about branches, new
products and deals.
• Consumers expect apps to support the
full functionality of a branch as mobile is
now the go-to destination for bill paying,
checking balances and more.

More Online Users Will Shift to Mobile in Years to Come
Sources: https://www.javelinstrategy.com/news/1478/92/Mobile-Device-Boom-Led-to-74-000-New-Mobile-Bankers-per-Day-in-2013/d,pressRoomDetail
“Money 3.0: Payments Go Mobile,” Online Banking Report, Number 225, February 2014.
Percent of U.S. Adults Using Mobile Banking in Past 12 Months
(millions of U.S. adults) Source: Javelin, March 2014
Mobile banking adoption increased by 40% in 2013,
leading to 74k new mobile bankers per day in 2013.
Desktop online banking is expected to fall as more and more users go mobile. Research
companies are predicting 500 million to 1 billion worldwide mobile banking users by 2017.
Mobile Banking vs. Online Banking Usage: 2025 vs. Today
(U.S. households) Source: Online Banking Report, January 2014
Consumer Households Using Online vs. Mobile Banking
(millions of U.S. households) Source: Online Banking Report, January 2014
12

Video Becoming Integral Part of Consumers’ Online Experience
Consumers are leveraging videos to search for quick answers and information about new
products and deals. The use of video content in conjunction with email can also
significantly improve response and drive results.
13
Sources: Google Insights; Compete “Profiling Credit Card Applicants” Study, 2012; Compete “YouTube Audience Profile for Credit Card Applicants”
Study, 2013; Nielsen @Plan Q2 2013; http://thefinancialbrand.com/38226/best-bank-credit-union-onboarding-integrates-digital-mobile-channels/
• 74% of all internet traffic in 2017 will be video
• Using the word “video” in subject line boosts
open rates 18.5%, click rates by 64.8%
• The number of mobile users who watch video
monthly will rise from 72M in ‘13 to 87M in ‘14
• 52% of marketing professionals name video as
the content with best ROI
• Credit card shoppers watch 25% more online
video than the average online adult one month
before opening a card
• Search engine results favor video
90% of credit card
shoppers visit YouTube
at least 1x month
Video in email
boosts open rates
by 20% and click
rates by 2-3x
Capital One 360 posts videos
on how to use mobile remote
deposit capture on YouTube.
Allstate includes a video in an email,
increasing the customer engagement.

Individual Customers Prefer Different Channels for Different Purposes
Research shows that individual customers prefer different channels for different purposes.
For banks to gain competitive advantage, customers expect to be able to move easily from
one channel to another without degrading response.
14
Channel Preference for Product Life Cycle Activities
(Percentage of Banking Customers) Source: CEB TowerGroup Research
0%
10%
20%
30%
40%
50%
60%
70%
80%
DDA Loans Invest
Online Branch Advice Phone
Top Research Preference by Account Type
Source: Novantas Bank Shopping and Industry Trends
Sources: Novantas Bank Shopping and Industry Trends; http://thefinancialbrand.com/33760/marketing-banking-services-in-mobile-channels;
“Rethinking Multichannel Strategy,” CEB TowerGroup Research, April 2013; http://www.zaginteractive.com/about/blog/blog-post/the-z-drive/2013/12/09/digital-
marketing-trends-for-banks-and-credit-unions-in-2014
Willingness to open online varies significantly
based on the product complexity and economic
significance to the consumer.

Rapidly Changing and Growing Complex Consumer Buying Behavior
While customers will choose different channels for different types of transactions based
on their individual preferences, banks must be ready to provide a consistent experience
across channels in order to meet this increasingly complex environment.
15
Sources: http://celent.com/reports/raising-bar-multichannel-banking; http://www.bai.org/Libraries/LOB-SPs-Downloads/Banking-by-Appointment-eBook-
revised.sflb.ashx ; FMSI, NCR CEB Tower ; BAI Webinar: “Retail Banking Transformation” March 26, 2014

The Core Function of the Branch and
Evolution of Self-Service

The Core Function of the Bank Has Changed
Initially the core utility of a bank could be accessed only through a branch. But today, the
primary utility of a bank is available digitally 24/7, where consumers access the utility more
easily though the web, mobile, ATM and tablet — while the branch slows and complicates
this utility. The future relationship will be one where the bank, its products and services are
available at a time and place most convenient to the customer.
17
Sources: Brett King and the Death of the Branch: Part 2,” CU Times, April 24, 2013.Mintel Oxygen Report, “Consumer Attitudes Toward Technology in Financial
Services,” September 2013 ; http://www.accenture.com/microsite/everydaybank/Documents/media/Accenture-EverydayBank-NewVisionforDigitalAge.pdf ; The
Financial Brand, October 2012; Novantas Research
Average customer visits their bank branch 3x per month Average online customer interacts with their bank 2x per day
Branch Activity Preferences Online Activity Preferences

As Channel Usage Shifts, It Becomes Harder to Justify the Cost of
Maintaining Full-Service Branches
18
Banks Closing Branches at Record Rates
Source: http://online.wsj.com/news/articles/SB10001424052702303277704579347223157745640
As transactions continue to migrate to online and mobile channels, more banks are
reconfiguring their traditional branches to reflect the new digital reality, with many banks
also starting to close unproductive branches. These trends will only escalate going forward
due to the costs of delivery and the reduced revenue potential.
• The number of bank branches
peaked in 2010 and has been
falling since
• In 2013, banks cut 1,487
branches (1.5% of total)
• On average, branches with
< $10MM in deposits lose
$200K/year

Banks Respond by Testing New Self-Service Branch Operating Models
Due to pressures of serving customers in low-cost ways, banks are trying new strategies,
like launching smaller technology centers that showcase branches as digital platforms that
excite the customer about alternative channels.
19
Sources: http://newsroom.bankofamerica.com/press-releases/consumer-banking/bank-america-opens-new-generation-banking-centers;
http://www.bizjournals.com/charlotte/blog/bank_notes/2013/10/bofa-branch-blog.html; http://thefinancialbrand.com/32306/pnc-bank-pop-up-branch/
 24-hr access to full-function ATMs
 Increases network productivity
 Enhances customer experience
 Generates revenue
 Maximizes customer engagement
 Small square footage footprint
 Cuts traditional branch operating
costs in half
 Paperless, physical integration of
technology into design
Wells Fargo became the first to offer a
smaller express branch when it unveiled
its “neighborhood store” earlier last year.
Bank of America recently piloted new
“Express Banking Centers” that offer
more technology and more flexibility.
PNC unveiled the first
ever pop-up branch at
only 160 square feet.

Revamping Branch Networks Around Customer Experience
20
Wells Fargo uses the ATM to generate more sales leads
for other channels by offering to email interested
customers more information about specific products.
Sources: “Banks Should Use ATMs To Boost Sales,” Forrester, November 2013; http://www.mobilecommercedaily.com/citi-app-tests-enabling-account-balance-access-
without-logging-in; http://www.adweek.com/news/advertising-branding/citi-pushes-be-amazon-banking-155533; http://www.ft.com/cms/s/0/5cb77220-89e5-11e3-
abc4-00144feab7de.html#axzz2sZsJUxXw ; http://www.americanbanker.com/issues/179_13/bbva-tests-drive-through-videoconferencing-in-texas-1065027-1.html
Citi’s new customer-centric ATMs remember
customer preferences, offer directions in multiple
languages and speed up the transaction process
by allowing customers to quickly check balances
without going to multiple screens.
BBVA is increasing functions of self-service
channels with “drive-thru banking,” where
customers interact with remote tellers via high-
definition devices, doubling as full-service ATMs.
In addition to physical design, building the bank of the future will also require a focus on
customer experience. As banks move to self-service channels, they are revamping current
brick-and-mortar networks and improving sales effectiveness. By integrating the ATM with
CRM systems, they can further personalize and enhance the customer experience.

Leveraging Digital Channels Without Sacrificing the Human Touch
While it is not practical for full-service branches to be open 24/7, remote channels that
are made available must become more robust to align with consumer expectations. If
assistance is not readily available in self-service channels, the consumer may abandon the
channel altogether. As a result, banks are ensuring help is accessible on every channel.
21
Sources: Novantas Review: Making Multi-Channel Work, Vol. 4, No. 1, 2013; “Online Lenders, Big Banks Vie for Website Gold,” American Banker, February 2014;
“Must-Have Features For Public Sites Of Wealth Management Firms,” Forrester, September 2013; “An Overview of Multi-channel Banking,” Infosys, 2011;
http://thefinancialbrand.com/37874/omni-channel-personalized-banking
Fidelity offers escalation to human help via
instant message/chat, email or phone on its
search results page.
Chat tools not only show visitor intent
but also visitor nomenclature such as
which products they called about.
E-Trade and Charles Schwab both won
awards for their online-help resources and
live chat functions.

Using Online Channels to Drive Branch Interactions
By offering self-service appointment scheduling, BMO and Bank of America are proving
that digital channels can be used to complement physical branches, convert online
prospects for high-value services and unify service delivery across channels to build
stronger customer relationships.
22
Sources: http://newsroom.bankofamerica.com/press-releases/consumer-banking/bank-america-opens-new-generation-banking-centers;
http://www.bizjournals.com/charlotte/blog/bank_notes/2013/10/bofa-branch-blog.html
BMO allows customers to book in-person branch
appointments online and promotes the service via social
media, as observed here on Twitter.
Bank of America compels consumers to schedule a branch
visit online when they’re in the process of researching
products and their interest is at its peak.
Bank of America also lets customers
schedule appointments from their
Facebook page or via mobile app.

The New Age of Digital Commerce
and Alternative Banking

The Rapidly Changing Mobile Landscape
Digital Wallets Mobile PaymentsMobile Money
Digital wallets are an
integrated payment
service for making online
and offline transactions;
provides other services
such as loyalty, rewards,
couponing, membership,
offers, receipts, etc.;
can be accessed across
channels (POS, mobile,
online), technologies (bar
code, NFC, cloud, SMS)
and device (tablet,
mobile, PC), depending
on the solution
Mobile wallet, in a
narrower sense of a
digital wallet, is a service
that requires a phone to
provide proximity
payments and other
commerce‐related
activities (loyalty, deals,
and more)
Mobile payments are
payments made through
a mobile device;
includes bill payment,
P2P (person‐to‐person)
transfers, payments
made at the POS, via
mobile app, or on the
mobile web through a
browser (or other
authorization to pay)
Financial-inclusion
initiatives that deliver
bank-like services via
mobile device; use a
market-optimized
network to replace cash
These mobile
infrastructures have
supported financial
systems in developing
countries
Examples:
• M-Pesa (Kenya)
• G-Cash (Philippines)
• WING (Cambodia)
• MTN M-Money
Mobile Banking
Adding mobile as a
service channel for
existing bank customers
Very similar to internet
banking in terms of
functions and features
Mobile Advertising
A form of advertising via
mobile phones or other
mobile devices
Types:
• App Display Ads
• Search Ads
• SMS Ads
• WAP Display Ads
• Push Notifications
Hot items:
• Marketing ID – Google,
Twitter, Apple ID
• Cookies don’t work
in apps
• Native Ads
(promoted tweet,
promoted account)
24
CHANNEL SERVICE BANK MARKETING FACILIATING PAYMENT/COMMERCE
The mobile landscape is rapidly changing, with the most noteworthy changes occurring in
the facilitation of payments and commerce.
Source: King, Brett. Bank 3.0: Why Banking Is No Longer Somewhere You Go But Something You Do. Wiley; 1 edition (December 26, 2012).

The Mobile Wallet Competitive Set
25
One of the latest trends redefining the industry is the mobile wallet. Multiple companies
from various sectors, including merchants, card associations and technology and financial
institutions, have gone to market with a mobile wallet.

Payments Taxonomy
How a payment is processed:
• Card Networks
(Visa, Mastercard and
American Express)
• ACH
• Independent Networks
(Non-Card)
• Bitcoin
What is used to pay (or how
identity is asserted and
payment initiated):
• Physical - Using a physical
card (credit/debit), cash
and/or checks
• Mobile - Using a mobile
device (smartphone, tablet,
or "wearables") to pay in a
way that does not involve a
card or a number from a
card; mobile device serves as
the actual instrument
Where payment takes place:
• Bricks and mortar/
Point of Sale (POS) –
In-person payments
• Online - Not-in-person
payments; split into four
deeper sub-scenarios:
1. Web
2. In-app (mobile)
virtual goods
3. In-app (mobile)
for real goods
4. Auto reoccurring
payments
Who is paying who:
• B2C - Consumers paying
businesses
• B2B - Businesses paying
businesses
• P2P domestic - Consumers
paying other consumers
• P2P international -
Consumers paying
consumers across borders,
usually called "remittances"
Source: http://www.thebusinessofbitcoin.com/2014/02/a-payments-taxonomy.html
26
Given all the intricacies of the payments space, the below framework can be used as a
guide for understanding this increasingly complex landscape.
Networks Instrument Scenario (Location) Participants
How? What? Where? Who?

Change Most Evident in Alternative and Mobile Payments
27
Sources: Accenture, “The Everyday Bank,” 2014
http://www.accenture.com/microsite/everydaybank/Documents/media/Accenture-EverydayBank-NewVisionforDigitalAge.pdf
Worldwide Mobile Payment Transactions
(Billions) Source: 2013, Biometrics Research Group, 2013
Mobile-enabled payments are experiencing record growth rates as technology has become
widely available at a marginal cost. As a result, there are numerous start-ups and digital
disruptors emerging in the payments space. By adopting new business models that let them
bypass regulatory hurdles, they are able to deliver superior experiences at a lower cost.
Mobile-enabled payments are expected to increase 3X
from 2014 to 2020.
While alternative payments players represented just 1.5% of the European
market in 2012, it is estimated that figure will increase to 15% by 2020—an
annualized growth rate of more than 35%.
Alternative Payments Transaction-Volume Outlook
(Billions) Source: Accenture Research; Analysis of ECB, EPC, WorldPay, Visa data, 2014

Emerging Payments Chipping Away at Traditional Payments
28
Emerging payments are chipping away at traditional payments and could put downward
pressure on cash use sooner than expected. According to Javelin Strategy, cash dropped by
10% of total POS payment volume in 2013 and is forecasted to drop even further in
upcoming years in response to changing consumer demand for instant access and a surge
of non-traditional P2P vendors.
Sources: https://www.javelinstrategy.com/news/1488/92/Mobile-Payment-Readers-The-Square-Effect-Drive-Cash-Down-by-10/d,pressRoomDetail
http://maps.yankeegroup.com/ygapp/content/ff860fab709a4eaa82ccc8652894c4f0/51/DAILYINSIGHT/0
The Number of U.S. P2P Users Will Reach 44 Million in 2018
Remote Mobile Payment P2P Users in Millions
Source: Yankee Group’s Mobile Forecast, March 2014
Cash Will Lose Nearly $100B in POS Volume by 2019

New Generations Increasingly Open to Alternative Banking Options
29
Sources: Accenture, “The Everyday Bank,” 2014; Mintel Comperemedia;
If these companies offered banking services, how likely
would you be to bank with them? (Likely or Very Likely)
As non-banks aggressively peruse digital innovations to capture more and more of the
banking value-chain, new generations of customers have become increasingly open to
alternative banking options. As this generational divide continues to emerge, banks that
align to the customer instead of the product will have an upper hand.
“I will never have an account with an internet-only bank
because I want the personal service I get at a branch”

Noteworthy Players: Google Wallet (NFC Payments)
30
Google Wallet is a mobile app that can be used on NFC-capable phones to pay at
NFC-enabled POS terminals. Funds can be held and withdrawn from a web-based Google
Wallet account. Google also created a digital wallet with an accompanying plastic debit
card to deliver new value to consumers.
Sources: Accenture, “The Everyday Bank,” 2014; http://thenextweb.com/google/2011/05/26/google-launches-local-deal-service-google-offers/;
http://tomnoyes.wordpress.com/2012/08/03/paypal-vs-google-at-pos/; http://www.accenture.com/microsite/everydaybank/Documents/media/Accenture-
EverydayBank-NewVisionforDigitalAge.pdf
Mobile POS Transforms Customer Engagement:
POS units are dramatically underutilized from a customer experience perspective. Payment at the
POS provides an opportunity to reach people at a point of heightened money consciousness and
leverage personal information to offer consumers compelling, relevant and timely messages.
The Google Card works as a
bank debit card at the POS
and has functionality of
automatically utilizing offers
and loyalty programs.

Noteworthy Players: Isis Mobile Wallet (NFC Payments)
31
Isis Mobile Wallet is a mobile app that can be used on NFC-capable phones to pay at NFC-
enabled POS terminals. Funds can be drawn from an American Express Serve account or
Chase and American Express credit cards.
Source: “Money 3.0: Payments Go Mobile,” Online Banking Report, Number 225, February 2014.

Noteworthy Players: Venmo (Third-Party Platform)
32
Venmo is a free social payments network that serves as a platform for users to pay each
other using their linked debit card or bank account. The app currently supports payments
to other Venmo users, as well as in-app payments.
Venmo currently works with 6 apps: Belly, Hotel Tonight,
Living Social, Task Rabbit, Trunk Club and Yplan.

Noteworthy Players: PayPal (Third-Party Platform)
33
PayPal is a P2P payments network that enables users to send money to others’ PayPal
accounts via email, phone number or text message. Available in 190 countries and 24
currencies, PayPal is now the leading online payment method, with more than 120M
digital wallets in use overall.
Sources: Accenture, “The Everyday Bank,” 2014; WorldPay “Global Online Shopper Report,” April 2012.
http://www.statista.com/chart/873/consumer-awareness-and-usage-of-digital-wallet-services/
Consumer Awareness and Usage of Digital Wallet Services, U.S.
Source: comScore

PayPal Here was its first payment card reader launched with a magstripe reader and chip
and PIN acceptance capability. PayPal unveiled Beacon in 2014, a location-sensing device
that sends out a BLE signal to customers with the PayPal app. Based on their physical
location in a store, customers can receive special offers via the PayPal app and make
hands-free payments.
Source: http://www.usatoday.com/story/tech/2013/09/09/paypal-beacon-stores/2789275/
Noteworthy Players: PayPal Here and PayPal Beacon (Mobile POS)
PayPal Beacon is a small stick that plugs into the wall and lets stores automatically
identify and authenticate PayPal users via Bluetooth as they enter the store.

Noteworthy Players: Starbucks (Mobile POS)
35
Starbucks has become the poster child for mobile payments in the U.S. Today it has 10%
of its customers paying with its proprietary QR code-based app. The Starbucks loyalty
card handles nearly one-third of the company’s U.S. transactions, where frequent prepaid
card users can see a return of well over 10% through rewards, refills and other offers.
Sources: Accenture, “The Everyday Bank,” 2014; “Money 3.0: Payments Go Mobile,” Online Banking Report, Number 225, February 2014.
Starbucks’ loyalty app has
over 10M users and 5M weekly
transactions, demonstrating
people’s willingness to embrace
mobile payments.
Upon opening the Starbucks-branded
app, consumers select the “Touch to
Pay” button, and then scan the
automatically generated bar code.
Mobile Payments Volume at U.S. Starbucks (in millions)
Source: Business Intelligence estimates and Starbucks, Jan 2014

Noteworthy Players: Square and Square Wallet (Mobile POS)
36
Small, disruptive startups are also growing rapidly. Square, the POS payment processing
venture, has accumulated more than 4M users since 2009. According to Accenture, half
of its North American users would be open to banking with the company if they could.
Sources: Accenture, “The Everyday Bank,” 2014
Square is a payment card reader that accepts
magstripe payment cards. Businesses that
use Square Wallet can offer their customers a
hands-free payment option.
Square’s Wallet app uses geo-location to
determine that a customer has entered a
store. If users have pre-authorized the
merchant, they can pay hands-free by just
saying their name to the cashier.

Noteworthy Players: Email-Based P2P (Google Wallet & Square Cash)
37
Google Wallet is integrated with Gmail so that users can send payments as an email
attachment to a Gmail message as they would with a document. Funds are then drawn
from their Google Wallet account. Square Cash also enables users to send and receive
money via any email address by linking a card to their email address.
Sources: “Money 3.0: Payments Go Mobile,” Online Banking Report, Number 225, February 2014. http://www.pcworld.com/article/2038864/google-wallet-makes-
payments-possible-through-gmail.html; http://www.paymentssource.com/news/square-launches-square-cash-email-based-p2p-3015741-1.html
To use Square Cash, senders put the dollar amount they wish to
send in the subject line of an email and copy “cash@square.com”
as an additional recipient. The sender then receives an enrollment
email asking for a valid debit card number.

Noteworthy Players: Loop (Magnetic Secure Transmission)
38
Loop is a new mobile wallet solution that communicates with 90% of existing
POS terminals via Magnetic Secure Transmission (MST). The technology allows consumers
to pay via phone at any POS without requiring merchants to upgrade their hardware.
Instead, consumers use a dongle plugged into their smartphone or a special case that is
held close to the magnetic stripe reader at checkout.
Source: “Money 3.0: Payments Go Mobile,” Online Banking Report, Number 225, February 2014. http://loopishere.com/wp-content/uploads/2013/12/Loop-Closes-
Series-A-Press-Release1.pdf; http://techcrunch.com/2013/10/19/loop-the-future-of-mobile-payments-or-a-temporary-fix/;
Loop Overcomes Key Barriers to Adoption:
How Consumers Load and Use Cards
Unlike other mobile wallet solutions that require a
special dedicated transaction network, Loop uses MST
to emulate the same signal as when a magstripe card
is swiped through a traditional POS card reader.

Noteworthy Players: Mobexo (Payments via QR Code)
39
Mobexo’s mobile app generates QR codes and displays them on users’ smartphones. Users
can scan the codes to pay and to be paid. Funds are then immediately available in the
users’ Mobexo account after the transfer.

Noteworthy Players: Barclaycard’s bPay Band (Wearable Payments)
40
Source: www.nfcworld.com/2014/06/11/329615/barclaycard-offer-contactless-wristbands-combine-payments-ticketing-offers/;
www.totalpayments.org/2014/07/14/barclays-bpay-band-brings-contactless-future-closer/#sthash.MR7VigDW.dpbs
“Money 3.0: Payments Go Mobile,” Online Banking Report, Number 225, February 2014.
Barclaycard is to make contactless payment wristbands available to anyone with a UK
bank account or credit card next year. The wristbands were tested this summer at
several summer festivals in London. Wearers received fast-track entry to the events and
used their bPay Band to make contactless payments and access exclusive offers.
The reloadable bands will be free with no fees,
providing users access to a range of special offers as
well as the ability to make payments of up to £20 at any
merchant equipped with a contactless POS terminal.

Coin is a single solution that simplifies several cards into one. In only three days, the
payment solution blew past its planned pre-order goal of $50,000 in 40 minutes, a
testament to the desire for consumers to leave their plastic behind.
Sources: http://thefinancialbrand.com/35187/coin-square-dawn-new-era-ewallets-digital-payments/; http://techcrunch.com/2013/11/14/coin-the-electronic-credit-
card-reaches-its-pre-order-goal-in-40-minutes/; http://techcrunch.com/2013/11/14/coin-the-electronic-credit-card-reaches-its-pre-order-goal-in-40-minutes/
41
Noteworthy Players: Coin
1. Upon purchase, users receive a Coin card
and card-swipe dongle
2. User connects card-swipe dongle to a
smartphone or tablet
3. Users take photos of their cards, swiping
them through the dongle and uploading
them to the Coin mobile app
4. Multiple card data is stored on the Coin card
5. To pay, consumers browse through stored
cards on their Coin, select one and swipe
How Coin Works
Consumers’ overwhelming response to Coin
demonstrates how close the banking industry
is to a nearly all-digital payments ecosystem.

Noteworthy Players: Apple
42
Sources: http://www.forbes.com/pictures/fkmm45kemh/apply-pay/; http://www.forbes.com/sites/laurashin/2014/09/09/why-apply-pay-could-finally-get-us-to-shop-
with-our-phones/; http://www.americanbanker.com/issues/179_175/why-banks-are-buying-in-to-apple-pay-1069868-1.html
Apple Pay, a touch-to-pay system built on NFC technology, is the first program to use a
tokenization system on a widespread basis. Perceived as a company that creates stellar
customer experiences that drive new consumer behaviors, Apple Pay’s intuitive user
experience and enhanced security features make the new platform extremely attractive.
.
To mitigate fraud, Apple Pay includes an NFC antenna across the top of the
phone, the TouchID fingerprint scanner and a secure element in the device
to store tokens that represent consumer card credentials.

Looking Ahead: Digital Currencies
43
Sources: “Money 3.0: Payments Go Mobile,” Online Banking Report, Number 225, February 2014. http://marketingland.com/5-key-trends-mobilelocation-based-
marketing-88394; http://www.deloitte.com/assets/DcomUnitedStates/Local%20Assets/Documents/FSI/us_fsi_BitcointheNewGoldRush_031814.pdf
Number of Bitcoin Wallets by Wallet Provider, 4/14
The fact that ~5MM Bitcoin wallets
(+8X Y/Y) exist proves extraordinary
interest in crypto-currencies.
Virtual online currencies offer value in place of parts of the payments ecosystem that are
excessively costly, inconvenient and risky. As these currencies emerge, traditional banks
may see an increased threat, forcing them to innovate to retain their traditional dominance.
Market Cap of the Top-20 Crypto-Currencies There are estimated to be more than 140 crypto-currencies. Bitcoin is by
far the largest, with a total value of more than $10B. Ripple, launched in
early 2013, has been gaining a fast following—tripling in value this year.

The New Age of Social Media

The Balance of “Value” Tips Back in Favor of the Consumer
45
Customers are assessing bank brands with a social lens that now lets them reject bank
policies, or the entire brand, based on recommendations from the “crowd.” In the age of
social media, the balance of “value” has tipped back in favor of the consumer and has
weakened the value proposition of the average bank brand.
Mobile Time Spent
Source: comScore Mobile Metrix, U.S. March 2013
U.S. desktop users
spend an average of
around 6 hours every
month on Facebook
U.S. mobile users
spend an average of
around 14 hours every
month on Facebook

Positive Dialogue Leads to Advocacy and Referrals
0.3%
4.0%
5.9%
8.0%
9.3%
9.9%
16.6%
17.6%
Consumer Information/Review Websites
Family/Friend Advice
Branch (Spoke to Teller)
Phone (Spoke to Customer Service Rep)
Visiting Bank's Website
Newspaper/Magazine Article
Written Material (Brochure)
Social Media (Facebook, Twitter)
Lift in % Conversion % All Respondents
5%
18%
6%
16%
12%
26%
7%
11%
Customers Who Research First More Likely to Convert, But Not All Sources Have Equal Impact
Source: 2013 Gallup U.S. Retail Banking Survey
Consumers today are using social media to follow and engage in dialogue about brands.
Positive dialogue has been found to lead to advocacy, which in turn can lead to referrals.
According to research from Gallup, social media was the most effective channel used by
customers that led to a sales conversion.
46

Banks Increase Social Media Initiatives
47
Social media has evolved into a forum where people seek news, make shopping decisions,
share dreams, ask for service and talk about brands. As a result, banks are seeking to
gather information and increase engagement with these consumers, who now demand
quick response to issues in real-time, by increasing staff and rolling out various social
media initiatives.
Sources: King, Brett. Bank 3.0: Why Banking Is No Longer Somewhere You Go But Something You Do. Wiley; 1 edition (December 26, 2012); "Wells Fargo Sets up War
Room to Monitor Social Media Sites" Bank Technology News (03/28/14) Wisniewski, Mary; “Wells Fargo Launches Web Magazine, Seeks 'Deeper' Ties with
Customers” American Banker (03/11/14) Wisniewski, Mary.
More banks are launching new command
centers with enhanced monitoring tools
where employees:
 Monitor social posts
 Engage with consumers on trending topics
 Respond to queries and complaints
 Gather customer data

© 2014 Merkle. All Rights Reserved. Confidential 48
The Core Social Media Team Increases in Size
Number of full-time equivalent employees that make up social media team
Having the Appropriate Infrastructure in Place is Paramount to
Surviving Social Disruption
Average Size of a Corporate Social Media Team
While control may have shifted to consumers, organizations that respond thoughtfully can
level the playing field. In order to support bidirectional conversation at scale, institutions
need to be equipped with a social infrastructure.
Sources: http://www.slideshare.net/Altimeter; "Wells Fargo Sets up War Room to Monitor Social Media Sites" Bank Technology News (03/28/14) Wisniewski, Mary;
“Wells Fargo Launches Web Magazine, Seeks 'Deeper' Ties with Customers” American Banker (03/11/14) Wisniewski, Mary; Source: King, Brett. Bank 3.0: Why
Banking Is No Longer Somewhere You Go But Something You Do. Wiley; 1 edition (December 26, 2012).
Social media requires a dedicated engagement team to integrate the
channel across the business. Since most banks create “silos,” this is
particularly difficult and remains a challenge for banks.
Role of Social Media Team Members

Expanding the Role of Social Media Beyond Marketing
While the industry is beginning to leverage social media as an effective customer
engagement tool, the current usage of social media is heavily focused on outbound
marketing. Instead, banks should view it as a tool for personal and relevant interactions
with customers.
49
Current Usage of Social Media by Size of Institutions
Source: “Trends in Retail Banking Channels: Opportunities in a Changing Landscape,” Capgemini, 2013; “Top Trends in Retail Banking 2013,” Celent December, 2012
Only 17% of large banks
integrate social media inputs
with call center activities and
only 10% track and manage
interactions in CRM.
The contact center is especially important for building customer engagement for the
virtual customer, essentially becoming the retail bank’s largest and fastest-growing branch.

Servicing Customers via Social Media Channels
50
Customers today expect to be able to reach their bank regarding service issues via social
media and get a response immediately. Many banks fall short in this area, not providing
adequate support for 24/7 social channel access. Social media has proven to be an
effective grievance redressal and retention tool by acting as a low-cost channel to host
conversations, provide service and identify customer dissatisfaction.
Source: “Trends in Retail Banking Channels: Opportunities in a Changing Landscape,” Capgemini, 2013; https://twitter.com/BofA_Help
Bank of America’s Twitter CRM initiative tracks the customer service interactions via Twitter,
automatically creating a service case whenever something is said on Twitter. Support agents then
attach relevant information in a reply tweet that gets logged and tracked.

The Importance of Positive Social Dialogue
51
Consumers are using social media to follow and engage in dialogue about brands both
positively and negatively. If a brand performs well, this can lead to advocacy, which in
turn can lead to referrals and new business. This positive dialogue becomes critical in
restoring trust in an individual bank’s brand.
Sources: “Trends in Retail Banking Channels: Opportunities in a Changing Landscape,” Capgemini, 2013; http://anderspink.com/portfolio-items/7-content-
marketing-lessons-from-american-express-open-forum/
American Express uses social media to drive brand impression and be at the center of conversations
by creating a persona of the bank which the customer can connect with. OPEN Forum, American
Express’ online community to connect businesses, has more than 190k Twitter followers and nearly
90% of its traffic is generated organically.
Because customers place
greater faith in messages
they receive from peers
rather than traditional
marketing messages, social
media is an excellent tool
for banks to achieve word-
of-mouth publicity and
improve brand recognition
and affinity among
customers.

Using Customer Dialogue to Inform Strategy
52
There is great potential for banks to use customer feedback and dialogue to make
marketing and product decisions. Banks whose product development efforts leverage
social media are better attuned to the needs of the customer.
Sources: “Trends in Retail Banking Channels: Opportunities in a Changing Landscape,” Capgemini, 2013; “IHG and Chase Enlist their Best Customers to Create a New
Credit Card,” Communispace, http://www.communispace.com/ihg-chase-credit-card-co-creation-case-study/
LEFT: A view of the card’s community homepage, where Chase had ongoing
conversations with customers in real-time, focusing on product development.
ABOVE: A print ad influenced by Priority Club Rewards community members.
Chase used social media to create a more innovative
product that reflected real-time consumer demand. An
online community of high-net-worth customers came
together to design Chase’s Priority Club Rewards Card.
Through a customer co-creation
approach, banks can grow their
business while instilling
customer loyalty with their
most desirable customers.

Integrating Payments Across Social Networks
53
Sources: “Is Twitter On The Verge Of Entering Payments?" ISO & Agent Weekly (07/10/14).
http://www.paymentssource.com/news/tippercoin-mixes-digital-currency-with-twitter-but-obstacles-loom-3016444-1.html
Social-enabled payments are another way companies are changing the business. While
Facebook already enables payments, companies like Chirpify, Dwolla and American Express
have experienced some success with Twitter, and new entrants like TipperCoin are testing
Twitter's potential for working with digital currency.
TipperCoin allows users to send Bitcoins
by Tweeting the hashtag #TipperCoin.
Chirpify established payments through
hashtags, enabling payments on Twitter,
Facebook and Instagram.
American Express uses searchable hashtags as
triggers for initiating purchases.
Dwolla users can send or receive cash
via social networks, email or location.
Facebook’s reloadable
gift card is redeemable at
several national retailers.

Social Networks and Online Platforms Change the Business
54
Online platforms connect those looking for and offering financial resources, cutting out
intermediaries and lowering costs. Whether in need of investments or capital, consumers
have the ability to use online platforms to connect with peers who will offer them
resources more quickly with fewer strings attached. In the process, disruptors are resetting
consumer expectations and changing the businesses.
Source: Forrester, “Digital Disruption Hits Retail Financial Services” (July 2014)
Crowdfunding and online lending platforms
like Lending Club match entrepreneurs and
other borrowers with potential investors.
Social investing platforms like eToro let
mainstream investors copy the stock-
picking strategies of talented individuals.
Currency marketplaces like TransferWise let
people exchange currencies at a lower cost
than doing so through a bank.

Customer Engagement

Digital Banking Customers More Profitable and Engaged
56
According to data from Digital Insight, highly engaged customers that use multiple digital
banking services are 51% more profitable than customers who do not actively utilize
online or mobile banking and are more likely to have higher account ownership, balances,
retention and debit card purchases.
Source: http://www.banking2020.com/2014/07/29/are-online-bankers-more-profitable/#.U9gT5fldX4Y
Total Consumer Balance

Creating Value Beyond Transactions
57
In a digital world, winning and retaining customers hinges on creating value for them that
enhances the convenience and quality of their everyday lives beyond mere transactions.
This requires a shift in strategic focus from being a provider of financial products and
services to being a provider of solutions. Banks must learn to play a greater role not just
at the moment of transactions, but before and afterwards as well.
Union Bank’s Yuby app, designed to teach children financial
literacy, exemplifies this approach as it creates value in unique
ways that increase customer touches and deepen connections.
Sources: Accenture, “The Everyday Bank,” 2014 http://www.americanbanker.com/bankthink/in-courting-millennials-think-transactions-before-deposits-1068195-
1.html ; http://www.accenture.com/microsite/everydaybank/Documents/media/Accenture-EverydayBank-NewVisionforDigitalAge.pdf

Leveraging Data for More Powerful Marketing
58
Banks today are in a unique position to tap mobile data and leverage a holistic view of the
customer to deliver segmented applications based on behavior and location. This furthers
the bank’s ability to use targeted campaigns based on consumer behavior to offer the
right services at the right time, including coupons, rewards and offers.
Sources: http://www.mobilemarketer.com/cms/news/banking-payments/9851.html; Forrester Research Interactive Marketing Forecast By Industry, 2011 To 2016 (US).
Instead of simply enabling customers to save money and pay for things, banks
have the potential to combine their vast transactional data with new digital tools
to help customers make decisions on what to buy and where and when to buy it.

Using Data to Gain Competitive Advantage
59
Banks already have in place the infrastructure, processes and procedures to manage
security and privacy for their own customers. By creating boundaries and keeping careful
watch on data usage behaviors, banks can use data to improve customers’ experiences.
Not to mention, consumers trust their bank more than anyone with their data.
Source: http://bankingblog.accenture.com/tag/everyday-bank/
According to Accenture’s CMT
Digital Consumer Study 2014,
consumers believe banks are the
most trustworthy recipients of
personal data.

Meeting Changing Consumer Expectations
Sources: http://www.citigroup.com/citi/news/2014/140521a.html;http://www.bankinnovation.net/2014/05/video-citibank-adds-quick-balance-feature-to-its-app/;
https://www.javelinstrategy.com/news/1478/92/Mobile-Device-Boom-Led-to-74-000-New-Mobile-Bankers-per-Day-in-2013/d,pressRoomDetail
Efficiency and simplicity play a large part in customer engagement. As a result, financial
institutions are rising to the challenge to meet changing consumer expectations and cater
to the growing lack of consumer patience and the seeming need for instantaneous
gratification and simplicity.
Citibank’s Mobile Snapshot
enables customers to view credit
card balances, deposit balances
and recent transactions without
having to log into their accounts.
Huntington’s Quick Balance
provides quick access to account
information by opening the app.
U.S. Bank has been testing out
voice recognition software that
serves as a password.
Given the high level of mobile bankers that use their
phones to check balances and review recent transactions,
a few innovative banks are driving the popularity of mobile
banking further by simplifying the mobile login process.
Capital One SureSwipe lets
users log into their apps by
recognizing swipe patterns.
60

Seamless Integration Across All Interactions
Sources: http://www.businesswire.com/news/home/20130409005152/en/Bank-America-Khan-Academy-Promote-Money-Habits
http://www.huffingtonpost.com/arianna-huffington/huffpost-financial-education_b_4284273.html
61
Ads have been seen in multiple
channels, including links to videos.
Bank of America partnered with Khan Academy to create the online
program, “Better Money Habits,” to help educate consumers on
how to manage and avoid debt. Consumers can learn at their own
pace via online videos, or in-person at a financial workshop.
Mobile Ad
It launched “HuffPost Financial
Education,” a hub of stories, advice
and tools to help readers make
informed financial decisions.
When developing and executing a multichannel strategy, it must align with channel
capabilities, customer preferences and the bank’s overall strategy and brand promise.
Bank of America is one bank that has focused on embedding themselves in daily life by
creating a seamless integration of the customer experience across multiple touch-points.
Display Ad
Product
Bank of America took the initiative
a step further by launching its
“Better Balance Rewards” Card,
which rewards customers for
responsible spending habits.
Videos
Online Program

Merkle’s POV

Merkle’s POV
63
 This will require a massive refocus on honing skill sets, intellectual property,
experience, technology and data
 Organizations will get back to basics in customer segmentation, have a better
understanding of customer behavior and adjust value propositions accordingly
 It will require capabilities for inbound and outbound engagement and
consolidation of the customer view among all offline and online touch points
 Organizations will be able to understand customer value, maximize customer
interactions and better manage customer relationships
 Customers will experience a seamless delivery as they move fluidly on their
journey through the consideration and buying process
To facilitate a true 1:1 approach to customer engagement, banks
must rapidly respond by embracing new capabilities that are driven
by more customer centric marketing strategies.

One main area of change within CRM technology is the growing need to run and
measure complex, integrated online and offline campaigns. These technologies are able
to operate as “eco-systems” where data and highly-specialized services are processed
against the goals of the campaign.
Technology Enabled, Data Driven Customer Relationship Marketing
64
Decisioning
Platforms
Ad Serving &
Tagging
Data Management
Platforms
Attribution
Platforms
Matching
Platforms
CRM Platforms Marketing Customer Data Warehouse
Audience
Platforms
Platform
Marketer
Stack
Name & address 3rd party cookie 3rd party segment Context
1st party cookie Device ID Geo-location Social ID / handle
Execution
Currencies
Management of this
marketing technology eco-
system (or “stack”), will be
uniquely configured for every
organization and become a
core enabler to 1:1 marketing.

The Platform Marketer
65
To support this new environment, significant and rapid evolution in the mix of talent and
skills will be required. Not only will the future marketer need to know financial services,
but they also must command a host of other specialties, from advertising platforms to
econometric modeling. We refer to this mix of advanced capabilities as the “Platform
Marketer” and see these skills as requisites to the effective pursuit of business goals.
Identity
Management
Audience
Management
Customer
Privacy&
Compliance
Platforms
Utilization
Media
Optimization
Channel
Optimization
Measurement
& Attribution
Marketing
Technology
Stack
Organization
Platform
Data
Platform
Execution
Platform
Enablers
Platform Marketing Competency Matrix

Requirements for Success
Regardless of their size, banking institutions must take several important steps in order to
embrace and evolve to a much higher degree of customer centricity.
66
• Commit strategically and financially to having a customer centric approach
• Requires marketing, sales and customer engagement be highly integrated
• Requires a material shift in strategy, technology platform and organizational structure
• Commitment to a comprehensive assessment planning exercise that involves the entire
enterprise, not just marketing
1 - Forge a plan for
organizational change
• Identify engagement opportunities in customer lifecycle to divert lost revenue/customer attrition
• Take a holistic technology approach and leverage multiple data streams
2 - Identify moments of
truth across media and
inbound channels
• Manage both prospect and customer engagements across lines of business and channels based on
known and anticipated needs
• In order to align these efforts, there needs to be one owner of these experiences
• Single ownership creates consistency and accountability and allows for a focus on customers
versus functions, channels and products
3 - Employ a singular
resource that owns
integrated engagement
• Payments traditionally involved two parties and was a relationship entry point for banks
• Today, payments consist of digital representations that involve multiple parties
• Understanding new dynamics becomes a key competitive advantage
4 - Adapt internal IT
infrastructure to the
digital infrastructure
• Due to the complexity of technology eco-systems, it is imperative to identify/track issues and seek
speedy resolution
5- Prepare for unforeseen
changes that may impact
roadmap implementation

Learn More
To be successful, marketers must align their business strategies, technology infrastructure,
internal organization and specialized agency partner resources against key business goals.
When that alignment is achieved and optimized, marketing is delivering on its value
proposition to the entire organization.
To learn more, request a copy of our new book or watch our webinar:
2014 Marketing Imperatives: The Rise of the Platform Marketer
67

Thank You!
merkleinc.com
Alison Berman
Senior Market Research Manager
aberman@merkleinc.com
MERKLE, Inc.
www.merkleinc.com
Twitter @merkleCRM

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