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One step ahead:

How banks can anticipate what
customers will want next

Today’s bank customers are

generally happy. But for
how long? Learn how banks
can deliver what customers
will want next.
The heart of the matter

Are US retail banking customers happy with their banks? How do

bank CEOs see the future? We know that banking is being
changed by a combination of technology, millennial preferences,
and non-traditional disruptors. And while many customers are
currently generally happy, sentiment can turn on a dime. Learn
how banks can understand changing consumer expectations and
stay one step ahead.
When they talk about the future, many CEOs ripe for disruption from competitors from
The very paradox are fond of quoting Wayne Gretzky. The other industries who are targeting a subset
of disruption: the hockey great said that he always tried to of the customer base and a portion of the
more you satisfy “skate to where the puck is going to be, not services offered.
your current where it has been.” Chief executives set
strategy and define budget priorities for a In this paper, we examine how consumers
customers, the feel about their banks today, what bank
company, and they’re always trying to
more likely you are balance today’s realities with tomorrow’s CEOs see for the road ahead, and how banks
to miss the very possibilities. They need to anticipate where that focus too much on the present may
thwart their future success. We agree with
thing that will rock the puck will be at a specific time in the
future—to think about what their customers most of the bank executives that the
your industry. financial services industry could look very
will want—and stay one step ahead at all
times in order to deliver. different by 2020. However, it’s too easy to
say that banks must disrupt themselves or
In our view, today’s banking CEOs face a become irrelevant. The message is clear:
future-defining challenge. They instinctively banks are under pressure from non-
want to skate forward into the digital future, standard competitors, and consumers are
and they have very good reasons for doing willing to listen to these competitors.
so. But, many of their customers are still
coasting around at the other end of the rink Every day, financial services executives
wanting traditional, customer-service driven make tactical decisions about the people
banking. And for now, these customers still they employ, the processes they implement,
drive a considerable part of today’s business. and the technologies they use. In each case,
they’ll succeed by acknowledging the
In our 2015 Consumer Banking Survey, we different constituencies they serve, and
asked a representative sample of US developing a plan for each, based on
consumers about what they want and expect behaviors and preferences.
from their primary financial institution. In
very broad terms, consumers appear to be
pretty happy with what they’re getting today.
And this is the very paradox of disruption:
the more you satisfy your current customers,
the more likely you are to miss the very
thing that will rock your industry. In our
view, the financial services industry is also

One step ahead:

How banks can anticipate what customers will want next 1
An in-depth discussion

The CEO and the consumer, Contrast that with the to-do list for financial
through the looking glass institution CEOs. They have to worry about
how to remain relevant and keep customers
What do US retail banking consumers want?
loyal in a fiercely competitive environment.
We asked, and they told us. As shown in
They also have to meet ever-changing
Figure 1, the vast majority of people we
regulator expectations and manage
asked considered the following features to
everything from fraud to operational risk. To
be important or very important: responsive
satisfy their customers, they have to find
customer service (86%), competitive pricing
ways to upgrade systems and improve their
(86%), convenient branch locations (81%),
service quality. But they need to do this
online banking offerings (77%), and
without the margins that their trading desks
convenient branch hours (77%).
and consumer fees once offered, while at the
same time competing with upstarts who
typically don’t have to follow the same
capital or compliance rules. That’s a lot of
juggling that consumers don’t want to think
about—or, arguably, care about. Consumers
just “want it to work.”

Figure 1: What US retail banking consumers want

One step ahead:

How banks can anticipate what customers will want next 2
 What keeps CEOs up at night As shown in Figure 2, bank CEOs told us
According to our
Earlier this year, in PwC’s 18th Annual CEO they see the following six forces at work:
most recent CEO
Survey, we asked senior banking executives customer expectations on the rise;
Survey, 68% of their thoughts about the future. Six out of technology that’s changing everything; non-
leaders see the speed seven leaders said they feel somewhat or traditional players disrupting existing
of technological very confident about their companies’ models, regulations continuing to challenge
change as a threat to revenue growth prospects between now and business models; new risks on the horizon
growth, up from 2018. But they feel that the probability of (such as cyberattacks); and trust remaining
disruption is very high, and they have a elusive.1 We share the bank CEO’s view, but
57% only a year right to be concerned. It’s all coming faster this further illustrates the disparities in
earlier. than ever: 68% of the leaders we asked were finding the consumer perspective. After all,
somewhat or extremely concerned about the consumers report they are generally happy
Source: PwC’s 18th Annual
speed of technological change, up from 57% with their current financial institution.
CEO Survey, Banking and
only a year earlier.
Capital Markets
respondents only.

Figure 2: Bank CEOs told us they see six forces at work

………………………..…..…
1
PwC, “18th Annual Global CEO Survey,” BCM sector results 2015, www.pwc.com/CEOsurvey.

One step ahead:

How banks can anticipate what customers will want next 3
 Consumers are happy—or are they? That’s certainly good. But banks need to look
On the surface, it would appear that a step ahead, and know that consumers can
consumers are generally fine with the status be shaped by their experiences with
quo. For example, at least 75% of those companies in other industries. When people
surveyed described themselves as satisfied check into a flight using their phone, or get
or very satisfied with the banks’ customer context-sensitive shopping hints (“if you like
service, mobile banking offerings, and this, you may like that”), they may start to
branch hours and locations. wonder why banks can’t also provide them
the same seamless, on-demand, interactions
for a wider set of banking services. So, when
far fewer express satisfaction with their
financial institution’s customized product
offers (57%), mobile offerings (57%), or
reward programs (45%), it’s a red flag (see
Figure 3). The fact is, consumers have seen it
done better outside the financial services
industry.

Figure 3: Banking services with relatively low consumer satisfaction ratings

One step ahead:

How banks can anticipate what customers will want next 4
 A new kind of competitor emerges There’s also the issue of market appetite:
In addition to consumer expectations being consumers don’t have the loyalty that might
driven by their experiences outside the keep them locked in. In our survey, we asked
banking industry, non-traditional consumers about their willingness to buy a
competitors have started to offer financial wide range of financial products from non-
products to consumers. Many of these traditional providers: retailers, technology
disruptors do a better job engaging with companies, and hybrids.2 As one might
customers and further contribute to rising expect, many were skeptical about turning to
customer expectations. These non- a non-traditional provider for complex and
traditional competitors often use digital critical products such as mortgages. But they
technology as an entry point. As the CEO of could easily see a technology company, say,
a large American regional bank told us, “The as a provider of peer-to-peer payments
days of being able to just think of other (44%), bill pay (40%) or point-of-sale
banks as your competitor are over. We’ve transaction processing (45%), and other
seen new entrants that are being driven by products that don’t require a lot of research.
technology.”
Finally, we note that technology companies
To start with, new competitors have an can cause trouble for banks, even if they
unfair advantage. After all, technology- don’t provide financial services themselves.
driven competitors don’t have to support a In the same way that comparison engines
branch network, a legacy technology revolutionized the way we book air travel,
infrastructure, a support structure that relies we’ve seen the rise of virtual brokers for
on human capital, and so on. And when it financial services. These tools, which steer
comes time to raise money for consumers to lower-priced competitors and
improvements, financial institutions may capture value in the process, have helped
find that their cost of capital makes push down margins. This is a zero-sum
investment problematic. game, in which consumers are perfectly
happy to shop around and reward the
provider with the lowest price.

………………………..…..…
2
PwC, "2015 PwC Consumer Banking Survey," 2015, www.pwc.com/fsi.

One step ahead:

How banks can anticipate what customers will want next 5
 Some customer churn is worse In addition to differences by age, wealthier
than others customers are more likely to trust non-
A final worry: over the long term, the traditional providers as well. For all
customers banks want most may stick the financial service products/services that we
least. As shown in Figure 4, consumers are asked about, consumers earning more than
more likely to trust retail, technology, or $100,000 per year tended to be more likely
online retail/technology companies for to trust technology companies than
products such as credit cards and checking consumers with lower incomes. For
accounts than they are for loans or mortgage example, 44% of those who earn less than
products. When we examine these trends by $75,000 per year would trust a technology
age, millennials are slightly more likely to company for peer-to-peer payments, but this
trust technology companies and hybrids as rises to 68% among earners making more
financial services providers than older than $100,000. Experience has shown that
generations. disruptors don’t target the entire client base
of a bank, just the valuable ones who are
interested in the services they offer.

Figure 4: Consumers are more likely to trust non-traditional providers for

products such as credit cards and checking accounts.

One step ahead:

How banks can anticipate what customers will want next 6
 Understanding the playing True, the average promoter score (“I’d
field, reinventing the bank recommend my primary financial institution
On the surface, the solution seems to friends or family”) is lower, at 77%. True,
straightforward. Non-traditional even fewer trust their provider to look after
competitors are offering new and innovative their best financial interests (74%) or feel
products to consumers who are interested valued as a customer (74%). But there’s a
and willing to listen. The solution? Banks strong inertial force to keep customers tied
should become more digital while to their banks because moving accounts is
emphasizing their brand and long histories inconvenient and time-consuming.
as a competitive advantage. While on the So bank CEOs aren’t just trying to figure out
surface this makes sense, it’s not that easy. how to outfox the tech start-ups. They do
Banks can’t simply make this shift. Why? have to do that—but they also have to work
First, it would require a fundamental with the hand they’ve been dealt. Given that
cultural change for the institution. Second, the vast majority of their customers are
they would also risk alienating some of their reasonably satisfied, employees and
most valued customers in doing so. And this managers don’t have a desire to implement
is unfortunate because organizational inertia drastic organizational changes, and the fact
can be controlled—unlike regulation, low that change is very expensive and time-
interest rates, or demographics. consuming, there will be a large, powerful
There are large groups of important constituency that argues for taking a more
customers who are perfectly happy with the incremental approach.
status quo. In fact, 86% of the consumers in
our survey said they either agree or strongly
agree that they’re satisfied with the service
they receive from their primary financial
institution. So why change what appears to
be working?

One step ahead:

How banks can anticipate what customers will want next 7
 Focusing on priorities: how banks can We recently considered the case of Anup and
succeed today and tomorrow Bree, both consumers with average balances
There’s no doubt that banks have to make near $2,000. It’s tempting to market to the
choices now to shape the way they’ll perform Anup-Bree segment because, at initial
in a very different future. We see macro glance, it’s easy to define who belongs. But
trends that will soon affect what gets sold, take a closer look and the marketing pitch
and to whom. They’ll also affect how services gets a little more complicated. Anup
will be delivered, and where. manages his finances on his phone, while
Bree visits a branch every three weeks. By
As shown in Figure 5, our Retail Banking
leveraging an analytic approach, we could
2020 report discussed the six priorities that
identify Anup as a mobile customer whereas
banks will need to execute well in order to
Bree sounds like she’s part of the 81% who
thrive: developing a customer-centric
care about convenient branch locations. 4
business model; optimizing distribution;
Over time, the bank should help Bree
simplifying business and operating models;
become more comfortable with self-service
getting an information advantage; enabling
channels (cut costs) or help her take
innovation, and the capabilities required to
advantage of the advisory opportunities
foster it; and managing risk, regulations,
within the branch (grow revenue).
and capital.3
While it’s important to focus on the top
In each case, they’ll succeed by
priorities of the bank after gaining an
acknowledging the different constituencies
understanding of technology capabilities,
they serve, and by developing a plan for each
millennial preferences, and disruptors from
based on behaviors and preferences.
other industries, bank executives should not
Consider the following example of a
underestimate the importance of change
“customer first” way of defining segments
management.
based on behaviors rather than products.

Figure 5: Banks need to execute on six priorities in order to thrive

………………………..…..…
3
PwC, “Retail Banking 2020: Evolution or Revolution?,” 2014.
4
PwC, “Making omnichannel work: The ‘to do’ list for banks,” 2015 and PwC 2015 Consumer Survey.

One step ahead:

How banks can anticipate what customers will want next 8
 Making change stick In the case of banks on the verge of a critical
When you want to encourage people to think transition, this is especially important. CEOs
about moving forward, it’s arguably easier to are right to think about redesigning the
make the change when you’re standing on a branch, for example. But for staff and
proverbial burning platform. When you managers who will be worried about job
want to encourage people to think about losses, changes in authority and status, and
moving forward—in ways that could changed responsibilities, knowing that it’s
encompass people, processes, and the right idea just isn’t enough. And without
technology all at once—an 86% satisfaction addressing the human side of change, it’s
rate could even be counter-productive. easy to imagine incomplete implementation,
Change management is the secret weapon. reduced productivity, turnover, or worse.

We’ve seen many examples of companies

having announced great projects, rollouts,
expansions, upgrades—only to see them run
into trouble soon after launch. That’s
because organizations tend to focus on the
technical details, rather than on helping to
motivate people based on their own self-
interest. To make change stick, you have to
combine logic and emotion. We firmly
believe that the human side of implementing
change is every bit as important as the
analytics behind the change.

One step ahead:

How banks can anticipate what customers will want next 9
What this means for your business

Our survey found that millennial (18-34) Some banks may choose to bet it all on a
customers are about 50% more likely than digital future. Others may carve out a niche
their older counterparts (55+) to trust that emphasizes service over everything else.
companies with a strong track record of Still others are likely to build partnerships
innovation. That’s the future: the mobile with disruptors as part of a model focused
banking, peer-to-peer paying customer who on cooperation. There are many ways to
researches mortgages and IRAs online play, but they all require change and the
instead of in a branch. But the future isn’t knowledge necessary to stay one step ahead
here yet. At present, for example, customers of consumer expectations. Banks that act
still prefer to apply for a mortgage in person. now will be among the winners.

When financial institutions understand what Some of the changes will be externally
their customers really want, banks and visible and will likely be key findings in
consumers both win. And when they apply future consumer survey results. Nearly all
an effective change management program, will also require back-office and strategic
they can show employees and legacy shifts that may not be visible to consumers
customers that the future is filled with but will have tremendous customer impact.
opportunities. All will require a coherent plan to explain
the changes to consumers and employees, so
The way consumers are buying continues to they have a stake in successfully skating to
change, and as technologies morph, there’s the puck together, while allowing banks to
no magic potion that will prevent attrition. stay one step ahead of the competition and
Consumers will almost always consider their customer expectations.
existing provider—but even with good
products offered through the right channel
at a fair price, an incumbent bank may find
that its best isn’t good enough. When you
already serve a customer, though, you’re in
the best position to know what that
customer values most.

One step ahead:

How banks can anticipate what customers will want next 10
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(312) 578-4753
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and from go-to-market strategy to human
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A publication of PwC’s
The 2015 Consumer Banking Survey was developed with assistance from PwC’s Financial Services Institute
Research to Insight (r2i).
Marie Carr
Research to Insight (r2i) is PwC’s global center of excellence for market research. For Principal
over 25 years we have undertaken some of the most prestigious and thought
provoking research in Europe, the Americas and Asia Pacific. The team offers a full
Cathryn Marsh
suite of market research solutions to deliver insight and analysis that informs
FSI Leader
strategy, drives performance improvement and supports change. Research to Insight
also works closely with the PwC international network to develop cutting-edge
thought leadership. Kristen Grigorescu
Senior Manager
For further information, please visit www.pwc.co.uk/r2i/researchtoinsight.jhtml.
Gregory Filce
Senior Manager

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“One step ahead: How banks can anticipate what customers will want next,” PwC, December 2015, www.pwc.com/fsi.

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