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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
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.
One step ahead:
How banks can anticipate what customers will want next
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
are fond of quoting Wayne Gretzky. The other industries who are targeting a subset
hockey great said that he always tried to of the customer base and a portion of the
“skate to where the puck is going to be, not services offered.
where it has been.” Chief executives set
strategy and define budget priorities for a In this paper, we examine how consumers
feel about their banks today, what bank
company, and they’re always trying to
balance today’s realities with tomorrow’s CEOs see for the road ahead, and how banks
possibilities. They need to anticipate where that focus too much on the present may
thwart their future success. We agree with
the puck will be at a specific time in the
future—to think about what their customers most of the bank executives that the
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
1
An in-depth discussion
The CEO and the consumer,
through the looking glass
What do US retail banking consumers want?
We asked, and they told us. As shown in
Figure 1, the vast majority of people we
asked considered the following features to
be important or very important: responsive
customer service (86%), competitive pricing
(86%), convenient branch locations (81%),
online banking offerings (77%), and
convenient branch hours (77%).
Figure 1: What US retail banking consumers want
One step ahead:
How banks can anticipate what customers will want next
Contrast that with the to-do list for financial
institution CEOs. They have to worry about
how to remain relevant and keep customers
loyal in a fiercely competitive environment.
They also have to meet ever-changing
regulator expectations and manage
everything from fraud to operational risk. To
satisfy their customers, they have to find
ways to upgrade systems and improve their
service quality. But they need to do this
without the margins that their trading desks
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.”
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?
On the surface, it would appear that
consumers are generally fine with the status
quo. For example, at least 75% of those
surveyed described themselves as satisfied
or very satisfied with the banks’ customer
service, mobile banking offerings, and
branch hours and locations.
Figure 3: Banking services with relatively low consumer satisfaction ratings
One step ahead:
How banks can anticipate what customers will want next
That’s certainly good. But banks need to look
a step ahead, and know that consumers can
be shaped by their experiences with
companies in other industries. When people
check into a flight using their phone, or get
context-sensitive shopping hints (“if you like
this, you may like that”), they may start to
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.
4
 A new kind of competitor emerges
In addition to consumer expectations being
driven by their experiences outside the
banking industry, non-traditional
competitors have started to offer financial
products to consumers. Many of these
disruptors do a better job engaging with
customers and further contribute to rising
customer expectations. These non-
traditional competitors often use digital
technology as an entry point. As the CEO of
a large American regional bank told us, “The
days of being able to just think of other
banks as your competitor are over. We’ve
seen new entrants that are being driven by
technology.”
To start with, new competitors have an
unfair advantage. After all, technology-
driven competitors don’t have to support a
branch network, a legacy technology
infrastructure, a support structure that relies
on human capital, and so on. And when it
comes time to raise money for
improvements, financial institutions may
find that their cost of capital makes
investment problematic.
………………………..…..…
2
PwC, "2015 PwC Consumer Banking Survey," 2015, www.pwc.com/fsi.
One step ahead:
How banks can anticipate what customers will want next
There’s also the issue of market appetite:
consumers don’t have the loyalty that might
keep them locked in. In our survey, we asked
consumers about their willingness to buy a
wide range of financial products from non-
traditional providers: retailers, technology
companies, and hybrids.2 As one might
expect, many were skeptical about turning to
a non-traditional provider for complex and
critical products such as mortgages. But they
could easily see a technology company, say,
as a provider of peer-to-peer payments
(44%), bill pay (40%) or point-of-sale
transaction processing (45%), and other
products that don’t require a lot of research.
Finally, we note that technology companies
can cause trouble for banks, even if they
don’t provide financial services themselves.
In the same way that comparison engines
revolutionized the way we book air travel,
we’ve seen the rise of virtual brokers for
financial services. These tools, which steer
consumers to lower-priced competitors and
capture value in the process, have helped
push down margins. This is a zero-sum
game, in which consumers are perfectly
happy to shop around and reward the
provider with the lowest price.
5
 Some customer churn is worse
than others
A final worry: over the long term, the
customers banks want most may stick the
least. As shown in Figure 4, consumers are
more likely to trust retail, technology, or
online retail/technology companies for
products such as credit cards and checking
accounts than they are for loans or mortgage
products. When we examine these trends by
age, millennials are slightly more likely to
trust technology companies and hybrids as
financial services providers than older
generations.
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
In addition to differences by age, wealthier
customers are more likely to trust non-
traditional providers as well. For all
financial service products/services that we
asked about, consumers earning more than
$100,000 per year tended to be more likely
to trust technology companies than
consumers with lower incomes. For
example, 44% of those who earn less than
$75,000 per year would trust a technology
company for peer-to-peer payments, but this
rises to 68% among earners making more
than $100,000. Experience has shown that
disruptors don’t target the entire client base
of a bank, just the valuable ones who are
interested in the services they offer.
6
 Understanding the playing
field, reinventing the bank
On the surface, the solution seems
straightforward. Non-traditional
competitors are offering new and innovative
products to consumers who are interested
and willing to listen. The solution? Banks
should become more digital while
emphasizing their brand and long histories
as a competitive advantage. While on the
surface this makes sense, it’s not that easy.
Banks can’t simply make this shift. Why?
First, it would require a fundamental
cultural change for the institution. Second,
they would also risk alienating some of their
most valued customers in doing so. And this
is unfortunate because organizational inertia
can be controlled—unlike regulation, low
interest rates, or demographics.
There are large groups of important
customers who are perfectly happy with the
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
True, the average promoter score (“I’d
recommend my primary financial institution
to friends or family”) is lower, at 77%. True,
even fewer trust their provider to look after
their best financial interests (74%) or feel
valued as a customer (74%). But there’s a
strong inertial force to keep customers tied
to their banks because moving accounts is
inconvenient and time-consuming.
So bank CEOs aren’t just trying to figure out
how to outfox the tech start-ups. They do
have to do that—but they also have to work
with the hand they’ve been dealt. Given that
the vast majority of their customers are
reasonably satisfied, employees and
managers don’t have a desire to implement
drastic organizational changes, and the fact
that change is very expensive and time-
consuming, there will be a large, powerful
constituency that argues for taking a more
incremental approach.
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
When you want to encourage people to think
about moving forward, it’s arguably easier to
make the change when you’re standing on a
proverbial burning platform. When you
want to encourage people to think about
moving forward—in ways that could
encompass people, processes, and
technology all at once—an 86% satisfaction
rate could even be counter-productive.
Change management is the secret weapon.
In the case of banks on the verge of a critical
transition, this is especially important. CEOs
are right to think about redesigning the
branch, for example. But for staff and
managers who will be worried about job
losses, changes in authority and status, and
changed responsibilities, knowing that it’s
the right idea just isn’t enough. And without
addressing the human side of change, it’s
easy to imagine incomplete implementation,
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)
customers are about 50% more likely than
their older counterparts (55+) to trust
companies with a strong track record of
innovation. That’s the future: the mobile
banking, peer-to-peer paying customer who
researches mortgages and IRAs online
instead of in a branch. But the future isn’t
here yet. At present, for example, customers
still prefer to apply for a mortgage in person.
When financial institutions understand what
their customers really want, banks and
consumers both win. And when they apply
an effective change management program,
they can show employees and legacy
customers that the future is filled with
opportunities.
The way consumers are buying continues to
change, and as technologies morph, there’s
no magic potion that will prevent attrition.
Consumers will almost always consider their
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
Some banks may choose to bet it all on a
digital future. Others may carve out a niche
that emphasizes service over everything else.
Still others are likely to build partnerships
with disruptors as part of a model focused
on cooperation. There are many ways to
play, but they all require change and the
knowledge necessary to stay one step ahead
of consumer expectations. Banks that act
now will be among the winners.
Some of the changes will be externally
visible and will likely be key findings in
future consumer survey results. Nearly all
will also require back-office and strategic
shifts that may not be visible to consumers
but will have tremendous customer impact.
All will require a coherent plan to explain
the changes to consumers and employees, so
they have a stake in successfully skating to
the puck together, while allowing banks to
stay one step ahead of the competition and
customer expectations.
10
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PwC serves multinational financial institutions
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(408) 808 2969 equity, payments, and financial technology. As
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issues that affect the industry, and we apply
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(312) 578-4753
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and from go-to-market strategy to human
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(212) 222-7272 PwC US helps organizations and individuals
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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.

© 2015 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC
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