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White paper December 2012
Hannah Williams
Senior Analyst Retail Banking
Since joining Datamonitor in 2010 I have specialized in Consumer Insight and Retail Banking. Working as a Senior Analyst in the financial team I have authored reports on a wide range of topics, including social media, the financial services sector in 2020, customer satisfaction and loyalty, and fee-based advice. Pivotal to our insight is our global consumer survey and I devote a lot of my time both to creating the survey and to querying the data. I have also played a key role in the development of the Financial Customer Intelligence framework – our global consumer trend framework.
If you have questions about the research, data, and findings within this document you can put your questions directly to the analysts. Simply email your questions to askfs@datamonitor.com. To find out more about Datamonitor Financial contact us at: email enquiries@datamonitorfinancial.com phone +44 20 7551 9437 Visit our website: www.datamonitorfinancial.com Or follow us on Twitter: @DatamonitorFS
DISCLAIMER While every care is taken to ensure the accuracy of the information contained in this material, the facts, estimates, and opinions stated are based on information and sources which, while we believe them to be reliable, are not guaranteed. In particular, it should not be relied upon as the sole source of reference in relation to the subject matter. No liability can be accepted by Datamonitor, its directors, or employees for any loss occasioned to any person or entity acting or failing to act as a result of anything contained in or omitted from the content of this material, or our conclusions as stated. The findings are Datamonitor's current opinions; they are subject to change without notice. Datamonitor has no obligation to update or amend the research or to let anyone know if our opinions change materially.
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The Financial Customer Intelligence framework presents eight mega-trends that help us to understand the needs, preferences, and demands of consumers. It is vital to understand the attitudes and behaviors of consumers in order to design products and services that align with these demands.
Source: Datamonitor. Marketing Strategies for Rebranding Financial Services (2012)
This document will focus on the Responsibility mega-trend. Responsibility is one of the eight mega-trends that Datamonitor has identified as being a significant driver of consumer behavior in relation to the purchase and use of financial services and products.
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Consumers want to take responsibility for their own finances. Datamonitor’s 2012 Financial Services Consumer Insight Survey reveals that 90% of consumers globally have already thought about their future financial needs. However, many consumers still need help from providers in order to make the right decisions about their finances. Despite the high levels of consideration over future financial needs, only 67% of consumers actually have a plan in place to cater for those future needs.
Source: Datamonitor. Marketing Strategies for Rebranding Financial Services (2012)
It is also important to consumers that financial services providers act responsibly and are accountable for more than just profit. Ethical and charitable considerations are valued. Sustainable practices and a long-term view of financial services are especially important in the post-crisis economy. 60% of
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consumers worldwide believe that their bank has a strong commitment to a charitable and ethical strategy.
Datamonitor's Financial Customer Intelligence framework summarizes the two trends within the Responsibility mega-trend as Responsible For Me and Responsible For Others. This white paper will use current case studies to illustrate how each of the sub-trends (Moderation and Avoidance, Financial Future, Financial Sustainability, and Social Responsibility) is now impacting on the financial services industry.
Consumers need to keep their finances under control on a day-to-day basis, monitoring their financial statements and levels of debt. In order to prevent avoidance behaviors such as ignoring debt, consumers need providers to facilitate the checking of finances.
The ImpulseSave service in the US allows consumers to set savings goals and transfer money towards these when they resist the urge to spend. “Impulse saving� is seen as the opposite of making an impulse purchase; rather than making an unnecessary purchase consumers are encouraged to save the money they would have spent. The service allows consumers to physically transfer the money into a savings account, ensuring that the resisted purchase is converted into an actual saving for the consumer. Impulse savings can be made through an iPhone app or by SMS.
Source: OrSaveIt (2012)
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The ImpulseSave idea is being built upon by OrSaveIt, which is due to launch in the UK imminently. This service will also offer an app through which customers can instantly save the money that they have resisted spending. While the full details are as yet unknown, this app will also help consumers to control their everyday finances and see tangible rewards from doing so.
Credit Sesame is a tool that allows consumers to monitor all their debt, including their mortgage, credit cards, and personal loans, in one place. The service combines an individual’s credit score and financial profile along with available products and market changes, to produce personalized recommendations that would help that individual to save money. “Debt optimization” is a key selling point of Credit Sesame; the tool helps customers to restructure their debt so that it is cheaper over the life of the debt.
Source: Credit Sesame (2012)
Credit Sesame was one of the FinnovateFall 2012 “Best of Show Winners.” The service has clear benefits for consumers who want to keep track of their debt
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and to reduce this as quickly as is possible. The personalized recommendations save consumers time, and they can also be applied for through the site. “What if” modeling helps customers to see what would happen if factors such as their credit score changed. This helps consumers to take more responsibility for their debt, while helping them to make better informed decisions.
Consumers want to take responsibility for their long-term financial future. Help with planning and choosing appropriate products is important to consumers.
The LearnVest website in the US combines more traditional personal financial management (PFM) functionality with the addition of tailored financial planning. The site allows consumers to make contact with a Certified Financial Planner to build a five-year plan or investment portfolio. While this planning service carries a cost to the consumer, it provides a convenient channel for consumers to make contact with an expert who can help them with their finances. The imagery and many of the topics covered on the site highlight its target audience – women – whom the site aims to “empower” to take control of their finances.
In addition to the PFM tools and financial planning options, the site provides context on news stories and how these may affect customers’ finances, as well as a series of “bootcamps” to help customers take control their financial situation. Overall this site helps consumers who may otherwise struggle to find access to financial planning to create a plan for their financial future. The emphasis on the importance of having a financial plan in place demonstrates how the provider is aiming to educate its target audience.
Consumers want providers to take a long-term view of financial services. Responsible lending and ensuring sustainable practices appeal to consumers.
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In October 2012, Barclays announced that it would end all commission-based sales targets for frontline staff, instead paying bonuses based solely on customer satisfaction ratings. Branch and call center staff will be affected by this change of focus of their bonus scheme. Team, rather than individual, performance will be assessed by looking at customer satisfaction ratings across a branch or area.
Refocusing the payment of staff incentives in this way demonstrates that Barclays has realized the potential damage of commission-based sales. These can lead to mis-selling and the pushing of inappropriate products. An emphasis instead on customer perceptions of the service that they have received should ensure that staff act in the best interests of the customer. This in turn will help to improve sustainability, with consumers purchasing the products that they need and that are best suited to their circumstances.
The US community bank PremierWest Bank launched an online “Financial Answer Center” in October 2012. This service provides customers with access to a host of financial questions, as well as offering “Quick Guides” on specific financial issues. The service also puts customers in touch with a local bank representative with expertise in a particular area if they want to discuss something further with their bank.
PremierWest Bank’s education platform demonstrates a commitment to helping consumers to make sensible decisions over their finances. It also differentiates the bank’s proposition from its competitors by going one step further to highlight its approach to financial responsibility. While it is very hard for providers to demonstrate attributes such as responsible lending, taking steps to educate customers and offering additional help when needed will provide an idea of financial responsibility.
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Consumers are concerned about the financial services industry’s wider corporate social responsibility (CSR) considerations. Facilities for the underbanked or financially excluded are important, along with charitable actions and community considerations.
In November 2012, Nationwide launched a five-year “citizenship strategy” in order to demonstrate to customers how the building society is meeting its brand promise of being on the side of its members. Nationwide has committed to three targets by 2017:
Help 750,000 people into a home of their own.
Empower 1 million people to start saving.
Invest £15m in local communities.
Source: Nationwide (2012)
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The setting out of clear and measurable objectives adds credibility to Nationwide’s new strategy. The three goals that the building society has set are focused on its customers and the communities in which it operates, highlighting a commitment to being socially responsible. The high level of transparency utilized by Nationwide in promoting this citizenship strategy is important so that consumers can see what the building society is doing and track its progress.
The “Superstorm� that hit New York and the northeastern US at the end of October 2012 caused widespread destruction to the area. Chase, which is based in New York, was one of the first banks to announce that it would offer disaster relief, pledging up to $5bn of support for small businesses and $5m in charitable relief. On a more practical level, Chase sponsored food trucks to deliver hot meals to people in areas affected by the storm. The bank also waived fees for customers affected by the storm.
This ad hoc demonstration of community support shows customers that their bank truly is interested in being socially responsible, beyond pre-planned CSR efforts. Banks are integral to the daily lives of consumers and in a crisis, providers need to demonstrate that they understand this. Support for the local community may not be in response to such a large-scale event; in the UK, for example, banks have the opportunity to assist communities dealing with flooding and to help customers in need.
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Personal responsibility and corporate responsibility are important to the modern consumer. The global financial crisis made abundantly clear the potentially damaging effects of individuals and providers not acting responsibly. Consumers want to do more to ensure the security of their financial futures. They also want to see providers making the same commitment to financial sustainability. This paper has identified several examples of tools that aid consumers in taking more responsibility for their finances, as well as initiatives from providers to highlight their efforts towards introducing sustainable practices.
Datamonitor's Financial Customer Intelligence framework offers a useful means of identifying the different factors that providers need to be aware of when trying to help consumers take responsibility for their finances, as well as demonstrate their own commitment to financial responsibility.
The financial crisis and previous cycles of boom and bust have left consumers concerned about the long-term future of the financial system as a whole. Consumers therefore want to see that providers are taking into account the long-term viability of financial services when making decisions. Responsible lending and borrowing are important to consumers.
There is also concern over the wider ethical and social considerations of financial services providers. Consumers want their providers to uphold the same values as they themselves hold. Activities such as sponsorship of events
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or teams, the support of charities, and community events all help to demonstrate to consumers that a provider is aiming to be socially responsible.
Consumers need to “keep on top of” their finances in order to ensure that their spending or levels of debt are under control. However, it is very easy for consumers to ignore their finances or spend in excess of their budget. Providers should help those consumers who need assistance to monitor their finances. Providers should consider tools and services that will provide additional support to those consumers who need it.
The long-term future of their finances is of vital importance to consumers. They want to take ownership of processes such as retirement planning to ensure that they have the financial future that they want. This does not mean that they will not need help from their financial services providers to do this effectively; planning for retirement or choosing life cover are not always simple processes. Providers must therefore offer consumers the advice or tools that they need in order to understand their position and what planning needs to be done.
Providers must get involved in the communities in which they operate – This shows consumers that the provider is aware of its wider responsibilities.
Help consumers to plan their finances – Consumers want to be responsible for their own finances but are not always able to plan without guidance.
Offer sustainable and ethical products and services – Consumers demand that their financial services providers align with their own beliefs around sustainability and ethicality.
Encourage consumers to be responsible for their finances – Helping consumers to engage with their finances will help to avoid problems with debt or low savings in the future.
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Be transparent about practices to secure financial sustainability – Consumers want to know that providers are designing strategies to safeguard their sustainability in the long term.
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At Datamonitor Financial, we deliver intelligence-led insight and data on financial services markets, competitors, and consumers. Our robust forecasting methodologies, proprietary databases, and the experience and knowledge of our in-house analysts help clients to make better strategic decisions in the areas of Retail Banking, Cards & Payments, Savings & Investments, Private Wealth Management, Life & Pensions, and General Insurance. Our research on cards and payments covers competitor developments, consumer attitudes, market forecasts, and technology developments, highlighting current and future trends. The Global Payment Card Analyzer, our proprietary online tool, includes market size, consumer, and competitor data for 60 countries.
If you have questions about the research, data and findings within this document you can put your questions directly to the analysts. Simply email your questions to askfs@datamonitor.com. To find out more about Datamonitor Financial contact us at: email enquiries@datamonitorfinancial.com phone +44 20 7551 9437 visit our website: www.datamonitorfinancial.com Or follow us on Twitter: @DatamonitorFS
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