Banks' Best Customer May Be the Stranger Who Just Walked Out the Door, Says PwC US

NEW YORK, July 13, 2011 /PRNewswire/ -- Industry analysts have estimated U.S. bank revenue to grow by five percent annually, but, according to surveys conducted by PwC US, major regulatory changes and shifts in consumer spending, saving and borrowing behavior are likely to depress revenue growth, increase operating costs, and squeeze profit margins in the retail banking sector, which accounts for one-half of U.S. bank industry revenues.

PwC's conclusions reflect the findings of two recently released reports - When the Growing Gets Tough: How Retail Banks Can Thrive in a Disruptive, Mobile, Regulated World and Getting to Know You: Building a Customer-Centric Business Model for Retail Banks - which provide an overview of the competitive landscape for retail banking based on proprietary analysis and a nationwide consumer survey.Lymelife (2008)"After years of talking about cross-selling and customer relationship management, many banks still operate in product silos and not based on customer needs. They still cannot identify who their best customers are, let alone identify appropriate products, pricing, servicing and channels for them," said John Garvey, partner and leader of PwC US's banking and financial services advisory practices.In a 2011 PwC survey of CEOs, nearly 90 percent of banking industry leaders cited over-regulation as the biggest threat to their growth prospects. The regulatory changes that will most affect retail banks' relationships with their customers and make it harder to capitalize on growth opportunities include:* The Basel III accords, which will more than triple capital requirements for banks, increasing their funding costs.Pitched in a downbeat dramedy territory between The Ice Storm, American Beauty and The Squid And The Whale, Derick Martini's directing debut is a fine slice of American 1970s suburban angst. In a depressed town, Rory Culkin plays a teen longing for the girl next door, who discovers his father (a great Alec Baldwin) is having an affair with her mother (Cynthia Nixon). Timothy Hutton co-stars as the burnt-out cuckold, suffering Lyme's disease.Retail banking profitability limited by regulations, changing consumer behaviorWatchmen (2009)Other trends can challenge profitability, including changing consumer behavior. Consumers are saving more, spending less and paying down debt. The U.S. personal savings rate, in the low single digits a few years ago, is expected to continue rising, potentially reaching levels not seen since the 1970s and 1980s. While consumer thrift can reduce the demand for debit and credit cards, it offers banks the opportunity to benefit by offering financial planning and related products.To address these challenges and capitalize on the opportunities available, banks need to attempt to meet more of their customers' financial needs throughout their lifetimes. Doing so means that banks would have to adopt a more customer-centric focus to better understand and anticipate their customers' needs and preferences.Complicating the challenges that banks face in trying to grow organically is the growing cost of attracting new customers, given how few Americans remain "unbanked." FDIC research indicates that 92 percent of U.S. households already have a checking or savings account with at least one financial institution, leaving little opportunity for banks to attract customers who lack financial services entirely."While the future of retail banking demands a customer-centric approach, some banks have resisted moving toward this model because of institutional impediments, including internal disincentives, conflicting organizational priorities and concerns about integration complexity and execution risks," said Peter Pollini, principal, financial services, PwC US. "If banks are to make the changes that are necessary to break down product silos and become more customer-centric, they will need assertive leadership from the very top. Nothing less will enable these necessary transformative, organization-wide changes."At the same time, there are opportunities. The same PwC survey indicated that, while the average consumer has 6.1 financial products, only about half of them are with the customer's primary financial institution, mainly checking and savings accounts. The other most commonly purchased financial products are more often acquired from financial institutions other than a consumer's primary financial institution: Credit cards (48 percent*), mortgages (57 percent), IRAs (66 percent) and insurance (85 percent). (*Percent of customers who purchase these products from a financial institution other their primary financial institution).Saturday, 10pm, Channel 4Wednesday, 10.50pm, Film4Banks also face the challenge of adapting to the Internet age of "anytime, anywhere, right now" by using social media to better target their customers and mobile technology to respond to their needs faster and more effectively. Already, more than 90 percent of U.S. adults have a mobile phone, and they are increasingly using them for financial transactions. While the numbers are currently small, they will grow rapidly as consumers become more comfortable with these mobile technologies.Winner of 2009's Foreign Film Oscar, Yojiro Takita's beguiling, understated movie follows an unemployed young cellist (Masahiro Motoki) who, returning to the mountain town of his late mother with his disapproving wife, finds himself working as an undertaker's assistant, preparing the dead for cremation ceremonies. Takita balances a gently sombre mood with wry comedy.Accordingly, there is significant opportunity for banks to acquire a greater share of their customers' business over an entire financial lifetime, based on life events from opening a first checking account to rolling a 401(k) into a post-retirement IRA.To view the multimedia assets associated with this release, please click http://www.prnewswire.com/news-releases/banks-best-customer-may-be-the-stranger-who-just-walked-out-the-door-says-pwc-us-125481958.htmlFriday, 11.05pm, BBC TwoCompeting by breaking down product silos to focus on customersProbably the most eagerly anticipated comic book adaptation yet (it was originally discussed as a Terry Gilliam project in the 1980s), Zack Snyder's take on Alan Moore and Dave Gibbon's seminal strip about seedy, outlawed superheroes coming out of retirement in an grimy alternative America delivers a fanboy's dream. Though some might quibble it's not as good as the book. And that The Incredibles is a far more splendid movie.

The PwC report When the Growing Gets Tough: How Retail Banks Can Thrive in a Disruptive, Mobile, Regulated World is available at http://www.pwc.com/us/Mobile-Retail-Banking.