Our quarterly report on business conditions and expectations in Financial Services provides a network-enabled, 12-month outlook on key drivers of economic performance in financial services.

Most in the industry expect continued mixed trends, as modest revenue growth returns but cost pressures increase and capital expenditures decline.

Financial service (FS) executives’ sentiment: Executive sentiment regarding revenues in the coming year improved compared to last quarter, while expectations regarding cost pressures in the next 12 months remained similar. Overall executives expect relatively better operating margins in 2012.

Revenue growth and cost pressures: Sixty-three percent of executives expect their company’s revenue to increase in the next 12 months but only somewhat. Further 67% of executives expect cost pressures to increase, with nearly one-third indicating higher
or much higher cost pressures.

Growth indicators: More than one-half of the executives expect an increase in sales to both new and existing customers. Among executives, 46% expect fl at R&D investments and 40% expect higher M&A deals in the next 12 months. Further 44% of executives
expect lower discretionary IT capex. More than one-third, however, expect an increase in capex investment, and one-third expect a decline during the same period.

Each quarter, CFC surveys nearly 20,000 consumers around the globe on their financial sentiments, product satisfaction,  confidence in financial institutions, and overall engagement with their finances.

Our Q4 2011 survey shows continuing declines in consumer financial sentiment in most markets. Feelings about personal finances, confidence and providers, and product and service satisfaction all show global declines. Under the surface the data, however, a few bright spots emerge for segments and markets:

1. Asia Pacific continues its positive trends, as consumers in India, China, and Indonesia all express strong optimism about their financial outlooks.

2. Mass affluent consumers are maintaining positive feelings about their personal finances despite ongoing economic malaise. However, the mass affluent in Europe have not avoided the debt crisis, and show rapidly declining sentiments and confidence in financial service providers.

3. In every market, younger segments have more confidence in financial service providers than older segments. While this is at least partly reflective of the relative simplicity of younger lives (no mortgage, little debt, little experience), it also shows that despite economic hardship everywhere, most young people remain optimistic about their relationships with their banks.

Download our complete Q4 2011 global view of consumer financial outlooks.

Market level views are also available:

Asia-Pacific

Europe

Latin America

North America

What makes customer behavior change? CFC recently surveyed customers across the globe on their channel preferences to better understand how customers choose channels and, in turn, what institutions can do to influence those choices in order to serve customers better while reducing costs.

Our findings suggest two important lessons for banks:

1) That basic experience is a major obstacle to migration. 30% of our global sample lacked experience using the internet for banking–meaning, quite simply, that they also lacked any frame of reference for making a qualitative choice about how to bank. One useful thought experiment: how many television advertisements for banks emphasize the power of the web? The industry has put its emphasis, education, and investments around the branch, and customers have followed.

2) That encouraging and managing customer migration requires understanding customer channel profiles. We asked customers how they prefer to conduct specific tasks. Out of a possible 625 different arrangements for conducting tasks by channel preference, we found that 95% of customers fall into 5 different channel profiles–ranging from those that prefer the branch for all tasks to those who prefer all activities remotely. Each of one of these profiles bears specific characteristics around financial competency, education, confidence in solving problems, and trust in financial services that directly impact channel preferences. Successfully managing customer relationships through channel migration requires that banks understand the unique characteristics of these groups and how they make decisions.

Download our research brief, “Channel Strategy: Replacing Consistency with Quality” to see more about customer channel profiles, how channel decisions are made, and three case studies of institutions working to create high-quality online experiences.

Each quarter, the Council on Financial Competition surveys nearly 20,000 consumers from around the globe on their financial sentiments—like feelings about progress toward financial goals and confidence in their banks—and their financial activities – like whether or not they keep a budget or have recently purchased financial products.

The results of our Q3 APAC Consumer Financial Monitor show that despite a decrease from Q2, consumer financial sentiments remain well above the global average. Here are several other key lessons from our most recent APAC data:

• Pessimistic outlook on goals: Consumers are becoming pessimistic in feelings regarding their progress toward financial goals.
• Positive trends in confidence in financial providers: While overall confidence in providers remained low, confidence in financial service providers rebounded this quarter.
• Gap in markets regarding satisfaction: Consumers in emerging markets—like India and Indonesia—have higher levels of product satisfaction than those in mature markets.
• High proactive financial management: Consumers in Asia–Pacific report higher proactive financial management compared to global standards.
• Declines in product purchases: Despite the highest levels of satisfaction, the purchase levels of transactional and insurance products trended downward.

For more information on our Consumer Financial Monitor, download the full report. Also be sure to attend our upcoming webinar, Capturing the Mass Affluent Mindset.

With the financial press routinely referencing Europe’s economic “meltdown”, her “future in the balance”, “teetering on the brink”, a more constructive conversation around what this actually means for individual consumers on the ground, and in particular, the providers hoping to serve them, has struggled to gain column inches. Our European Q3 Consumer Financial Monitor, a quarterly survey of financial sentiment across Europe, offers actionable insight on crisis-era consumer engagement.  Amongst the top-line trends:

• Consumer Sentiment is Intractably Low – No surprises here – Europeans report the most negative change in “progress toward achieving financial goals” – 38% negative. Consumers are worried. Less expected: consumers lack confidence in traditional providers around many basic, foundational aspects of banking, such as “keeping consumers’ money safe” and “offering clear and simple policies”. Worst of all, this low confidence is translating into a clear decline in product purchase. Obvious message for providers: focus on simplicity and clarity around sales, service and support to drive consumer confidence (and thus sales).

• Proactive Financial Engagement (PFE) is in Decline – Not only is PFE low amongst Europeans compared to global standards, but compared to Q2 there was a decline across all key attributes of proactive financial management – “kept a formal written budget”, “had a formal written long-term plan”, “used a financial advisor” “performed any of the above activities”. At a bare minimum, this implies providers must do more to engage consumers constructively around their finances – through “courageous conversations” in-branch, Personal Financial Management tools on-line, and especially perhaps, by offering further guidance and insight through the “human face” of social media.

• Consumer Sentiment Varies Notably Across Segments – Whereas earlier CFM data suggested downward trending of confidence and purchase behaviour across all income and age brackets, Q3 data for Europe supports a more nuanced interpretation. Mass Affluent consumers and High Net Worth are far more optimistic about their personal finances, while consumers in all other segments report a drop in “positive feelings”. Likewise, younger adults express more confidence in providers, report higher product purchase, and greater product satisfaction. As these differences develop, embracing a more segmented banking model will ensure providers engage with the right consumers in the right way.

Access our “Consumer Financial Monitor: Q3 2011” for full survey results and further insight on crisis-era consumer interaction in Europe.

To learn more about how the crisis is affecting the Mass Affluent in particular, please register for our webinar, “Capturing the Mass Affluent Mindset,” next week:

Members in the Americas and Europe

Members in the Asia-Pacific

Across the first three quarters of 2011, mass affluent individuals have become less positive about their personal finances.  According to our global Consumer Financial Monitor, feelings about personal finances have dropped a net 5 percentage points since Q1.  Their gloominess is widely shared.  Feelings about personal finances have converged around the world as even once robust markets, like Asia, confront slowing growth and rising uncertainty.

Aggregate mass affluent statistics, however, mask important differences among this hugely diverse group.  For example, individuals with between $100,000 and $500,000 in investable assets report significantly more negative feelings about their finances than those with $500,000 to $1,000,000.  In turn, older mass affluent express far less confidence in financial providers compared to younger cohorts.  Pick almost any indicator of sentiment or behavior and you see major differences among the mass affluent based on wealth or age.

The mass affluent represent an outsized source of loans and deposits for retail banks, are a key constituency for brokerages, and an important pipeline of wealth management clients.  To support our members’ efforts at acquiring, retaining and growing mass affluent relationships, we will explore the attitudes shaping the mass affluents’ financial decisions and how financial services firms can address the needs of this important, but complicated, segment.

Please join our Webinar:

Members in the Americas and Europe

Members in the Asia-Pacific

Each quarter, the Council on Financial Competition surveys nearly 20,000 consumers from around the globe on their financial sentiments—like feelings about progress toward financial goals and confidence in their banks—and their financial activities, like whether or not they keep a budget or have recently purchased financial products.

The results of our Q3 Consumer Financial Monitor show consumers in almost every market bracing for more hard times ahead. Here are 3 key lessons from our most recent data:

• Pessimism about personal finances is creeping into emerging markets. Over the past three quarters, sentiments about personal finances in emerging  markets have converged toward the low marks of mature markets. Asia-Pacific regions, the Middle East, and emerging Europe are all showing increasing pessimism around personal finances. Negative sentiments are entrenched in mature markets. “Progress toward financial goals” and “outlook on personal savings” saw the greatest drops in sentiment, signaling a consumer sensing troubling uncertainty about the future.

• Financial disengagement is becoming more pronounced. We have shown how financial confidence and product purchase are linked to basic financial management–even simply keeping a budget. In a worrying sign for banks, proactive financial management remains very low. Only 1 in 5 consumers report keeping a basic budget. In a sign of consumers preparing for continued hardship, balance sheet activity stabilized everywhere. Consumers reported both less saving activity and less indebtedness—suggesting that consumers are either living strictly within their means or that more and more money is finding its way under the mattress.

• Confidence in financial service providers improved, but banks still have plenty of room to grow. Across all wealth segments and age groups, confidence in financial service providers remains very low. From Q2 to Q3, the high net worth segment saw a notable decrease in confidence, despite remaining the most confident segment along with the mass affluent. For all its troubles, North America still reports the most confidence in banks.

For more on our Consumer Financial Monitor, download the full report. See also our report on mass affluent financial sentiment and activity.

As we approach the second half of the year, the Council team is focused on ways to best serve our membership. We are excited to be able to offer a range of access points and resources to help your organization get the most out of its Insights membership.

• Leverage our website which houses searchable databases of all CFC studies, topic-specific resource centers, and regularly updated consumer data on financial outlooks and banking activities by region.
• Read our weekly newsletter and blog to learn of weekly updates on research, education on resources, and industry commentary to help members understand and access industry analysis.
• Send questions directly to our research staff for customized advice on best practices and resources for specific challenges.
• Hear peer views by asking questions to a web forum of other CFC members.
• Connect with other members and learn research firsthand at our Executive Insight Meetings.
• Stay abreast of current research initiatives through our webinar series.

In addition to these resources, the Council now drives decision-making through a combination of best-practice industry research and proprietary data sets.

• The Consumer Financial Monitor, a quarterly survey of over 18,000 consumers, tracks sentiment and product demand.
• The Branch Salesforce Productivity Accelerator, a survey of 20,000 frontline bankers from 7,000 branches offers key factors to make proactive sales efforts more effective.
• Our Multinational Customer Experience Survey provides analysis of changing consumer banking channel preferences and uncovers primary reasons why banks fail to convert serve into sales both through the branch and online.
• The Post Crisis “Boomer” Opportunity unpacks how the financial crisis shifted expectations and behaviors of this segment and separates the analysis of mass market, mass affluent, and high-net-worth sub-segments.

We invite you to visit our updated website. Our continued investment in web capabilities is designed to help our members maximize our value and find meaningful solutions in our extensive databases, resources, and quantitative insight pages.

With the exception of a few bright spots in most regions, confidence in financial providers dropped from the first quarter to the second.  Asia Pacific, Europe, and Latin America saw the steepest drops.  Unfortunately, this is from already low levels of confidence. 

Confidence may seem touchy-feely, but our research shows a large hit to the industry’s top-line.  In Europe and North America alone, we estimate 63 million financial products went unsold in 2010 because of anemic confidence levels.

Please join our upcoming webinars on July 6 (or July 7 in the Asia Pacific) where we will share additional findings from the latest quarter’s Consumer Financial Monitor™ and present a deeper analysis on the role that consumer confidence and emotions play in influencing the financial behavior of mass market, mass affluent, and high-net-worth individuals around the world—and what retail bank executives can do about it.

The Council presents two important resources for understanding country-level consumer perspectives on economic outlooks and financial engagement.

First, our Consumer Financial Monitor now offers country-level insights into financial sentiment and activity across 18,000 consumers in 24 countries. These detailed pictures of the world’s major markets offer essential information on consumer interactions with, and feelings about, banks and their products. Our reports track key indicators like satisfaction, confidence, and engagement with financial service providers. Individual country profiles can be found by following these regional links:

• Asia-Pacific
• Europe
• Latin America
• Middle East and South Africa
• North America

Next, our Global Banking Outlook also now offers country-level reporting into consumer financial behavior and values. These profiles track behaviors around borrowing, saving, investing, and financial values.

• Australia
• Brazil
• Canada
• China
• Italy
• Mexico
• Turkey
• United Kingdom
• United States