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.

BankSimple, Google, Facebook, Apple—with hardly any real movements, these firms and others have become synonymous with the changing shape of retail banking and threats to its business models. Meanwhile, tech-startups are proliferating across the web: for the iPhone alone, there are 51 pages of “Finance Apps” available through the Apple website. Our data show that simple engagement with finances–like basic budgeting–is a predictor of both confidence and product purchase. Meaning that these apps are challenging banks at the critical intersection of experience and engagement.

What threat, exactly, do all these innovators—none of whom have yet gained widespread adoption—pose to traditional banking? The answer: the threat of outstanding web-based customer experience through highly targeted activities. As the chart below shows, almost every facet of bank activity is now being targeted by “pure-play”, technology-driven competition from non-bank financial innovators.

Moving beyond specific offerings, a pattern emerges around the so-called “emerging competitors.” They all share three key strategies related to customer experience:

• They move from the margins to the middle: They offer basic, low cost services that attack apparently marginal customer segments—relying on early adopters to drive uptake.
• They focus on user-centricity: Using new technology, they meet customers when and where they need services, economically and geographically.
• They focus on uniting a network: Through social media-driven advice and reviews, they aim to spread by quickly engaging networks of like-minded, financially-similar users.

For banks, then, the challenge will be an honest appraisal of how their customer experience compares not just to familiar industry competitors, but to new entrants willing to bet on novel, technology-driven experiences. How well do banks understand their own customer experience strategies and the role increasing touchpoints in customer relationships? Careful assessment of this question becomes all the more important as more high-value relationships become remote. To help banks pressure-test their customer experience design, we offer a Customer Experience Diagnostic, meant to gauge the consistency and coherence of the customer experience across the bank. For more information on this tool, please email cfcresearch@executiveboard.com

We also offer our members the Customer Experience Resource Center, which includes best practices around creating Customer Experience Storyboards, Realizing Greater Revenue from Service, and additional resources on Executing the Experience in Non-Branch Channels.

Banks are struggling with lofty sales goals amid disengaged customer bases. To counteract negative customer outlooks, Wen Bank’s (a pseudonym) sales staff focused on providing a list of concrete suggestions that save customers money or time before attempting any sales. Through this simple strategy, they earned the right to sell while gaining rich customer insights.

The Challenge: Wen Bank wanted to improve both the quality and quantity of sales. Rather than chance proactive marketing contact, where customers are difficult to reach and engage, it sought to take better advantage of the revenue opportunity presented when a customer enters the branch.

The Solution: The greatest challenge was to move sales staff away from the instantaneous selling mentality. Instead, the bank taught them to earn the right to sell by educating customers on subjects like where they could make greater use of products they already owned, earn more points, or qualify for premium services. Through conversations focused on better uses of current accounts and products, sales staff could easily identify new areas of need, useful customer information, and insights into possible improvements on product offerings.

The Result: By adopting a service-to-sales approach focused on education, the bank saw significant increases in customer retention, improved customer product usage, and–because sales staff became better in-tuned with customer needs–developed a stronger product innovation insights process.

Our members can read this complete case study on our website.

What makes a sales force productive? CFC surveyed 20,000 bankers to find the key differentiators between top performers and core staff. The results provide our members with a picture of what a top performer looks like:

• Top performers gain greater leverage from reactive selling
• Top performers spend more time with customers
• Top performers spend less time preparing for calls, but are still more effective than their counterparts

If core performers are given strong guidelines around time allocation for call preparation and actual customer outreach, they can begin to replicate top sales staff. The key: it’s about working smarter, not harder. As our study shows, through small, habitual changes, core performers can deliver dramatic lift toward sales goals.

To understand all the characteristics of top performers, our members can read our profile of ”High Performing Branch Bankers.”

It is not often that an entirely new model for banking emerges, but Banksimple is preparing to offer just that. The banking industry can be defined by two key activities: holding money for customers, and then effectively distributing it as their customers request. Banksimple wants to separate these tasks. Their plan: let banks worry about holding money, since that is what they do best, while Banksimple will focus the customer-facing tasks of intuitive, simple products, algorithmically-enabled money management, and superior customer service through their web-only platform.

For more on Banksimple and other innovations, visit our Product Innovation Library.

A new consumer segment is emerging. This segment, characterized by social media prowess, is strongly influenced by a new, global bank called “The Shadow Bank.” Haven’t heard of it? Your customers have, and they are turning to it for advice.

In the last two weeks we introduced the concept that social media savvy customers are more proactive with their financial management, and that consumers who proactively manage finances are more likely to purchase. In other words, social media and financial engagement go hand-in-hand–meaning banks cannot afford to ignore social media or the vital consumer segment it is empowering.

The new segment is armed with advice from a bank other than ours. They come to us pre-advised by the large and growing information network we have termed the “Shadow Bank.” Nearly overnight, the Shadow Bank has market share that rivals the largest consumer banks in the world.  Social media has not just created a new channel for us to consider, it has created a new competitor. Read More »

Consumers who use social media are two-times more likely to proactively take actions such as shop for a new bank, and move balances between banks, versus a less connected consumer.

We told you last week that consumers who proactively manage their finances are more likely to purchase financial products and report much higher satisfaction with the products they purchase. Social media is now a key area where customers are now engaging with their finances.

How are people engaging with banks through the social media world? In the Council’s recent survey of over 3,000 banking product consumers, over 30% reported using social media to communicate and learn about banking related issues.  More specifically,

• 18% of consumers are sharing frustrations
• 17% are using their networks to aid in financial decision making
• 12% are making bank recommendations to others.

But the implications are more important than you may think. Learn more about the social media savvy customer and the ways in which they interact with their bank by reviewing early findings from the Social Media Consumer Survey or by joining our upcoming webinar on 20 April or 28 April.