Segmentation in Financial Services

Published: September 2012
No. of Pages: 96


This report addresses the following key points:

  • The customer segmentation phenomenon explained
  • Trends among emerging and developed markets
  • Customer segmentation in retail banking is defined
  • Importance of customer segmentation in the financial services industry is explained
  • Customer segmentation case studies

Executive summary

At the heart of any customer relationship management (CRM) program is the effective segmentation and profiling of customers, allowing institutions to serve increasingly finer segments more profitably. Segmentation seeks to differentiate between different value groupings, in order to establish the most significant features that describe the user of a particular product, and to identify which of those are characteristic of a particular customer group. This report assesses the rapid wins available to both senior strategic staff and those at regional and branch level, looking to attract and retain retail customers by accurately profiling potential customers. It covers both individual retail clients and corporations.


This report will allow you:

  • To assess the new opportunities for business development based on marketing segmentation
  • To understand the major challenges faced by the financial services industry in segmentation
  • To analyze the impact of segmentation in customer service and business development
  • Understand the practices followed by various global financial institutions

Key highlights

  • The CRM process of financial institutions is adopting new ways for gaining HNWI customers.
  • Effective segmentation and profiling of customers is allowing institutions to serve increasingly finer segments more profitably.
  • Most of the retail banks manage the wealth market in pyramidal fashion, with the affluent segment at the bottom and UHNWI or family offices at the top.
  • The financial services industry is shifting from traditional relationship management to a customer segmentation approach.

Reasons to buy

  • Provides detailed analysis on segmentation in the financial services industry
  • There is a special emphasis on the various approaches of global financial firms with regards to marketing segmentation
  • The report also focuses on providing better solutions through segmentation for effective customer service
  • Provides in-depth analysis of the key issues in segmentation in financial services

Segmentation in Financial Services

Table of Contents

1 Executive Summary

2 Table of Contents

3 An Overview of Segmentation in Financial Services
3.1 Background
3.1.1 Back to basics: the role of customer segmentation in CRM
3.1.2 The disaggregation of the financial services function
3.2 History of Segmentation in Financial Services
3.2.1 Technological drivers
3.2.2 Socio-demographic drivers
3.2.3 Intensified competition
3.2.4 Changing demand-side dynamics
3.3 Opportunities for the Banking Sector
3.4 Segmentation Approaches in the European Banking Sector
3.5 The Battle for Long-Term Savings
3.6 Key Issues
3.6.1 Cost-cutting discourages major investment
3.6.2 Consolidating segmentation techniques
3.6.3 Legacy systems and lack of IT cohesion impede CRM
3.6.4 Impact of mergers and acquisitions
3.7 Proprietary Data Analysis
3.7.1 Initial data extraction and analysis
3.7.2 Value-based segmentation
3.7.3 Behavioral segmentation
3.8 External Market Segmentation
3.8.1 Methodology
3.8.2 Demographic and psychographic segmentation
3.8.3 Value-based segmentation
3.8.4 Database marketing
3.8.5 Marketing excellence
3.8.6 Channel use and the sales process
3.9 Future Trends
3.1 Key Segments
3.10.1 Affluent and Professional Clients

4 The Affluent Segment
4.1 Defining the Affluent Segment
4.2 What Drives the Affluent Segment?
4.2.1 Growing personal wealth rose to US$231 trillion in 2011
4.2.2 Demography drives greater concern for retirement provision
4.2.3 The relative attractiveness of wealth management products in a mature, increasingly competitive banking market
4.2.4 The shift from defined benefit to defined contributions
4.2.5 Regulatory efforts to protect the retail client
4.3 Placing the Affluent Segment in the Wealth Management Context
4.3.1 The clients and their needs
4.3.2 Customer needs
4.3.3 Client profile: the issue of segmentation
4.3.4 Service level
4.4 Products for the Affluent Market
4.4.1 Traditional retail banking products
4.5 Investment and Advisory Products
4.5.1 Tailoring the product offering
4.6 Organizational Structure
4.6.1 Predominance of the retail function
4.6.2 Other structures
4.6.3 Physical relationship between affluent and mass-market networks
4.7 Profitability
4.7.1 What drives the profitability of an affluent client business?
4.7.2 Definition of affluent segment
4.7.3 Product mix
4.7.4 Client mix and profile
4.7.5 National market
4.7.6 Business model
4.7.7 Market volatility
4.7.8 What do the available profit data indicate?
4.7.9 Market surveys
4.7.10 Issues to be addressed
4.8 Affluent Case Studies
4.8.1 UOB targets affluent Chinese
4.8.2 Metro Bank targets service for affluent customers
4.8.3 Citibank Korea targets emerging affluent
4.8.4 US$700 billion mass affluent opportunity

5 The Professional Segment
5.1 What is Professional Banking?
5.2 The Market
5.3 Why Have a Special Offering for Professionals?
5.3.1 Professionals are attractive customers
5.3.2 Profitability and cross-selling opportunities
5.3.3 Risks
5.3.4 Professionals have unique banking needs not met by standard offerings
5.4 Management Strategies
5.4.1 Organizational design and professional banking
5.4.2 Banks using this approach
5.4.3 Other approaches
5.5 The Professional Banking Team − A Specialist Unit?
5.6 Product Strategies
5.6.1 Main product lines for professionals
5.6.2 Personal products
5.6.3 Intermediary products
5.6.4 Business products
5.6.5 Cash management and payment services
5.6.6 Medical banking
5.6.7 Insurance
5.6.8 Practice management solutions
5.6.9 Financial advice and wealth management
5.6.10 Products for different stages of the professional lifecycle
5.6.11 Doctors’ financial lifecycle
5.6.12 Products for different specialties
5.6.13 Limited product offerings versus comprehensive product packages
5.6.14 Gateway products
5.6.15 New products versus repackaged existing products
5.7 Customer Service Strategies
5.7.1 High-touch customer service
5.7.2 A single point of contact
5.7.3 Saving customers time
5.7.4 Business support and advisory services
5.7.5 High-tech customer service
5.8 Professionals as a Source of Customer Referrals
5.8.1 Crestmark Bank
5.8.2 AEX Commercial Financing Group LLC
5.9 Risk Management Strategies
5.9.1 Risk profile of professionals
5.9.2 Cash flow versus asset-based lending
5.9.3 Professional liability risks
5.1 Financing for Professionals’ Clients
5.10.1 Medical professionals – patient financing
5.10.2 Care Credit
5.11 Legal Professionals – Litigation Financing
5.11.1 The litigation finance industry
5.11.2 Reasons mainstream banks have not entered the market
5.11.3 LawFinance Group

6 The Unbanked Segment
6.1 Who are the Unbanked?
6.2 Market Size – Global
6.3 Formal vs Informal Financial Institutions
6.4 Why are People Unbanked?
6.5 Drivers of Change
6.6 The Business Case for Banking the Unbanked
6.6.1 Union Bank of India targets unbanked segment
6.6.2 SBI rolls out Mobicash m-banking trial
6.6.3 ABSA launches Transact to target unbanked
6.6.4 Capitec starts new store concept to attract unbanked
6.6.5 Banamex to cover Latin America's unbanked
6.7 Strategies and Best Practices: Product strategies
6.7.1 Designing products for the unbanked
6.7.2 Gateway products
6.7.3 Basic accounts
6.7.4 Check cashing
6.7.5 Bill payments
6.7.6 Stored value cards
6.7.7 Payroll cards
6.7.8 Electronic welfare distribution
6.7.9 Cash-to-cash model
6.7.10 Cash-to-card model
6.7.11 Cash-to-account model
6.7.12 Account-to-account model
6.7.13 Account-to-card model
6.7.14 Account-to-cash model
6.7.15 Western Union International Bank
6.7.16 Credit products
6.8 Distribution Strategies
6.8.1 Branch channels
6.8.2 Branches in non-traditional locations
6.8.3 Portable branches
6.8.4 Mobile branches
6.8.5 Shared branching
6.8.6 Direct channels
6.8.7 ATMs and self-service kiosks
6.8.8 Smart cards
6.8.9 Mobile telephone banking
6.8.10 The internet
6.8.11 Third-party distribution channels
6.8.12 Retailers
6.8.13 Franchisees
6.8.14 Postal networks
6.8.15 Other financial institutions
6.8.16 Microfinance institutions
6.8.17 Community-based organizations
6.8.18 The workplace
6.8.19 Home Street Bank − Employer assisted housing
6.9 Marketing and Customer Relationship Strategies
6.9.1 Market segmentation
6.9.2 Gathering market information
6.9.3 Customer relations
6.9.4 Institutional commitment
6.9.5 Financial education
6.9.6 Simple and transparent product information
6.1 Marketing Channels
6.10.1 Grassroots marketing
6.10.2 Mainstream media
6.10.3 Cross-selling
6.11 Credit Risk Strategies
6.11.1 Managing repayments
6.11.2 Diversification
6.11.3 Alternative credit scores
6.11.4 Relationship lending
6.11.5 Group lending
6.11.6 Building a credit history
6.11.7 Financial education
6.11.8 Collateral and guarantees
6.11.9 Alternative proof of income
6.11.10 Mobile as a distribution channel
6.11.11 Mobile as a gateway product

7 The Least Served Segment − Female Customers
7.1 Financial Advisers and Women
7.2 The Business Case for Targeting Financial Services at Women
7.2.1 HDFC Bank targets women with two new credit cards
7.2.2 Women power to lead in Austria
7.2.3 Ajman Bank launches female-only service in the UAE
7.2.4 UniCredit may open women-oriented branches in CEE
7.2.5 Marketing to women at Citibank
7.3 Local Market Snapshots
7.4 Private Banking
7.4.1 Few findings of the research report understanding the female economy:
7.4.2 The ‘emotional’ element
7.5 Female Business Case Snapshot
7.6 The Importance of Financial Education
7.6.1 The US
7.6.2 Southeast Asia
7.6.3 The Indian scenario

8 Behavioral Finance − After the Credit Crunch
8.1 Overconfidence Bias
8.1.1 Prediction overconfidence
8.1.2 Certainty overconfidence
8.2 Representative Bias
8.3 Anchoring and Adjustment Bias
8.4 Cognitive Dissonance Bias
8.5 Availability Bias
8.6 Self-Attribution Bias
8.7 Illusion of Control Bias
8.8 Conservatism Bias
8.9 Ambiguity Aversion Bias
8.1 Endowment Bias
8.11 Self-control Bias
8.12 Optimism Bias
8.13 Mental Accounting Bias
8.14 Confirmation Bias
8.15 Hindsight Bias
8.16 Loss Aversion Bias
8.17 Recency Bias
8.18 Regret Aversion Bias
8.19 Framing Bias
8.2 Status quo Bias

9 Socially Responsible Segment(s)
9.1 “Environmentally-Friendly” Marketing
9.1.1 Characteristics of environmentally-friendly products
9.1.2 Importance of environmentally-friendly marketing
9.1.3 Environmentally-friendly Marketing – reasons for adoption
9.2 Carbon Offsets
9.3 Ethical Marketing Practices
9.3.1 Marketing to college students
9.4 Affinity Marketing
9.5 Social Awareness Marketing

10 Appendix

Published By: Timetric
Product Code: Timetric346

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