Take Charge of Consumer Relationships with Financial Services Loyalty

by Rohan Ahire |

Consumers have more payment options than ever before—and a mere 30% use a single source for all their financial needs. Most spread their payments and other financial needs across a wide range of providers. Incumbent banks are suffering from eroding economics and fading customer relationships as more consumers engage with newer digital offerings. Neobanks and other digital start-ups have been chipping away at banking markets for a decade. Their transparent pricing and products make it easy for consumers to shop around. Personalized experiences are key to showing consumers you understand their individual needs but knowing exactly where and how to add value is a challenge.

Jane Fraser, President of Citigroup and CEO of Global Consumer Banking, said it best during a panel discussion at the 2020 Davos gathering:

“You have to capture not just the wallet, but you have to capture the heart and mind of the customer. That’s the strongest defense against the huge platform player—making sure you’re relevant to your customer at all times. Otherwise, you will become a utility.”

Churn in Financial Services Can Be Hard to Measure

Most banks understate their churn rates, as most “losses’ consist of consumers getting credit cards, loans, or other products elsewhere, but not closing their original account. Maintaining a healthy base of primary customers may disguise the harsh reality of declining share of wallet.

Keeping the Interest of Your High-value Customers  

Banks have evolved from a brick-and-mortar institution to an application on our phones—and banking customers want seamless interactions between their physical and digital banking experiences which requires an omnichannel approach. Younger customers go ‘cashless’ and want quick money transfers with mobile banking. Other customers expect personalized financial services and advice via an online banking platform. Meeting your customers’ unique needs requires a customer-centric strategy. However, it makes sense to prioritize and focus on retaining your high-value customers and keeping them engaged.

While financial institutions have moved the needle when it comes to simplifying customer journeys, being more transparent about fees, and upgrading their digital banking platforms—some of these improvements have been done at the expense of their higher value customers. And value is increasingly driven by frequent digital engagements. Unfortunately, most banks still offer better deals to new customers. According to a Global Data’s Global Retail Banking Survey, only 23% of consumers felt they were rewarding for being a loyal customer. Today’s consumers have increased their expectations across all channels—and they want convenience, simplicity, speed, and personalized experiences. According to Boston Consulting Group, for every $100B in bank assets, it can achieve as much as $300M in revenue growth by personalizing its customer interactions.

How to Retain & Engage High-value Customers with a Financial Services Loyalty Program

Accenture reports 75% of consumers still regard their relationship with financial institutions as “purely transactional”. A financial services loyalty program helps you add unique value beyond credit cards, increase the number and diversity of interactions, incentivize profitable behaviors, and take customer relationships to the next level. And research shows balances and revenue increase as engagement increases. Leveraging today’s customer loyalty technology is one of the most effective ways to truly understand your customers, identify and reward your best customers, and accelerate growth.

Here are some of the ways leading banks are increasing retention and keeping their high-value customers coming back with a financial services loyalty program:

  • Offer a Wallet Application for Loyalty Card Management—Software company Amdocsreports 61% of customers like the ability to manage their loyalty programs through a mobile wallet, but only 21% of financial providers offer this feature. Having a wallet app for managing the loyalty card eliminates the need to carry a physical loyalty card. Make sure the loyalty program is managed through a digital system.
  • Personalize Interactions & Offers—People prefer offers that demonstrate personalized value. Integrating personalized options into existing loyalty programs can help create a more meaningful customer connection. For example, if your bank rewards transactions at places customers frequent, they’re more likely to engage with loyalty benefits and opt for your banking services over the competition.
  • Educate Millennials and Gen Z—Millennials and Gen Z more likely to select multiple digital banking platforms and more likely to change their platform, so keeping them engaged is essential. Some banks provide exclusive programs for students to offer support and education, building trust for decades to come.  
  • Reward Your Best Customers—Identify and reward your high-value customers based on channel usage, brand preferences, purchasing behavior, etc. Using CLV metrics can help identify target segments of high value customers, boosting conversion rates up to 20%.
  • Use Surveys and Analytics to Predict Churn—Churn sneaks up on you but surveys, social connectedness, and other data can help you better predict churn. One bank did this to achieve 70% accuracy and saw a 6X increase in conversions, from 5% to 30%
  • Nurture Advocacy—Loyalty creates emotional bonds that lead to advocacy. Loyal customers promote you more, spend more, cost less to serve, and are more likely to refer friends and colleagues.
  • Test & Learn—One-off offers don’t work over the long-term. Don’t be afraid to experiment to find the most effective strategies and offerings across different segments.
  • Leverage Data—First-party loyalty data enable banks and fintech to engage their high-value customers more effectively, through granular segmentation and personalization. One finance company, for example, implemented a systematic activation program in pilot markets that yielded a 22% increase in customer retention along with a 4% lift in profitability.

“What if profits from personalization are only a part of what’s possible by taking a more comprehensive approach? More than opportunistically targeting offers and upsells, personalization can become a means to a more rewarding end—growing the relationship. The true promise of customer engagement in retail banking is “Being able to go beyond next-best offers and targeted marketing and create more customized, relevant end-to-end experiences for customers.”

Boston Consulting Group

Here are just a few of the benefits of financial services loyalty programs:

  • Identify, Reward & Educate Your Best Customers—Relationship-based customers are high value and studies show they use up to two more products and services on average. Loyalty provides the opportunity to meet these high value customers’ need for information and support. Go beyond banking and credit cards by offering unique, exclusive benefits and education around investing, saving money, budgeting tips, and more.
  • Improve Relevancy—Loyalty enables you to learn more about your customers’ needs and preferences every day. The more you know about your customers, the easier it is to offer relevant education, materials, and rewards that align with their behaviors and solve their specific needs.
  • Incentivize Profitable Behaviors—Let members earn points for signing up, using their card, and using the mobile app while also incenting them to use other services and actively do business with you.
  • Expand Reach—Leveraging insights from loyalty’s unified customer profile enables you to extend education to the entire family, including kids, pre-paving the way for them to open accounts at your bank.
  • Elevate Partnerships—Go beyond transactions with more meaningful, mutually beneficial partnerships.
  • Extend Your Currency Boundaries—Forbes reports loyalty points will soon be recognized as another form of payment, where points could be used to pay off bills and other everyday life transactions.
  • Improve Acquisition—Loyal customers are more likely to refer others, and referred customers automatically have more trust and confidence in your bank.
  • Loyalty in Action

Let’s look at a few real-life financial services loyalty programs in action:

Citibank—Citi ThankYou

Citibank’s loyalty program includes:

• Enrollment requires a Citi credit card, and 1 point is earned with each $1 spent using the card
• 10% points back on all redemption options for the first 100,000 points
• Customers can buy 1,000 points for $25
• Earned points can be transferred to another member’s account
• Points can be used for travel rewards, gift cards, cash rewards, mortgage, or student loan payments—even charitable donation


Bank of America—Preferred Rewards

Their tiered bank loyalty program offers increased benefits at each level:

• Gold offers a 5% interest rate booster, 25% bonus on eligible priority credit service, mortgage reduction, and no fees at select banking services
• Platinum requires a balance of at least $50,000, increases the values of all the existing benefits, provides 12 free ATM transactions per year, and allows members to make free online stock and ETF trades
• Users with an account balance of $100,000 or more are eligible for the Platinum Honors rank, with even better deals and unlimited free ATM transactions


Wells Fargo—Go Far Rewards

Wells Fargo boasts a complex reward-based credit card system where:

• Users earn rewards with net purchases and by using the credit card
• Each credit card has a different rewards system and benefits
• There are four reward categories: merchandise, gift cards, travel, and online auctions
• Users can share their rewards or donate their points to the Red Cross


Capital One—Purchase Eraser

Capital One allows customers to make travel-related purchases with their rewards card, then wipe out the cost of that purchase from their statement using their accrued miles:

• Customers can earn miles on every purchase and redeem for all kinds of travel-related shopping and enjoy unlimited cash-back rewards
• Points can be redeemed when shopping at Amazon.com or paying with PayPal
• Rewards don’t expire for the life of the account


Annex Cloud Can Help

Annex Cloud’s Loyalty Experience Platform combines best-in-class loyalty management with powerful engagement and communication modules, enabling banks and financial institutions to build lasting customer bonds while accelerating growth. It’s modular, so you buy just what you need. Learn more about our solutions for financial services loyalty.

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