3 ways retail banks can build loyalty with the new age customer

03 January 2017

By Mark Roper, former Commercial Director

We've all seen a great deal of change in the way banks have dealt with card-based loyalty initiatives, since the well-documented EU interchange regulations came into effect at the end of 2015. Banks continue to be under pressure to deliver loyalty differently and have been forced to take a fresh look at their loyalty programmes and strategies. Many have cut cashback, slashed points earning, cut monthly rewards and even axed their card programmes altogether:   

So how can banks continue to acquire, engage with and retain customers, when the primary method of paying for these activities has been reduced?

Customer behaviour has changed and continues to evolve in how they engage with banks, and brands in general; increased expectation for omni-channel engagement and growing need for banks to put the customer first. Whilst loyalty programmes and initiatives have been adapted to drive engagement and spend, membership is down and banks are hit the hardest - due to their need to cut back on rewards and make what they deliver more commercially viable.

Our recent research shows that of mass affluent consumers:

  • 65% expect to be rewarded for loyalty and 67% want more choice of rewards and benefits
  • 68% of Millennials demand digital experiences in exchange for their loyalty
  • 66% still want to be able to collect points
  • 82% of consumers who are active with their bank loyalty programme, spend more as a result

So how can banks build loyalty with these lucrative and savvy customers and still be commercially viable?

1.       Develop a merchant funded community

In the past it was merchants who suffered through high interchange fees, now it's the turn of the banks, unable to fund their loyalty programmes and initiatives - and ultimately the customer is losing out.  By a bank bringing together the merchant and the customer in a tripartite relationship through a merchant-funded rewards programme, all parties win, whilst also enabling a closer, more loyal and profitable relationship.

2.      Create & deliver a personalised customer experience

Many brands have a customer-centric vision, with the ultimate aim to create engagement and loyalty with their customers at every touch-point, to motivate and reward behaviours, in the channel of their choice and in the way most relevant to their needs and preferences. Retail banking is no different - understanding your customers fully is essential to providing choice, flexibility and a tailored personalised approach, focusing on a real-time, relevant and responsive experience. Both transactional and behavioural data insight will allow rules and customer journeys to be created and implemented to drive card usage, recency, frequency and value of spend, ultimately rewarding specific behaviours.

Put the customer in the driving seat and give them the choice they desire; offers and merchant partners relevant to them, a choice of earning and redemption methods in-store or online, more than just merchandise redemption - travel, experiences or charitable donations, part payment and points switching and multi-channel communication and delivery.

3.      Enhance your core product with value-added benefits

Banks should consider how core products can be enhanced with benefits that really add value to the customer. What services would customers consider as high perceived value whilst being commercially viable for the bank, low cost and easy to deliver?

Aspirational benefits

Duty of care benefits,the modern day equivalents of extended protection or warranty, as duty of care assistance

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About the author

As former Commercial Director, Mark was responsible for driving revenue and clients for Collinson financial services and travel propositions, with teams across Europe, the Americas, Asia and the Middle East.

Mark is an expert in financial services loyalty, marketing and partnerships, having worked in the field for the past 25 years. Prior to his role at Collinson, Mark spent 12 years at American Express where he was responsible for developing customer engagement and loyalty programmes across 18 markets. Mark was also Head of Customer Loyalty at Lloyds Banking Group where he developed the Lloyds Premier Banking account.