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How Banks Ramp Up Customer Retention With Loyalty Programs

Mar 23, 2022

How Banks can ramp up consumer rentention with loyalty programs

Living in the new digital era, customers are growing increasingly estranged by legacy banking models that have failed to adopt digital transformation. Unsurprisingly, the number of clients considering switching banks hit a record high in recent years. According to Foresight Research, approximately 44 million people considered leaving their old bank and establishing a new primary financial institution in 2020. This leaves banks with no choice but to up their game and creates next-generation loyalty programs. With that being said, it raises the question: What do customers want from a loyalty program?

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Traditional loyalty programs are losing relevance

Yet, banking loyalty programs generally encounter a common drawback. Most of them rely on transactional rewards—for instance, a consumer makes a purchase and takes their points in exchange for cash, gifts, and merchandise.

Unfortunately, 77% of those transaction-based programs fail in the first two years. The lack of personalization is deemed to be the main issue with those programs. In fact, only 11% of loyalty programs provide personalized rewards based on a consumer’s location data or purchase history. In a highly-competitive banking environment, a lack of care for a bank’s loyalty program can increase the churn rate.

Having a loyalty program is only a prerequisite for making customer retention possible. As a result, mediocre results can be expected when banks offer ordinary loyalty programs. To reap more visible benefits, financial service providers need to deliver rewards that surpass the conventional level of service.

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4 ways to increase customer retention and loyalty in banking

Mobile wallets for loyalty card management

Roughly 69% of the customers are more likely to use a loyalty card if it’s on their phone. Likewise, if the rewards and points are automatically visible and updated on mobile loyalty cards, 73% of the users are more likely to join a loyalty program. These statistics prove that mobile wallets can act as a catalyst for bank loyalty programs. Capital One is one of such forward-thinking banks with its proprietary wallet app designed for reward redemption and card management.

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Here are a few different ways by which you can integrate loyalty programs into your mobile wallet:

  • Send a notification alert to users whenever they reach a higher level of their rewards and loyalty program
  • Offer extra benefits like low-interest rates or gym memberships discount
  • Enable your consumers to effortlessly view and access their loyalty points and rewards
  • Remind clients that they have rewards available whenever they open the mobile wallet or are in proximity to the bank

Personalize digital banking experience 

Personalization can drive up to 15% revenue growth for corporations in the financial sector, as per Mckinsey & Company. By personalizing engagements throughout the customer lifecycle, banks can indicate to buyers that they understand their needs.

Customer support speaking with a client

A great example of personalizing mobile banking experience is S&T Bank’s My Reward program. It is developed specifically for clients who frequently utilize debit cards. The system provides personalized reward cards designed according to the online shopping preference of S&T customers. It also displays users’ favorite stores along with a full range of in-store and online discounts.

Research also shows that customers are willing to share personal data, like location data and lifestyle information, with financial institutions to receive personalized propositions. One of the most desired services among participants is money management: 57% stated they want saving tips based on their spending habits, and 51% responded they want updates on how much money they have left until their next payday.

Winning Gen Z with innovative loyalty programs

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For banks, Generation Z is the banking customer of the near future and becoming more important as a demographic. However, brand loyalty is much harder to achieve with this cohort. They have no hesitation to switch banks if the latter can’t satisfy their needs.

To decrease such a probability, Zions Bank created the Pays for A’s program to reward students for their diligence in studies and assist education. The program permits students to earn $1 for each A on their report card, which is deposited directly into a savings account at the bank. Moreover, it allows all students to participate in a lottery and win a bonus of $100 or even a $1,000 scholarship.

With this program, Zions Bank can entice the younger generation and collect data about them in the early stages to develop more targeted banking products and services. Meanwhile, such incentives contribute to a greater brand image while strengthening trust among both parents and students.

Take loyalty programs to the next level with the right technology

Big Data Statistics Analytics Computing Center Isometric Flat vector illustration. People standing working with data to improve loyalty programs

In today’s digital world, if banks wish to generate captivating loyalty programs that prevail over rivals and retain customers, they can’t overlook technologies that supply valuable consumer insights and present innovative customer retention strategies.

One of the crucial steps towards game-changing loyalty programs is to make the most of advanced analytics tools. With several sets of big data including customer demographics, credit-card statements, etc., it can help banks accurately segment target audiences. Having a full view of customers, financial providers will be able to develop more targeted and personalized loyalty programs. Furthermore, machine learning can support them in identifying ineffective programs and correcting unnecessary discounts.

KMS Solutions offers Banking Analytics solutions that leverage Advanced Analytics coupled with Artificial Intelligence, allowing you to store, process and monetize your data. Find out more on: https://kms-solutions.asia/services/data-analytics/

We work closely with leading software companies globally to bring the most advanced and innovative technologies to world-known companies in the financial sector.

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