The feature opens a discussion about the importance of customer loyalty for banks in the new pandemic reality, where digital financial services and cashless transactions have dominated, rather than traditional relationships. As the COVID-19 pandemic is still on our agenda we are witnessing significant changes in consumer habits and attitudes toward the traditional relationships with banks, which have been serving their customers for years.
Now, there are many new issues to consider. Here comes new challenges as personal safety, longer waiting time, the convenience to be served only remote, without any physical contact, etc. Even more, retail banks have closed a large number of branches, because of the pandemic. Without a physical location to visit, many consumers have shifted to online banking. As a result, people can be easily attracted by the new fintech disruptors that are native with innovative digital payment services. We all agree on the trust in the high- street banks still matters. However, bank managers have to be honest and ask themselves, “Can we afford not to invest in customer loyalty and what is needed to retain our clients?”
This article was originally published on FinTechMagazine, the editors have granted marketing and promotional rights for its distribution.
The financial services market is more competitive than ever before
Trust is an incredibly important part of a banking relationship; as a consumer, you want to be certain that your data and money is in safe hands. However, today a financial provider’s reputation is not enough to attract and retain customers for the long term.
The financial services market is becoming increasingly competitive as fintechs and digital giants with volumes of customer data have moved into the market offering everything from ApplePay and PayPal for ease of payments, to retailer credit cards which give their shoppers points.
Consumers have high digital expectations and banks have been slow to catch up which has left them vulnerable to digital disruptors. Traditional banks that have launched digital programmes have often failed to deliver them due to lack of internal expertise and the sheer scale of the challenge of digitalising their legacy systems into one seamless customer experience. It has never been easier for customers to switch their banking between providers. Information on the offerings of different providers is now transparently available online and banks have lost their information advantage.
Does this mean the end of traditional banks?
Traditional banks who win with digitalisation have a huge advantage. They can bring their long history of experience and trust into the digital age and through this create propositions and experiences that attract and retain loyal customers.
The most effective way of doing this quickly and cost effectively is to partner with a technology expert who can create seamless digital experiences. Banks that see digitalisation as a threat and disruption will not survive. Those that see it as a huge opportunity and embrace digital developments will ultimately win. For example, Open Banking allows real-time flows of data between banks and external partners. This could be seen as a threat to traditional banking or be a driver for creating beneficial partnerships and increasing innovation.
How can banks stand out and drive customer loyalty?
Customers increasingly demand 24/7 access to their finances through the channels that integrate best with their lifestyle and communications preferences; whether that be a video call with a mortgage advisor or managing transactions on their mobile phone. Excellent customer service, differentiated customer experience and competitive propositions are the foundation of customer loyalty.
For high net worth clients, customer loyalty often comes from the personal relationship that wealthy clients have with their relationship manager. In the digital age, customers who do not want or need a relationship manager can run the risk of very transactional relationships.
So how can banks move beyond these transactional relationships to deep ones? The next step is formally recognising customer loyalty. Customers want to feel they are known and understood as individuals. Simply offering points or frequent flyer programmes tends not to be enough to generate true customer loyalty; banks offering just these rewards often see customers switching to competitors to get the benefits of sign-up bonuses or more profitable schemes.
Banks have a huge amount of data on customer spending habits so they are perfectly positioned to offer reward programmes that feel unique to each customer. If banks don’t give their existing customers preferential treatment then they are risking huge amounts of revenue; it is much more expensive to have a churning customer base than customers that you reward regularly and retain.
The case for investing in loyalty
According to a 2018 study by KPMG, 61% of customers said it was extremely or very important for their bank to focus on ‘finding better ways to reward loyal customers’. A global study by market research firm Nielsen found that 72% of loyalty programme participants somewhat or strongly agree that, all other factors equal, they will buy from a business with a loyalty program over one without.
These findings are echoed by consultancy firm CGI, who concluded that being rewarded for their business is the top service demanded by financial consumers. A study by research and data analytics group YouGov, found that almost six in ten (59%) adults in the UK think all brands should offer a loyalty programme, and over three quarters (77%) are subscribed to at least one programme - a figure that rises to 85% among women (vs 70% of men) . The data strongly suggests that loyalty programmes are a strategic means of acquiring and retaining clients.
Banks that are leading the way with loyalty
A number of banks in the UK have established reward schemes. These range from the simple point-based rewards offered by Lloyds to cashback rewards for product holdings and spending which are offered by Barclays, Citibank and others.
Banks may mistakenly think that creating a reward scheme is expensive. While building a platform from scratch can be time consuming and require technical expertise, there are loyalty programmes available on a ‘plug and play’ basis. For example, the Sirma Loyax Platform is a fully customisable loyalty technology that enables businesses to create bespoke loyalty programmes at a very reasonable price, without the need for internal resources to be tied up in a big technology project.
Winning with customer loyalty
In today’s digital age, switching banks and becoming multi banked has never been easier. The banks who win will offer seamless digital experiences, market leading propositions and excellent customer service.
They will inspire loyalty with deep, consistent and meaningful engagement with their customers across channels, always offering preferential rewards to existing clients in form of best offers, best service and effortless complaint resolution. Through loyalty programmes, the winning banks will offer rewards for transactional banking that can be used on core banking services and vice versa, so that the customer feels recognised and valued as an individual no matter what products or services he or she uses. Banks that invest in loyalty platforms are truly putting their customers at the centre of the business and innovating as the market and customer needs change.
Author: Fabrice Gouttebroze, Managing Director of S&G Technology Services (part of Sirma Group Holding)