Financial Services Loyalty Programs in Perspective: The Path Toward Engagement Success

Aug 28, 2013

It wasn’t long ago that loyalty managers had a near-impossible task: discover consumer wants and needs in real time and do so in a way deemed unobtrusive. This was especially true in the financial services loyalty program realm.

Thanks to new technology like smartphones, systems that can manage terabytes of data and new channels that can deliver genuine experiences in personalized ways; the loyalty program manager’s job has paradoxically grown easier yet more complex. While enhanced engagement means greater customer behavioral insights and data, that information influx has led to an uptick in fraud and identity theft.

Kobie Marketing’s Chief Information Officer Don Hughes discusses these challenges and opportunities, offering his insights on how financial services institutions’ loyalty programs can achieve customer engagement success with a top-notch loyalty experience.

What are some of the biggest challenges and opportunities for financial services loyalty programs?

The biggest opportunity for financial services loyalty management comes down to tapping into the real-time data stream. With programs delivered via “smart” mobile devices, financial service providers have access to an unparalleled amount of data which can be used to segment customers based on their level of brand engagement. Only 10 years ago these levels of granular insight were impossible.

The challenge for financial service loyalty providers is earning customer participation while honoring those customers’ channel preferences. How do programs vie for their customers’ voluntary participation and on what channels? What type of message will improve members’ loyalty experience, product-specific or program offers? These are some of the questions program managers must answer in order to maximize their customers’ loyalty experience.

Are there technological challenges that financial services loyalty programs face over other verticals?

FI programs face audit and compliance challenges that other verticals don’t. They spend more on these due to frequently-changing standards as regulations become more rigorous over time. FI’s must also be wary how much data they can pull from other sources and use those insights to inform their customers. Another loyalty management technology threat relates to fraud and the nature of open-architecture systems and their capabilities. How can banks store highly sensitive cardholder data while preventing or reducing the risk of a breach? And how can that data be protected from emerging threats coming from Asia and overseas?

What are some of those specific threats?

Until recently, data breaches were systemic in nature. Now, a lot more organized data breaching activity and hacking are occurring overseas targeting companies within North America. We have a customer who experienced what’s known as a DOS (denial of service) attack that came from China. Essentially, it was a massive effort targeting one particular company and its entire service infrastructure.  

What are the critical factors for a successful financial services loyalty program?

Financial services loyalty programs must be cost-effective. That means the monetary value it brings to the brand exceeds its cost of implementation. FIs must also push the envelope and find alternate funding sources within a brand’s financial services model, moving beyond more traditional incentives like:

  • 15% discount for opening a particular credit card
  • 15% off an item purchased
  • Zero payments or zero interest rates for six months

Financial services loyalty programs also require a technology partner that is innovative by nature and technology-agile to the point it can rapidly respond to new ideas, especially ones that are time-sensitive.

The bottom line

It may not be consistently recognized, but banks and financial services institutions, due to their data-driven requirements, have long been at the forefront of gauging customer behaviors, wants and needs:

  • Today, the deck is stacked increasingly in their favor as new technology and new engagement methods help them collectively chart new paths forward in customer loyalty.
  • Even so, security risks must be reduced and communication channel management is a must.

But with a 73% loyalty program approval rating, there’s no question that banks and financial services institutions are beginning to find the right engagement balance.

Are you running a financial services loyalty program? What types of customer engagement, channel preference and security threats has your brand encountered? And how do you determine the financial viability of your program? Please share your thoughts with the Kobie community below or send us an email to