At its most basic level, loyalty is about trust – not about the program specifics, per se. But that’s not great news for banks: recent data shows that Americans don’t trust their banks very much. Investors, too have diminishing trust in the financial system, according to the SEC (Securities and Exchange Commission). As for non-investors and everyday Americans, only 1 in 4 have faith in big banks while Bankrate.com (an aggregator of financial rate information), says that 76% of Americans remain risk-averse when it comes to stock investments – even with Wall Street’s recent record highs.
Now for some better news: considering the number and popularity of co-branded credit cards linked to customer rewards, millions of consumers are part of financial services loyalty programs (total membership is around 420 million, including multiple programs) even if they’re not actively engaged.
So bringing these challenges together – skepticism of banks and a lack of clarity about loyalty program benefits and their differentiators, how can loyalty programs improve customer trust and preferences for a financial services brand?
Here are a few ideas that the Kobie team discussed on a panel at the Card Forum & Expo last month:
- Recognize and act on the importance of Big Data: Some financial institutions aren’t as proficient as they should be when it comes to dealing with ‘Big Data.’ Traditional consumer transaction data? No problem. Loyalty data? Less so. A recent Celent report finds widespread financial services’ awareness of Big Data, but uncertainty over what to do with the data collected. That’s despite the fact 60% of firms believe information is key to their competitive advantage.
- Consider convergence: Financial service companies frequently keep customer relationship data and loyalty data in siloed collection centers. But convergence of these two data sets will help paint a more granular, accurate picture. So if customer A has B amount of money invested, but chooses to spend on XYZ, financial services companies can put two and two together and incentivize transactions via loyalty rewards, possibly with gamified elements and mobile apps, adding to the enjoyment. While not strictly a financial services example, iZettle, the Swedish mobile payments company that many hope will be Europe’s answer to Square is a good example of data convergence. Rather than just logging credit transaction information, the latest device upgrades include the ability to analyze what was purchased, measuring revenue, top selling products, transactions, average payment volume and returning customers.
- Build trust through an omnichannel loyalty framework: As is the case with loyalty programs in other industries, transparency in the financial services industry is critical – especially following the US housing bubble implosion and the collapse of major lending institutions. Building trust and being transparent begins with engaging outreach across all marketing channels and consumer touch points. That’s what we call omnichannel loyalty – an enterprise-level initiative to drive, track, measure and reward incremental behavior throughout the enterprise and customer experience. The fact that there are 400 million American financial loyalty program memberships says nothing about their level of engagement or activity. Too often loyalty cards, digital or physical, accumulate in consumers’ wallets and on their smartphones without ever being used.
While big banks still evoke mistrust, a lot of smaller banks have fared better. Some, like Birmingham, Alabama-based Cadence Bank, are implementing several of the above suggestions as part of a new debit card loyalty program. Cadence builds trust by giving back to the local community through a “buy local initiative.” The program, called Buzz Points™, encourages local business owners to become Buzz Point Merchants, which according to the company’s data, increases local spending by 35%. The study also found that 52% of the money spent with local merchants remains in the local economy versus only 14% for big box stores. The campaign also relies on a host of social media, email, web and mobile outreach efforts – a clear nod to omnichannel engagement.
The reality is that consumers can’t live without credit cards or banks. But neither can banks live without customers. Loyalty programs that improve the customer experience, demonstrate transparency, engage across all channels and utilize Big Data in a way that drives enhanced consumer knowledge are the best ways financial institutions can improve long term customer loyalty.
Are you tasked with running a financial services loyalty program? We would love to hear your views on the program challenges you face and how you communicate and build trust with your customers.
