Best Practices Currently Employed in Banking Loyalty

With the emerging competition in the retail banking industry, loyalty programs sprung up as a key marketing tool to retain customers and attend to their needs. Thus, the pressure to introduce innovative programs and remain profitable amidst this industry has increased. 

Banks don’t necessarily need to incorporate all the below-listed practices to have a successful program, however, as per a report by Aimia, loyalty programs who are outperforming have one or more of these best practices integrated. 

Enabling non-core redemptions

In loyalty programs and banking, convenience is key.  Innovative banks are introducing a real-time “pay-with-points” rewards option that provides customers with a convenient redemption experience, as well as an abundance of reward options. For instance, offering customers the option to redeem points in real-time directly through mobile phones; this provides ease of redemption and encourages customers to use their credit cards. By allowing flexible redemptions, a lot can be learned on the user preferences, and this easy and convenient experience reflects positively on the customer’s participation in the loyalty program offered by the bank.

Using segment-focused mechanics

With increased competition, it is difficult for most banks to retain and engage their customers. Therefore, by using their data insights they can identify the focal customer segments or classify customers into categories and then design relevant loyalty mechanics around the preferences of these segments. Through this approach, banks can form an emotional connection with their customers and also introduce novelty in their offerings. In Saudi Arabia, banks such as Al Rajhi offer the “Ladies Credit cards - Laki” designed to offer distinction and privacy for female customers as per required by the market, these cards also provide special offers and discounts at retail outlets for trending products and services that interest ladies in specific. This can be taken a step further using reward points and hyper-personalized the redemption options. 

Providing Experiential Rewards

This is becoming a very popular approach, through their loyalty programs banks provide customers with experiential benefits from other cross-industry partners. These benefits include highly exclusive experiences and luxurious benefits, including top-tier hotel membership status, priority access to airport lounges, retail co-branding partnerships and VIP event invites. In July 2015, the First Abu Dhabi Bank in UAE  introduced the Al-Futtaim Credit Cards; an exceptional co-brand card developed to provide experiential benefits, savings, and specialized seasonal offers in travel and lifestyle across Al-Futtaim brands and partnering companies. The card rewards apply on domestic and international spends and offer benefits such as free membership, 0% Easy Payment Plans and points redemption against Etihad Guest Miles or Emirates Skywards Miles. 

Merchant-funded Rewards

Banks are using their multi-dimensional data and partnerships to run targeted campaigns and reward offers on behalf of major merchants. These campaigns are funded by the merchants themselves which in turn lowers the cost on the banks.  This marketing approach gives direct access for merchants to reach out to customers through technical channels or platforms. At the same time, it enables banks to deliver personalized offers at a minimum cost, hence, increasing engagement with the customers. 

It is evident that in the upcoming years loyalty in the banks and other financial services industry will focus more and more on customer-centric approaches, addressing specific needs, and engaging with the consumer on a personal level. For that reason, banks who empower this relationship will optimize the use of the data customers share to be more predictive and precise in their services. With new digital opportunities emerging everyday the above-listed practices will not always sufficient to help banks stand out from the competition, thus staying updated on new milestones is very crucial for banks.  

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