October 31, 2019 Customer Engagement, Customer Experience, Financial Institutions, Loyalty Trends

Financial Institution Loyalty Landscape – Current Global Perspective

People walking through bank

Globally, loyalty in the Financial Institution (FI) industry remains heavily centered around credit card benefits. Traditional credit card loyalty constructs consist of: customers earning points for card spend, generic point redemption offers centered around products, cashback or partnership gift cards, and paying up membership for additional benefits. While banks understand the importance and ROI value of personalization, they struggle with how to define and scale it. USAA in the US, BVAA in Spain and Westpac and Combank in Australia appear to be the few outliers who have found their niche in carving out personalized journeys for customers. Without the value exchange of data and benefits between customer and brand, banks struggle to build emotional bonds with customers, as shown by the high churn rate in this industry. It’s unlikely financial institutions will create one loyalty offering for an individual customer due to competing priorities, disparate systems and regulatory situations. Axis Bank in India seems to be one of the few who have figured out or compromised on a formula for this.

Through our research into the loyalty landscape of FI, credit card programs are rampant, each offering more benefits for higher annual fees. There is strong competition across brands for the best benefits (i.e. cashback), at the best price (i.e. annual fee), with most brands leaning on travel partners as a hook for customers. Taking a closer look around the globe, we see the UK and some other European areas have more limited loyalty card options, most with a simple cashback model.

One major, much-needed change in this field is a shift from the traditional reward catalog of offerings to real-time redemptions at any POS. While the industry hasn’t actualized real-time redemption yet, there are emerging technologies, in each region, that are allowing banks to offer redemption anywhere; bringing the concept closer to real-time reality.

Emotional Consumer Loyalty Research

Aimia’s recent emotional loyalty study reviews these loyalty trends to uncover what engages consumers (rational) and what consumers expect (emotional) from loyalty programs. Looking at the consumer needs and wants helps to uncover opportunities for program improvement and areas where brands can truly differentiate.

This graph shows primary loyalty drivers in key regions

According to the study, consumers had the highest emotional expectations for Preferred Treatment in the US (+49%) and APAC (+54%), while the UK and Dubai expect the most from Customer Data & Service (+36% and +55%, respectively). Australia was the only region with highest emotional expectations in Ease & Participation within a program (+33%), meaning FI loyalty in Australia needs to be easy to join, earn and redeem, and gamification features can keep Australian customers engaged. Rationally, Ease & Participation in the program contributed for ideal loyalty in the US (33%), UK (37%) and Australia (32%), which Dubai consumers saw 34% driven by Rewards and 36% in APAC.

This graph shows the emotional loyalty drivers for banks

Find Your Distinction

In short, there is opportunity for financial institutions to deviate from the norm in various regions. Companies should make using their program easier and be more proactive and suggestive with reward offerings. Better understanding the customer will unlock ways for brands to make the customer experience more personal, allowing them to reap the benefits.

Across all regions, financial institutions can differentiate by identifying key customer segments and improving their overall experience based on individual priorities – rather than broadly promoting key products. Reflecting a personalized customer experience will exceed expectations in making customers feel valued and truly rewarded.

Customer centricity is key to differentiation among a crowded loyalty landscape. Aimia uses its proprietary SmartJourney® methodology, taking a holistic and personalized customer-centric approach, where each brand interaction is designed to create a meaningful moment and ultimately drive emotional advocacy and long-term customer growth.

 

The data in this article is derived from Aimia’s emotional loyalty market research report, Global Emotional Loyalty. Download the full report here.

 

Definitions

Ease & Participation: Ease of use in joining and participating in the program, and processes within the program such as gamification and recognition
Customer Data & Service: How much data is exchanged for program benefits and data security; general care for the customer

 

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