How Banks Can Increase Customer Retention through Loyalty Programs

October 08, 2021 by Taylor Smith

In recent years, every industry has been searching for strategies keep a grip on their customers and stay appealing enough to attract new customers as well. The banking industry has been slow in adapting meaningful loyalty programs. The industry is adapting to change and integrating the power of loyalty with their currently running systems.

How Banks Can Increase Customer Retention through Loyalty Programs

Consumer behavior has completely changed and financial services must extend beyond physical locations. Instead, digital banking services must ensure that customers are being rewarded every time they transact through the bank. The right banking reward program can build a meaningful relationship with the customer through their day-to-day digital banking needs.

A Bank Loyalty Program is More Than a Retention Strategy  

A loyalty program is not a mere customer retention strategy, it’s an opportunity to enhance, grow and flourish a business. The arrival of new digital banks does not mean that consumers will dramatically decrease the number of institutions they’re currently banking with.

Rather, consumers are looking for better deals and pricing within financial products and the diversity of digital banking options means customers can work with several different brands. Financial institutions can make use of loyalty programs to offer existing customers better value for the similar products.

Not only can providing customers with the right loyalty solutions and experience help a brand gain new customers, but also keep them for life. Further, positive experiences create brand advocates who are likely to recommend a digital banking platform to others. A recent study reveals that 73% of consumers are more likely to recommend a brand with a robust loyalty program.

Traditional Loyalty Programs Are Losing the Race

With the introduction of new loyalty strategies and customer-centric programs, traditional loyalty programs are losing relevance. For instance, many banks already have existing loyalty programs in place, but haven’t redesigned them for the customer-centric focus that drives modern-day digital banking needs.

Instead, these traditional paper-intensive programs that might not have a fail to make loyalty earnings a visible part of digital banking options are missing a huge opportunity to have an impact on the customers. As a result, there are more chances that customers will leave the brand or opt for a better alternative.

In the era of digital banking, financial institutions need to be highly focused on enhancing customer experience and provide streamlined services that expand what customers can do through mobile platforms.

3 Ways to Address Customer Requirements and Preferences

Every customer is unique and so are their requirements. Financial brands must focus on customer’s needs and their unique demands. Let’s check out a few points every bank must consider when addressing customer needs through a loyalty program:

1.      Wallet Application for Loyalty Card Management

According to Amdocs’s research, 61% of customers like the ability to manage their loyalty programs through a mobile wallet, but only 21% of financial providers offer this feature. Focus on having a wallet app for managing the loyalty card and eliminate the necessity of carrying a physical loyalty card for regular purchases. Instead, make sure that the loyalty program is managed through a digital system.

2.      Personalization Means Better Engagement

People love personalized options and prefer to see that a brand extend offers that demonstrate personalized value. Integrating personalized options into existing loyalty programs can help create a better connection with the customer.

For instance, if a bank provides rewards on customer’s regular transactions or at a places where customers spend meaningful amounts of time, they are more likely to engage with loyalty benefits and opt for your banking services over the competition.

3.      Better Ways to Attract & Retain the Millennials and Gen Z

The future belongs to the new generations. It's important to establish a long-term relationship with the millennials and Gen Z users by keeping them engaged in using more digital banking products and services. More than prior generations, these demographics are more likely to select multiple digital banking platforms and are likely to change their platform, selecting the one that offers more engaging.

If a bank does not meet their need, they can easily switch over and find a better-suited option. Contrarily, several banks have begun providing exclusive programs for students to support and education. These are exactly the sort of offerings that trust and make it easier for people to stick with your brand in the long run.  

Integrating Technology with Loyalty Programs

If banks are willing to create a compelling loyalty programs that stand above the competition and at the same time have a higher chance of retaining customers, they must also consider how technological advancements influence customer behavior.

Digital tools can help financial institutions get the right data to retain customers, provide them with the right offers, while introducing new approaches to customer retention as.

Making use of a banking CRM system can also serve as a step towards creating a top-notch loyalty program. It helps the banks in managing their customer's database while segmenting the customers according to various parameters including their income, lifestyle choices, and purchasing behavior.

Combining CRM with an advanced analytics tool can further help the banks in launching smart reward programs that build personalization through meaningful data insights.

Conclusion

Implementing robust loyalty program is undoubtedly a necessity for modern digital banking programs. Amidst tight competition, a bank must have the right research in one place to give their customers the exact options they need.

As other brands are easily able provide similar services, loyalty programs offer a meaningful strategy for targeting new customers while retaining existing ones.

Get started with a feature-packed loyalty program for your bank and stay vigilant on what other banks are offering in order provide a unique and meaningful customer experience.

 

Author bio: Taylor Smith is a website copywriter and a content strategist at Clavax Technologies. He does a lot of research to create technology-rich content for my users. With years of experience in writing, he's able to condense tech-related information into easily digestible articles.

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