Rethinking Banking Loyalty

There is a lot of chatter now about banking loyalty with several large banks exploring the concept, so given that neither banks or loyalty are new…why are banks now suddenly interested in loyalty.  I think the answer lies not in the banks themselves but in the evolving marketing they play in.  Every moment or every day gives birth to a new fintech start-up. All of them focused on somehow disrupting the financial services market…everything from mobile payments to subscription based lending to crowd sourcing.  For now, banks are relatively safe as these disrupters attack non-consumption, that is servicing areas of the market that banks don’t play in or just don’t exist…micro financing, or mobile payments for people who can’t get credit cards for example.  This, however, is a short-term perspective.

As the disrupters grow and mature, they will begin to move in to places where the banks do play. Credit cards get replaced by peer to peer micro payments.  The question is not will banks disappear like Kodak and Nokia (and the answer is no because banks are far too important for that). The question is what will they be left with.  Potentially, they will be left with all the unprofitable bits.

In the meantime, there are things that make customers sticky (and valuable) to banks; transaction habits, payment processes, and spending patterns.  Where traditional views of banking customer value have been based around product holdings and balances, the key to long term relationships lies elsewhere…in micro habits and therein lies the dilemma.  How do you create a program that promotes and retains customer value when the drivers to value are not the drivers to retention?  That means giving customers Frequent Flyer points for having a home loan or for having $10,000 in the account is unlikely to retain value.

If we start with the hypothesis that, for the mass of banking customers they have emotionless attachment to their bank; that means the strongest driver to retention is inconvenience.  The inconvenience of setting up new regular payments, learning how to use a new banking app, setting up a new list of friends to pay etc. But how does a bank encourage you to set up a new payee. How do they reward you for having your salary deposited to your account (begging not withstanding). How do they give you something small regularly to remind you that your bank loves you for the small things…

Stay tuned…the emergence of bank wide loyalty.


About the Author

Regan Yan is the CEO at Digital Alchemy. He is a subject-matter expert in analytical database marketing and customer relationship marketing, as well as an in-demand presenter and keynote speaker at national and international events.

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