Bank loyalty program in USA
What is bank loyalty program
A bank loyalty program is a marketing strategy aimed at a financial institution to retain customers. The financial sector is highly competitive. Payment system programs have become a new trend. They offer the organization of interaction between the buyer and the seller without a bank’s participation, for example, Visa Commerce Network.
Banks need new solutions so as not to be the third wheel in the seller-buyer relationship.
The availability and convenience of digital tools here play an important role in retaining customer loyalty. In banking, consumers do not buy products in the traditional sense. They use a bank card as a tool for making purchases. And the banks loyalty programs are aimed at stimulating payments with the help of a card.
Bank loyalty programs have a limited number of participants. Unlike supermarkets or online stores, only those with an open bank account can join the program.
Opportunities to interact with a loyal audience are limited. Customers do not contact the bank regularly, but only when they need to open or close an account.
Benefits of loyalty program in financial services
A working loyalty system allows not only to store the client's funds in a bank account but also to receive several advantages:
● Business reputation improvement
The more the consumer appreciates the services provided by the bank, the higher the likelihood that he will recommend them to others.
● Increasing the number of transactions;
The bank earns on the issuance and maintenance of credit and debit cards, interest on the use of credit money, etc. The more often the customer makes purchases, the higher the average check, the greater the bank's income.
● Reduced customer churn
According to statistics, in Europe and the US, more than 32% of customers leave in the first year after opening an account, and only 19% show loyalty by staying with the bank for a long time. The more rewards and bonuses the client receives from using the card, the less he thinks about moving to another bank.
● Card life extension
The more attractive the loyalty program, the more benefits from cashback, cash withdrawal or non-cash payments the client receives, the longer he uses the card.
Differences between B2B and B2C loyalty
In the B2B sector, payments are higher. This means that one customer will bring more profit to the bank. At the same time, the process of making a decision on cooperation with the bank is extended in time, due to the need for approvals at various levels of the organization.
The bank's customer base in the B2B sector is smaller than in B2C but more detailed. Therefore, the financial institution has the opportunity to offer a more personalized loyalty program designed for a specific organization or its management.
The bank can offer non-financial services to the companies it cooperates with, such as customer clubs, which create an opportunity to establish business contacts and exchange business experience in a particular area.
Finally, the bank can offer a coalition as loyalty programs: bonuses, cashback, discounts, etc. when buying partner goods with a bank card.
Types of banking reward programs
Point Based Program
The points program is one of the most effective. It has proven itself in many types of business. In banking, rewards in the form of points are also popular.
According to studies, every second consumer is ready to change banks if another offers him a card with a large number of points. At the same time, more than 40% agree to reissue the card, upgrade its class or open a new one, if the bank offers bonuses for this.
Coalition points programs are popular in banking. Their characteristic feature is the ability to use bonus points as a universal currency. The consumer earns them in one organization and spends in another. For example, for using banking products (credit, deposit, etc.), he receives bonus miles, which he can spend on buying air tickets or booking a hotel.
Cashback is a customer reward program that allows him to return part of the money spent on the purchase of goods using a bank card. The programs first appeared in the US in the 1980s and have been popular ever since because they take advantage of the customer's desire to receive a gift and save on purchases.
The program is based on an agreement between the seller and the bank that issued the card. For each purchase with the bank card, the seller returns a certain percentage to the bank. The latter, in its turn, returns part of the payment to the buyer.
Many cashback programs allow the cardholder to select categories of goods in the mobile wallet he will receive an increased monthly reward for in the form of a part of the money from the payment made.
Gift Card Program
Gift cards are debit cards that contain a certain amount of money. They can be of two types:
● Open, which allows you to use the funds on the card to make any transactions or withdraw cash from an ATM.
● Closed, which can be used only in a certain distribution network or for the purchase of certain types of goods.
Gift cards appeared in the US in the mid-1990s. They are used to encourage employees, as appreciation to regular customers and to promote a business by applying a company logo. Every year in the US, banks and companies issue $100 billion worth of gift cards. According to statistics, more than 70% of gift card holders spend 20% more than the face value of the card when making a purchase.
Referral programs are a way to reward customers who recommend the bank to their friends and acquaintances. The benefits of such programs:
More than 80% of customers trust the recommendations of good friends.
● Increasing brand awareness and customer loyalty
More people know about the bank. Customers who recommend the bank's services will stay with it longer.
Banking and financial services. Loyalty software solutions
mLoyalty offers ready-made solutions for creating bank loyalty programs. The bank receives a program released under its own brand, getting the opportunity to collect data and offer various options for customer loyalty programs.