Financial services and banking are based on trust. This trust has to be earned through a customer’s continuous positive experience with a brand. Loyalty marketing offers a variety of mechanics to give your customers more touchpoints with the brand, to create opportunities to build those positive experiences, and to keep nurturing relationships with your brand.
Modern loyalty software gives you a plethora of mechanics to support these goals. It allows you to collect behavioral data of your users, analyze them, and understand their needs. It opens new ways to entertain them, enhance their experience, help solve their problems, and deliver additional perceived value to make them stay.
Interestingly, the openness to deepen this bond is mutual. According to the Bain Retail Banking NPS Survey from 2022, more than 70% of consumers are interested in having their personal banking data used to receive personalized offerings. They expect you to get involved and adjust your offering to their needs. That’s a great starting point for building a lasting relationship with your customer. The question is which buttons to push to make it last.
Over the last few years, loyalty marketing has elbowed its way into customer success strategies in finance and personal banking. In this article, we’ll present you with the proven loyalty mechanics that allow you to bring your customers closer to the brand.
To keep it coherent and show how the features influence each other, we decided to showcase them based on the example of Warba Bank’s loyalty program that’s built with the Open Loyalty engine. This will allow us to observe how it played out in a real fintech environment and show what the results were.
1. Supporting the customer journey with the right actions to drive engagement in the mobile banking app
It all starts with strategy and a deep understanding of the customer journey. Once you know what you want them to accomplish, the next step is to reward the right actions that will get them closer to this goal. You can grant your users points and gifts for using the banking app.
While modern loyalty software allows you to basically set up any imaginable goals, there are four fundamental features that can constitute the basic structure of a loyalty engine: receiving cash back, transferring salary, paying bills, and giving recommendations. Let’s go through them one by one.
Credit card cash back and cash back alternatives
You know how valuable the users’ habit is of using your bank’s credit card on a daily basis. In the realm of fintech, cash back has long been a favored reward. Its value is easy to understand, and cash is a universal motivator.
However, modern loyalty programs are offering alternatives to allow customers to earn points that can be converted into various benefits. A properly designed system can be more cost effective than a simple cash back based on money. It provides customers with more flexibility and a broader range of choices. This contributes to a more personalized loyalty experience. At the same time, it’s more beneficial for the bank.
For example, a restaurant can reward your customers with 100 points every time they visit them. You can stimulate the users’ decision by adding tiers and multiplying their results; the more they pay with your card, the more they can earn.
Earning points for transferring salary
The second tier of customers’ commitment is transferring their salary to their account in your bank. It’s obvious that in order to keep your service as the main account for an average user, they need to transfer their earnings to it.
It’s a high-value behavior that requires a particular promotion. In the Warba Bank app, the customer is incentivized by a cash gift.
Paying bills through the app
Now that the customer transferred their money, they have to pay their bills. Your bank is where those bills are paid.
While it can be a tedious task, the right setup allows a customer to do it automatically. Once it’s set up, it’s out of the customer’s hair. Moving to another bank gets harder because they’d have to set it up all over again. It’s a stronghold for the loyalty of your customers.
For example, to encourage your customers to pay their bills through your banking app, it can be set up in two tiers:
- Getting 1% of the payment in loyalty points for one-time payments.
- Getting 2% of the payment in loyalty points for scheduled or automated payments.
It’s a small investment in keeping your customer within your banking ecosystem. You solve their issues and pay the customer for solving them. Why would they try to spoil something that works so well?
Invite friends using the mobile app
The final step is a recommendation. Nothing beats the social proof of a customer’s friend recommending your services. The way to make the most of it is to enhance the correct actions from the start.
Innovative loyalty mechanics are adding a twist. Beyond receiving rewards for successful referrals, customers are now earning ongoing incentives for every transaction made by their referred friends. This encourages a continuous loop of engagement and rewards for both the existing and new customers.
For example, for inviting a customer to Warba Bank, they can automatically get six points. It doesn’t sound like much because it’s just a simple one-sided recommendation. The deeper you go, the better it gets. If the invited friend transfers their salary to the bank, the customer who recommended them can get up to 1,500 points.
2. Extending the range of loyalty rewards in mobile banking
Once you identify the desired behavior you want to promote, you need to take care of the other side of your loyalty program: the incentives.
It might be difficult for some industries to provide a wide portfolio of benefits. Thankfully, modern loyalty software allows for easy API integrations with external apps and partners.
You can contract with a partner to provide additional rewards for your customers. It makes a lot of sense for a bank to give customers access to benefits outside of their financial offering.
Getting back to the example of Warba Bank; they integrated Pocket with The Entertainer digital coupon subscription service for buy-one-get-one-free coupons and other discounts for events, activities, restaurants, and so on. Thanks to the integration, it’s easy for customers to transfer points and claim rewards.
3. Keeping the loyalty program future-proof
There’s fierce competition in banking, and it’s a key to staying flexible enough to grab the opportunities the developing market provides. The technologies come and go, and it’s hard to predict when you might need certain integrations.
At the same time, the ability to adjust to the future needs of your business is something that can be easily overlooked while composing your technical stack. Being short-sighted here can lead to painful time-to-market issues in the future and bloated investments.
Modern loyalty platforms are turning toward a composable tech stack to solve this issue. In practice, it means that an API-first approach allows you to plug in any solutions to add new features or replace parts of your system with more efficient providers, if necessary. It gives you a scalable, reliable, and resilient architecture that can accommodate these changes. This could be especially important in the unique, highly customized case of Warba bank.
For sure, there will be plenty of opportunities in the coming years. Virtual reality is slowly gaining traction, while artificial intelligence's popularity exploded in the last year. Perhaps you might need to infuse gamification elements into your loyalty programs in 2024 or add social media integrations to enhance customer engagement. Whichever it might be, an API-first solution will be ready to accommodate it.
Building on an agile stack also means a shorter time to market. It’s easy to introduce changes and integrate them with existing solutions.
How it works in real life: an example of a banking loyalty system
We referred to the loyalty program for the mobile banking app created by Warba Bank above. It gives us the opportunity to see how its launch influenced the business results.
In short, Warba Bank is the leading digital-first corporate and retail bank in Kuwait. They rolled out a new loyalty program leveraging Open Loyalty tech in 2020 through their Pocket mobile banking app.
Their main goal was to increase customers' engagement and boost the number of mobile payments. The technical challenge was to integrate loyalty features into the pre-existing tech infrastructure. There were a number of legacy systems in the picture, and they all had to meet top security standards.
Thanks to headless architecture and an API-first approach, the implementation took three months, and since the loyalty engine was relatively easy to integrate with the Warba banking system, the enterprise LDAP, an SSO, and an external gift provider.
The results were spectacular. In the first year, 55,000 users enrolled in the loyalty program and converted 100 million points to rewards.
Banking and fintech are particularly rewarding industries for loyalty marketing. Loyalty programs have become a cornerstone for banking institutions seeking to enhance customer engagement and build lasting relationships.
The top loyalty mechanics for banking and fintech institutions are evolving to meet the dynamic expectations of modern customers. By embracing innovative approaches, leveraging technology, and personalizing the customer experience, these institutions are building loyalty and setting the stage for the future of customer engagement.
If you want to dig deeper into it and see how to set up your own system, check out our quick guide to loyalty programs.
Published November 9, 2023