There is no doubt that reward schemes are a decision driver for consumers to shift their financial services towards retailers, who are increasingly becoming a threat to retail banks. In recent research by ICM Unlimited it was found that more than 50% of consumers are considering financial services with their supermarket because of competitive pricing and loyalty rewards.
Add to this the research that shows 64% of high-income households would increase business with their main bank if they were rewarded for doing so (Maritz) and it highlights that reward schemes are not just a gimmick, there is strong demand.
With this in mind, we were curious whether banks planned on launching a rewards mechanism and, if so, what were their main drivers in doing so and what would these mechanisms offer customers? Here is what our 60 second survey found...
Banks are nearly unanimous in their decision to offer reward schemes
As retailers begin to offer their own financial services, banks are seeing the benefits of offering reward schemes to increase customer retention and avoid losing market share. Our survey results show that 70% of banks surveyed plan to launch a reward mechanism to their retail banking customers, and an additional 15% of those surveyed said they already had one. As retailers start acting like banks, banks appear to be fighting back.
Offering rewards schemes is encouraging positive response to the changing financial services market and changing competition and, fits with the banks' ultimate objective of improving customer experience.
In fact, 41% of banks surveyed said their main driver in offering reward schemes was to improve customer experience. As retailers make using their financial services more attractive, banks that improve customer experience will encourage customers to spend with their bank's card instead of their supermarket's card.
Not all options considered
Surveying banks' plans to offer reward schemes found certainty in offering them, but not a lot of consideration in how. Our survey asked banks if they planned to offer redemption capabilities through their own corporate clients. The majority (59%) said yes, but 26% had not considered this option. For the next question, if they planned on offering this instead of interest on current account or in addition, 37% had not considered this option.
Banks need to ensure they truly maximize their biggest assets - of customer data, insight and segmentation - and offer contextual, meaningful rewards to their customers. They need to realise how mutually beneficial a rewards programme could be for themselves, their retail customers and their corporate customers. For example, they could increase their own brand relevance by teaming up with other brands that customers associate with, already have a relationship with, by looking at spending habits and other insight they may have gathered.
Take advice from retailers
While some banks may feel out of their comfort zone in behaving like retailers, they will have to be more creative if they want to face their biggest challenges head on. Improving customer experience and adding value to customers' lives will require them to successfully pull off new initiatives.
For more information see a recent the blog, Loyalty and Rewards: driving a new experience for retail banking, by Adrian Hadley, Product Director, Retail Banking.