There is however a but and a big one: cuts to loyalty programmes resulting from caps on interchange fees risk customer relationships. Douglas Blakey writes
Financial services brands are generating value and support from customers through loyalty initiatives, so say marketing specialists Collinson Group.
A survey of 2,500 loyalty programme members finds that 81% of loyalty programme members were part of a financial services programme, compared to airline carriers (53%) and hotel companies (42%).
It also finds that over half (53%) of the respondents said that their financial services loyalty programme is their favourite.
The survey of 2,500 consumers covers the US, the UK, Singapore and the UAE.
My strong suspicion is that if the study had extended to Canada (see feature on page 6) support for banking loyalty programmes would have been even higher.
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The findings suggest that financial service organisations understand the rewards that consumers genuinely value in loyalty programmes and recognise that these help to build positive, ongoing relationships.
Of those consumers who are members of a financial services provider’s loyalty programme, 63% said that they valued the wide range of rewards and offers.
This was followed by the ability to collect points and spend rewards in-store (55%), and being able to spend their points on goods and services online (51%).
More than half (57%) of those surveyed said that they like the ability to customise their loyalty programme to ensure that it is relevant to them.
Financial services brands should continue to explore ways to offer flexibility and choice in both the collection and redemption aspects of reward programmes.
If they are looking for ideas for inspiration, they could do worse than cast their eyes towards Canada.
Royal Bank of Canada and Toronto Dominion, for example, have outstanding programmes enabling customers to earn coveted travel rewards with their ‘travel anytime’ messaging resonating with cardholders frustrated with an inability to redeem for flights on the major coalition programmes.
Meantime, Scotiabank continues to invest in its Momentum cashback card and its Amex partnership.
Despite the positives in the Collinson report, loyalty programmes in the financial services sector remain under threat from EU legislation which has capped interchange fees.
Analysis by First Annapolis Consulting found that in the first six months since the introduction of the cap on interchange fees, financial service brands reduced the value of their reward programmes and the number of reward options available. It remains to be seen if this turns out to be a false economy.
Meantime, a report comes to hand from Deloitte, noting that enrolment in loyalty programmes in the US across various industries in the US grew by 20% to 3.32 billion in 2015 from 2.65 billion just three years earlier. The study rightly suggests that loyalty rewards programmes represent strategic investments for all types of organisations.
But it also finds that many programmes are not realising full potential, due to account inactivity; low redemption rates; time delays; high transaction and system management and customer acquisition costs and low client retention. One suggested way forward is the use of blockchain, as a distributed ledger as a fundamentally new way to transact and maintain records in a secure, trustless, digitised interlinked network, to eliminate many inefficiencies.
The Deloitte report: Making blockchain real for customer loyalty rewards programmes is well worth a read.