Lloyds Banking Group has rolled out an upgraded customer loyalty programme as it looks to meet competitors head-on in the drive for UK current accounts. The bank believes it will continue to be a frontrunner in what could be a significant year of change for the country’s retail banking market. Dan Jones reports.
Halifax and Bank of Scotland (BoS), two retail banking subsidiaries of the UK’s Lloyds Banking Group (LBG), have launched a new customer loyalty programme in the latest New Year salvo within the hotly contested UK retail banking market.
The initiative, named Rewards at Halifax and Exclusives at BoS, will reward customers who fund their Halifax or BoS current account with at least £1,000 ($1,629) per month by offering them a range of discounts on other products and services.
For Halifax, the initiative expands upon both a range of current accounts launched in 2009 and the bank’s previous loyalty-based product programme for current account customers, Extras.
Speaking to RBI, Mike Regnier, director of current accounts at Halifax, described the Halifax reward current account, launched in February 2009, as having been “very successful”.
Long history of loyalty products
“We have a long history of offering loyalty-based products to our existing customers,” said Regnier.
“We launched Extras at the beginning of 2009 and prior to this have featured a range of innovative products and offers linked to cross product holdings.
“The relaunch of Halifax Extras as Halifax Rewards extends the concept of rewarding our customers from our current account range across to other areas.”
Those areas now encompass savings, mortgages and credit cards. Current account customers taking a new product with Halifax will enjoy an extra 0.2 percent on variable savings products for one year; a reduction of at least 0.2 percent on the interest rate charged on their mortgage; and an extra three months at 0 percent on purchases using the Halifax All in One card – a product which already offers 0 percent on balance transfers and purchases for the first nine months.
The bank says that making full use of these offers will make customers over £350 better off in their first year alone, a figure which includes the £60 per year that customers can make from Halifax’s existing Extras offer of a monthly reward payment of £5 for customers who fund their account with £1,000 or more per month.
That scheme is indicative of the UK retail banking industry’s growing interest in giving back more to current account customers. The trend could be seen as confounding expectations: in 2009, when the threat of UK bank overdraft fees being outlawed was still a distinct possibility, many observers believed the industry could end up abandoning its tradition of fee-free account provision.
But the customer loyalty push, exemplified by LBG’s latest offering, will not necessarily preclude the introduction of such fees.
Speaking at VRL’s Loyalty in Financial Services round table in London in November 2009 (see RBI 624), Patrick Muir, head of marketing at Citigroup’s UK direct bank Egg, said: “The customer now knows there is no such thing as free banking but they want to understand where it comes from and where it goes to.
“[With loyalty programmes] we can be upfront about where the money comes from and goes to, how much we invest in this and what the return is, and the amount of money you are paying for the service, as long as we ensure you are getting full value.”
In terms of existing current account deals, UK retail banking customers can look not only to LBG; HSBC is offering up to £100 to customers who open a current account with the bank as part of its annual ‘January sale’ promotion.
Similarly, Alliance & Leicester, due to be rebranded under the name of parent group Santander later this year, has re-launched its own premier current account promotion giving new customers a £100 signing-up bonus.
The much-vaunted retail banking debut from supermarket chain Tesco, which intends to begin offering UK current accounts later in 2010, is likely to further shake-up an industry which has already undergone seismic changes over the past few years.
“Rewards is all about building meaningful and lasting relationships with new and existing customers,” said Regnier.
“We have always had a clear strategy of building long-term relationships with our customers so we can make them better off across a broader range of their financial needs.
We achieve this by continually striving to meet their customer service needs as well as offering great value products.”
For each competitor there will be challenges: for Tesco, the task of gaining a foothold and new customers in a highly entrenched market; for Santander and HSBC, to find a way of reeling in market leaders LBG, Royal Bank of Scotland and Barclays. In the aftermath of the financial crisis the core issue for LBG itself, arguably, is one of reputation.
At the height of the crisis, rivals such as Co-operative Financial Services said they were seeing a significant number of new current account openings as a result of customers migrating away from larger, more troubled institutions. But Regnier remains confident that Halifax will continue to be a force to be reckoned with.
“We are not stating any targets for Rewards, but historically we have been a net beneficiary of the new and switchers market and would look to maintain this,” he said.