A key consideration is the growing demand by consumers for highly personalised rewards and services in customer loyalty initiatives. Traditionally, marketing has focused on geographic or demographic segmentation, however, the digital revolution has made it easier to segment customers based on their omni-channel behaviour and common attitudes. Alternative choices for managing money means that rewarding customers in a way which reflects their personal preferences and motivations is more important than ever to ensure engagement and ultimately loyalty to their banks. Collinson Group's research found that customer engagement improved by as much as a third amongst individuals who 'feel understood' by their bank. Using big data to better understand consumer behaviour provides banks with the opportunity to deliver timely and contextually relevant offers and communications, as well as to connect with their customers on an emotional level.
A further development is the growing desire for choice and depth of rewards aligned to changing consumer motivations which has put pressure on retail banks to deliver exclusive, individual rewards and benefits at the right time in the interaction journey. Some banks still tend to think of rewards which relate to only financial services, or are simply points-based programmes. However, consumers today seek cross-sector rewards including offers that 'money can't buy' or are experiential. Loyalty initiatives and programmes need to reflect the broader areas of consumer interest, from altruism where charitable redemption options appeal to community-funded initiatives.
If banks are able to address the above challenges and opportunities, their ability to stay relevant to their customers will provide a platform for greater engagement.
How can retail banks generate new revenue in the midst of changing consumer needs?
Financial services providers have traditionally funded their reward and loyalty programmes through the interchange fee levied on merchants for the processing of credit and debit card transactions. Regulation, now enforced in Europe, and rippling through the globe has reduced these interchange fees and banks must now seek new sources of revenue to continue to fund reward programmes. This means that banks need to demonstrate the worth of their customer data to entice merchants to jointly fund their reward programmes, and in so doing provide a compelling value story to consumers. These merchants will have the opportunity to expose their brand to a wider and more targeted audience, build greater connection with their customers, and gain incremental revenues. This joint-funding with merchants who benefit from increased footfall will also allow financial services providers to track consumer spending, understand who their best customers are, and motivate behavioural change. A good example of this is the recently launched All-in Rewards by RCBC Bankard, which generates merchant funded points from new places to shop online.
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