Customers in all sectors expect seamless, hyper-personalised experiences across all digital channels. Yet, I’ve found from working with various clients in the finance sector, legacy systems and siloed data make it challenging to deliver. Does this sound familiar?
Believe me, you're not alone. Many companies struggle with customer loyalty in financial services. But there is a solution – implementing a well-crafted customer loyalty programme. In this blog post we'll dive deep into the world of customer loyalty in the finance industry. Exploring the challenges faced in your industry, the key strategies for building lasting relationships with your customers, and more.
Contents:
-
Why Customer Attitudes Changed Towards Financial Services Companies
-
Current Challenges to Improve Customer Loyalty in Financial Services
-
Strategies to Improve Customer Loyalty in Financial Services
- Make a Point of Loyalty
Key Takeaways
-
Customer attitudes towards financial services companies have changed due to external factors, low consumer trust, and different expectations of value.
-
Traditional financial services face challenges such as the need for new tech, a highly competitive market, demand for hyper-personalised experiences, and effective use of analytics.
-
Strategies to improve customer loyalty include using sensible rewards, offering hyper-relevant rewards, ensuring upsell and cross-sell relevance, providing cashback and BNPL options, and delivering omnichannel support.
-
A well-crafted loyalty programme addresses multiple challenges and helps financial services companies differentiate themselves in a competitive market.
Get your copy of our "Guide to Building Customer Loyalty Programmes in Financial Services" with tips on how to monetise your customer loyalty programmes whilst increasing customer retention.
Why Customer Attitudes Changed Towards Financial Services Companies
Over the past decade there’s been a significant shift in customer attitudes towards financial services companies. Below, I’ve listed what I think are the main factors that by and large contribute to this change.
External macro factors
We've all experienced the impact of external factors on the global economy. From the 2008 financial crisis to the Covid-19 pandemic, these events have collectively eroded the trust that people have in traditional financial institutions. And trust, as we know, is the foundation of customer loyalty.
Historic low in consumer trust
A recent survey revealed that while 81% of consumers consider trust a major factor in their buying decisions, only 34% actually trust the brands they use. This mistrust extends to banks and insurance companies as well.
GFT's Q3 2022 Banking Disruption Index found that only 48% of consumers trust their banks to help them through a recession. Similarly, a report by BritainThinks and The Association of British Insurers highlighted customers' frustrations with premium price increases and concerns about data handling.
As a loyalty programme provider, we understand that without trust, customer loyalty in any sector – let alone financial services – will never improve. And in the case of the finance world, new competitors are entering the market, offering attractive rewards and incentives and alternative options for consumers to handle their finances. Naturally, this makes it crucial for established players to adapt.
Different expectations and perception of value
To increase customer retention, companies must adopt the strategies used by these new competitors. Value is under more scrutiny than ever before, thanks to the global economic crisis, the pandemic, and today's high inflation markets.
Consumers are more cautious with their spending, and they have a stricter perception of what's considered "valuable." With an abundance of choices available, it's no surprise that consumer attitudes are changing. However, the problem lies not with the changing attitudes of customers, but with companies who refuse or don't know how to adapt. Those who fail to evolve suffer from poor customer loyalty, lower acquisition, and non-existent retention rates.
At Propello, we help our clients navigate this changing landscape by leveraging data analytics, AI, and machine learning to create hyper-personalised experiences that build trust and enhance customer satisfaction. With well-crafted loyalty programmes, financial institutions can deliver the personalised banking experiences that customers have come to expect.
Current challenges to improve customer loyalty in financial services
From the need for omnichannel experiences to the demand for hyper-personalisation, businesses in the finance world must navigate a complex landscape to meet the evolving expectations of their customers.
A need for new tech
One of the biggest hurdles financial services companies face is the adoption of new technology. The pandemic accelerated the digitisation of so many sectors, forcing banks and insurance companies to innovate and adapt. However, investing in technology is not a one-time fix. Issues like security risks, data regulations, and the need for improved efficiency and operability can still arise.
For example, when bank apps experience digital disruption, 60% of consumers abandon them. With most banks closing branches, customers rely heavily on apps to access their accounts. If the technology is insecure or doesn't work properly, it can lead to frustration and a sharp rise in lapsed customers who will seek solutions elsewhere.
Highly competitive market
The financial services industry is facing intense competition from tech-savvy players like crypto exchanges, challenger banks, and FinTech companies. These new entrants are leading the way in innovative user experiences, offering enhanced customer journeys that traditional institutions struggle to match.
Digital currencies promote financial liberty from the constraints of traditional banking and offer generous interest rates on digital wallets. Challenger banks differentiate themselves by specialising in underserved areas of finance while operating completely online.
FinTech companies continue to design technology that facilitates the digital transition of banking services, even developing in-app rewards and loyalty schemes for the traditional big four UK retail banks. Goldman Sachs predicted that FinTech start ups would syphon $4.7 trillion in revenue in the coming years.
While traditional financial services are switching to digital, the question remains: is it enough? With FinTech startups, crypto exchanges, and challenger banks all vying for market share, established players must find ways to differentiate themselves and build lasting customer relationships.
Hyper-personalised experiences
Consumers today expect hyper-personalised experiences from the brands they interact with, and financial services companies are no exception. While banks have started offering monetary rewards to shoppers of selected brands, insurance companies have a greater opportunity to personalise their offers but are sorely lacking in this department.
Insurance providers understand the importance of customer loyalty, but the industry has long relied on a mini-ecosystem of rotated customer bases. The main driver of revenue is heavily tipped towards acquisition through low premium offers, leaving loyal customers with higher prices at the end of their tenure and no choice but to look elsewhere.
However, consumers are becoming savvier, and their personalised experiences from other sectors influence their attitudes and behaviours. Financial service providers have long relied on customers sticking with them out of convenience, in the same way insurance customers have been conditioned to shop around.
But digitisation has made transitioning to other finance service providers easier for consumers. Plus, more challengers offering hyper-personalised experiences are emerging on the market. When these factors are combined, they make a compelling reason for consumers to switch.
Analytics
Effective customer loyalty strategies require a wealth of data to provide businesses with vital information about when and how to approach customers with the right messaging. Banks and insurance companies handle substantial real-time data for their main services to function, but this data is often departmentalised, causing information silos.
Insurance companies, for example, rely on multiple sources of data for internal and external communications, product design, pricing, and claims handling. Lagging data sets, low levels of data maturity, and inconsistencies across different departments result in a fragmented, frustrating experience for customers.
To improve customer loyalty, financial services companies must adopt strategies that break down these silos and provide a unified view of the customer.
There’s plenty more where that came from
The challenges we've discussed here are just the tip of the iceberg when it comes to building customer loyalty in the financial services industry. With customers always on the lookout for better saving deals and interest rates, and only 12% of customers having accounts with one bank, the threat of attrition is ever-present.
That's why it's crucial for financial services companies to consider implementing a loyalty platform. Loyalty programmes offer a powerful solution to many of these challenges, providing a centralised platform to address issues like technical overhauls, differentiation in a competitive market, and accurate data collection. Without the right loyalty platform, the difficulty of building customer loyalty increases significantly.
Strategies to Improve Customer Loyalty in Financial Services
In this section, I’m going to give you some proven tactics that not only restore customers' trust but also help overcome the challenges above.
Use rewards that make sense
One of the most effective approaches to nurturing loyalty is embedding it in your acquisition strategies. The way you attract customers through messaging gives them a hint of what to expect from you. Promoting powerful incentives is a proven acquisition tactic, but many companies get this crucial step wrong.
For financial services companies, acquisition tactics should include informed rewards and offers, such as reward programmes, cashback, buy now pay later (BNPL) options, and additional help with mortgages and loans.
Hyper-relevant rewards
Insurance providers can improve customer loyalty by offering discounts and vouchers on products related to their service. For example, content insurance providers could offer vouchers on homeware, while car insurance policyholders would benefit from prepaid fuel cards.
These rewards can be offered to returning customers, along with lower premiums.
However, it's essential to incentivise them to participate in relevant upsells, such as windscreen protection or free tyre replacement for particular car makes.
Simply offering cheaper insurance might win customers in the short term, but implementing hyper-relevant cross-sells and upsells related to the product you're covering can make a lasting impact.
Upsell and cross-sell relevance
Relevance is synonymous with personalised offers. To ensure your offers are relevant, set up systems that allow you to segment your audience based on data analysis. Use a platform capable of gathering data and seamlessly analysing your findings.
Cashback
Cashback has seen significant adoption rates in recent years due to its effectiveness in fostering banking loyalty. It's not just about the amount; it's about how much sense the offer makes to customers.
For example, Santander's Edge account, which targets household bills and shopping expenses, scored 73 during the cost of living crisis. In comparison, Chase's current account scored 85% due to its lack of monthly fees, flexibility in spending choices, and additional perks like no ATM withdrawal fees abroad. Value is key.
Buy now pay later
BNPL adds flexibility to the point of sale, making it a serious contender for improving customer loyalty in financial services. As the fastest-growing payment method in the US and UK, BNPL works around the customer, offering generous interest rates based on soft credit scores and other payment parameters.
BNPL has boosted traffic for participating insurers and lenders and has been a hit in the e-commerce market, particularly with Millennials and Gen-Zers who value its flexibility and self-service model.
Omnichannel support
Flexible omnichannel communications make any interaction with your brand seamless and frictionless. For example mobile banking shows customers that you work around them while providing great customer service. It also helps your business capture leads, swiftly resolve queries before customers lapse, and encourage consistent engagement between purchases.
Chatbots and live support
Banks, funds, investment holders, business banking, and accountants all handle money and must inspire trust in their customers. Using live customer support and 24/7 chatbots reassures people that you're listening.
However, during the pandemic, many customers felt banks just about met their expectations or even failed miserably. A poll showed 29% agreed their expectations were just about met, while 39% felt dissatisfied overall. Reassurance is crucial for customer loyalty in financial services, especially during difficult financial times, such as the UK’s ongoing cost of living crisis.
Compassionate conversations
Train your team to sympathise with potential and existing customers for increased loyalty. The key to successful sales is compassion. During strenuous financial times, people want to feel reassured, listened to, and looked out for.
The Bank of America has created excellent customer service that's uplifted their acquisition numbers through a thorough approach to their omnichannel strategy. Their Life Plan initiative sees specially trained relationship managers guide customers through significant financial decisions, offering one-to-one advice to first-time buyers about mortgages and short-term and long-term saving goals.
Consistently engaging customers in a way that lands on human touchpoints has yielded huge dividends in terms of banking loyalty and is a great way of increasing customer loyalty in financial services as a whole.
Make a point of loyalty
Delivering innovative services like digital wallets, cashback, and BNPL terms, and providing omnichannel support, financial services companies can differentiate themselves and create lasting customer relationships.
These strategies work together to help you overcome challenges and give customers something to shout about. Just look at Swissborg, whose referral programme and user-friendly platform helped them become a leading crypto exchange in Europe.
At Propello, we understand that customer loyalty in financial services requires a multi-pronged approach. Our platform leverages advanced analytics, personalised rewards, and seamless integration to help businesses create exceptional experiences that drive long term loyalty and advocacy.
Get your copy of our "Guide to Building Customer Loyalty Programmes in Financial Services" with tips on how to monetise your customer loyalty programmes whilst increasing customer retention.
FAQs
What are the main factors that have changed customer attitudes towards financial services companies?
The main factors that have changed customer attitudes towards financial services companies are external macro factors like financial crises and pandemics, historic low in consumer trust, and different expectations and perceptions of value.
Why is trust so important for customer loyalty in financial services?
Trust is the foundation of customer loyalty in financial services. Without trust, customers are less likely to remain loyal to a brand, especially when new competitors offer attractive incentives and alternative options.
What are some of the key challenges traditional financial services face in building customer loyalty?
Traditional financial services face several challenges in building customer loyalty, including the need for new technology, intense competition from tech-savvy players like FinTech companies and challenger banks, demand for hyper-personalised experiences, and the effective use of analytics.
How can financial services companies use rewards to improve customer loyalty?
Financial services companies can improve customer loyalty by using rewards that make sense and are hyper-relevant to their customers. This includes offering cashback, BNPL options, and targeted discounts or vouchers based on customer preferences and behaviour.
What role does personalisation play in building customer loyalty in financial services
Personalisation plays a crucial role in building customer loyalty in financial services. Consumers expect hyper-personalised experiences tailored to their individual needs and preferences.
How can financial services companies effectively use data analytics to improve customer loyalty?
By analysing customer behaviour, preferences, and interactions across various touchpoints, companies can identify opportunities for personalised engagement, proactive support, and targeted offers that drive loyalty and retention.
What is the importance of omnichannel support in building customer loyalty for financial services?
Omnichannel support is essential for building customer loyalty in financial services because it provides a seamless, frictionless experience across all touchpoints.
How can financial services companies use chatbots and live support to improve customer loyalty?
Financial services companies can use chatbots and live support to improve customer loyalty, providing 24/7 assistance, quick issue resolution, and personalised guidance. Chatbots can handle routine queries and direct customers to relevant resources, while live support offers human interaction for more complex issues.
What role do compassionate conversations play in building customer loyalty in financial services?
Training teams to empathise with customers' concerns and provide reassuring, supportive communication, financial services companies demonstrate their commitment to customer well-being. This human-centric approach helps build emotional connections and fosters long-term loyalty.
How can a well-crafted loyalty programme help financial services companies overcome challenges and differentiate themselves?
Leveraging advanced analytics, personalised rewards, and seamless integration, loyalty programmes enable companies to create exceptional experiences that drive long-term loyalty and advocacy, setting them apart from competitors.
Author Bio, Written By:
Mark Camp | CEO & Founder at PropelloCloud.com | LinkedIn
Mark is the Founder and CEO of Propello Cloud, an innovative SaaS platform for loyalty and customer engagement. With over 20 years of marketing experience, he is passionate about helping brands boost retention and acquisition with scalable loyalty solutions.
Mark is an expert in loyalty and engagement strategy, having worked with major enterprise clients across industries to drive growth through rewards programmes. He leads Propello Cloud's mission to deliver versatile platforms that help organisations attract, engage and retain customers.
.png){kind=logo}