Photo by Tessa Distor.

How can financial institutions build customer loyalty in the modern era?

It’s no longer just about giving perks, but about offering experiences, industry leaders said.

Expectations from customer loyalty rewards are seeing a massive shift today: customers are no longer satisfied with just receiving cashbacks or coupons, they want an emotional experience.

“We are seeing a real change in what the younger generations expect from brands today. It is moving away from the tangible rewards (for example, points or cashback), which is what we previously associate loyalty with, to more emotional, experiential benefits (for instance, travel experiences),” James Ellis, Vice President, Business Development, Asia Pacific, Collinson, told attendees of the Asian Banking & Finance Manila Forum held at Shangri-La The Fort.

“This is also aligned to their social media use where they share their life moments and or experiences through channels such as TikTok and Instagram,” Ellis said.

Ellis joined a panel of top industry analysts and Philippine bankers to talk about how financial institutions can deliver the best customer experience today. The consensus: a swift, measurable engagement across all services.

“An important trend that we’ve identified through working with companies, particularly within the financial services industry, to design their customer engagement strategies, is that there is real pressure to deliver measurable engagement across the board,” Ellis noted.

Travel, in particular, seems to have a strong correlation with encouraging customer loyalty. A survey by Collinson of 4,750 consumers in Asia Pacific found that customers who take 10 or more trips a year are members of twice as many loyalty programmes than those that took 1 or fewer trips per year. 

"60% of the respondents that we surveyed – those that took 10 or more trips in a year – said their spending behaviours are influenced by the loyalty programmes that they are a part of,” Ellis added.

Beyond travel, customers still expect to access loyalty programmes and loyalty-related perks across all services on offer, said Anurag Mishra, Partner, Partner, Financial Services, Technology Consulting, EY.

Mishra noted the challenges of building loyalty in the digital era, however– especially as FIs will have to balance maintaining their standards with customers’ expectations for a swift service.

“Let us also be cognitive of the fact that a financial institution typically works with credit scoring methods. You have to score your customers on the fly in a minute. That's a challenge. That's a journey for a lot of incumbent institutions to take. And that's not going to be an easy journey to take,” Mishra said.

Just the ability to offer an experience is a challenge. “The big question to ask is, do you as a financial institution, understand across products, what are the different engagements your customers are having? And are you able to hashtag it into one significant experience?” Mishra noted, adding that banks face risks in screening and choosing which people can access their services.

China Banking Corporation’s Executive Vice President & Head of Consumer Banking Segment, Aloiysus C. Alday Jr., also noted the rising expenses associated with building loyalty.

“Some advantages, it's easier to communicate now. And disadvantage, it's difficult to stand out. There's so much clutter embedded, [and] it used to be so much cheaper. Now it's becoming more expensive,” Alday noted.

Alday added, however, that digitization had made it easier to deepen relationships with existing customers. Acquiring new clients have also gotten easier thanks to the rise of social media and online selling, which allows FI’s services to be integrated in online platforms’ ecosystems.

“We have digital stores where we can do active usage campaigns for our credit cards. These are the actual cases that we can see that there are some benefits with using digitalization,” Alday said.

Rahul Rasal, Security Bank’s Head of Retail Banking Segment, highlighted experience as a driver of loyalty, noting that technology should not be used as a gimmick.

“It [technology] cannot be gimmicky. It has to solve a real customer pain point ideally,” Rasal said.

He also noted the challenges of driving financial inclusion, and the plethora of questions that banks need to address to maintain a previously unbanked attention’s enough for them to continue in their banking journey. 

“Once the customer is onboarded, how do the features of your card and your value proposition fit into the lifestyle? We have a consumer product cashback card, we have certain aspects like groceries or gas. People understand it and it jives with their lifestyle. If there's an engagement problem, we have chatbot, again, modeling chatbot security by which every pain point experience type of experience,” Rasal said.

Beyond easier marketing, digitalization has helped in building customer loyalty by making it possible to offer advisory services remotely.

“For us, we believe [that] a lot of the customers are best served digitally. We've seen that with a lot of use cases like for instance, where we introduced a mobile app or credit card base, especially when we ask for the adoption of the app to critical use cases that are relevant,” said RCBC Credit Cards President Arniel Ong.

“That's where we see it's not just about having an app, but directing and assisting customers digitally, this is what we can do with it,” Ong added.

Ong shared RCBC Credit Cards’ experience with going digital, saying that it has allowed them to serve customers the way they wanted to be served.

“We allow customers to be served where they want to be served. And that has allowed growth in transactions,” Ong said.

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