How to Build Customer Loyalty in the Banking Industry?

Igor Izraylevych

5 min read

Retail banks have offered reward programs for years. But customers no longer perceive these programs as proper rewards for their loyalty. They are becoming more selective in choosing companies that offer them the most personalized benefits.

At the same time, advances in digital technology are opening up new opportunities for businesses in the financial sector, such as banks, to improve customer retention.

How to maintain customer loyalty in the banking industry?

1. Improve the customer experience 

2. Create personalized products 

3. Provide rewards 

4. Leverage technology

Illustration by Andrew McKay

Сustomer loyalty management: digital first

Small banks are often afraid of being out-invested by big national banks. However, even regional banks can win the competition if they position themselves as technology innovators. Customers today are more loyal to banks that are digitizing financial services, as it saves them time and effort.

Virtual wallets, digital deposits, mobile banking applications, and other innovations significantly improve the customer experience.

The Texas-based Frost Bank provides an excellent example of progressive banking digitization. In 2000, Frost Bank became the first regional bank in the US to launch online banking.  

The bank provided electronic deposits, encouraged customers to join the Zell virtual wallet network, and allowed customers to freeze their debit cards simply by responding to text messages. Thus, Frost Bank topped the competition among US banks according to the Net Promoter Score.

 

Animation by Johny Vino

8 tips to increase and maintain customer loyalty in banking

  1. Know your customer
  2. Leverage digital customer adoption
  3. Create an omnichannel experience
  4. Use mobile wallets for customer loyalty management
  5. Personalize the digital banking experience
  6. Work with a younger Gen Z audience
  7. Incorporate a banking CRM system
  8. Apply gamification in banking

A Deloitte survey shows that only 19 percent of bank customers can be characterized as truly loyal to their bank.

To increase customer satisfaction and customer loyalty in the banking sector, financial institutions should create customized banking software. Here, we go over a few tips and solutions for digital banking.

1. Know your audience

It may be obvious, but it’s true: in order to effectively attract customers, you first need to know them.

Therefore, it’s imperative that every bank is staffed with professionals who can read and interpret market data to manage customer relationships. For this reason, financial institutions require new roles such as data analyst and CRM specialist.

Based on data, banks are building more effective marketing campaigns more easily by taking into account the characteristics of their target audiences. They can reach those audiences through personalized messages and through different channels.

2. Leverage digital customer adoption

The products and services that finance and banking companies offer can be complex and difficult to explain.

Often, the onboarding process ends with several interactions with clients aimed at collecting their information and completing a loan application. However, there can be many more points of interaction if you get creative.

Customer onboarding is an excellent opportunity to show customers that a bank cares about them. For example, you can do this by creating an online assistant in your mobile banking app that helps customers start using new financial products.

How to make onboarding smoother:

  • Pay attention to creating intuitive navigation
  • Develop a mobile or web experience that can solve all customer problems online
  • Build a trustworthy online identity verification system
  • Enable autofill to avoid asking customers the same questions twice
  • Provide fast access to accounts or products after onboarding is complete

3. Create an omnichannel experience

With the advent of new technologies, today’s consumer often connects to multiple devices at the same time. 

Companies in the financial sector must take this into account. It means they have to develop a communication strategy capable of exploiting all touchpoints. They also have to create a network in which various channels are properly integrated.

If in doing so a bank properly collects and interprets data, it can even arrive at predictable risk and service management so it can anticipate the needs of each client.

4. Use mobile wallets for loyalty card management

The possibility for digital banks to manage loyalty programs directly from a digital wallet can significantly simplify the user experience and increase user loyalty. 

Capital One has become one of the first companies in the banking industry to start incorporating this innovation. Capital One manages customer loyalty programs through a mobile wallet. Its customer loyalty programs are some of the most successful in the realm of digital banking. 

DBS Bank Singapore gives us another excellent example of how to build customer loyalty in banking. Its mobile wallet, DBS PayLah!, is the fastest-growing digital wallet in Singapore, with more than 785,000 users and 15,000 P2P transactions per day. 

One of DBS Bank Singapore’s methods to boost customer loyalty in banking is allowing customers to open new deposit accounts online and transfer money in real time using QR codes.

5. Personalize the digital banking experience

Distributing product-oriented messages is no longer enough for your product or service to have a dominant market position. On the contrary, banks should gradually shift their focus to the customer. In other words, marketing must become customer-centric.

Clients, their needs, and their requirements should be at the center of attention.

A great example of personalizing the banking experience is S&T Bank’s My Reward program for clients who often use debit cards. The system offers personalized rewards cards designed according to the online shopping preferences of S&T customers.

My Reward shows users’ favorite stores with a full range of in-store and online offers and discounts. This approach takes into account the tastes and preferences of each customer. Thus, it provides even more opportunities for ongoing interaction with the bank and increases customer retention.

6. Engage Generation Z

The future is now dictated by a younger generation of tech-savvy customers — Generation Z. Brands will lose out if they don’t adjust their traditional systems with innovations that satisfy Gen Z’s needs — including in the financial sector. 

For example, Zions Bank has created the Pays for A’s program to reward students who have been particularly diligent in their studies and support their education. The system is also aimed at student engagement and motivates students to use more financial services in the future. 

The Pays for A’s program lets students earn one dollar for each A on a report card, and this money is deposited right to a deposit account at the bank. 

Furthermore, Zions Bank has organized a lottery for students, giving each participant the chance to earn a bonus of $100 or even a $1000 scholarship. It sounds like an awesome opportunity for students and can considerably drive the loyalty of this demographic. 

This loyalty program also helps Zions Bank collect data about students and build a new target audience for their future marketing campaigns.  

7. Incorporate a banking CRM system

CRM systems enable banks to run smart and highly personalized reward programs based on efficient customer segmentation. CRMs allow you to keep a whole customer database in one place and easily manage contacts of different customer groups. 

A banking CRM helps to accurately segment a bank’s target audience according to income and demographic data, lifestyle, and customer behaviors. With the data they need, banks can identify and target the most profitable customers. Data also helps them identify and stop ineffective loyalty programs.

Find out more about banking software development with S-PRO. We develop complex banking software that drives growth and creates value in the financial sector.

8. Gamify loyalty programs 

Gamification is often used in mobile apps and on websites as a tool for engagement and customer loyalty in the retail banking sector. By applying gamification elements in customer loyalty programs, you can boost the popularity of these programs among your target audience. 

Imagine a cute and funny pop-up congratulating users for receiving bonuses for maintaining a certain balance for a particular period.

Animation by Latham Arnott

To summarize: customer loyalty in retail banking

To stay competitive on today’s market, you need to adjust all your company’s processes to the requirements of the new era of digital transformation. 

Simply going digital isn’t enough to increase customer engagement and loyalty in the banking sector. The points listed above will allow you to preserve your community, influence attitudes towards your company, and even turn your customers into true brand ambassadors.

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What the right partnership gives

If you have any further questions about the meaning and importance of customer loyalty in banking or need a clearer idea of where to start, you can read more about software development for banks and financial institutions. Or you can make an appointment with us and we will be happy to answer your questions during a call.

Our team is always glad to help. We can also consult on how to measure and increase customer loyalty in any financial institution.

S-PRO has extensive expertise and domain knowledge that allows us to develop mobile banking applications that will give you lots of benefits. 

We partner with world-known companies in the economics, analytics, regulatory compliance, and blockchain consulting fields to help them overcome FinTech development challenges and create excellent digital products.