Content Marketing Manager and Writer with a good understanding of the processes in mobile app development, AI, ML, IoT, Blockchain, web development, and design industries.

Building Customer Loyalty in Digital Banking?

5 min read

Illustration by Alex Krugli

Retail banks have been offering different reward programs for many years. However, things have changed. Customers don’t recognize these programs as appropriate loyalty anymore. Banks should challenge the hegemony of the traditional system and find new ways to build customer loyalty. With the digital disruption in financial services making it easy for customers to flee elsewhere, and with fintech startups hot on the heels of financial institutions, banks that don’t invest in loyalty will lose the game. 

In this article, we will consider the key factors affecting customer loyalty in the banking sector. Here we are also going to share our expert insights and tips that will help you get a comprehensive understanding of what is customer loyalty in banking.

To build customer loyalty in digital banking, companies should do the following:

Retail banks have been offering different reward programs for many years. However, things have changed. Customers don’t recognize these programs as appropriate loyalty anymore. Banks should challenge the hegemony of the traditional system and find new ways to build customer loyalty. With the digital disruption in financial services making it easy for customers to flee elsewhere, and with fintech startups hot on the heels of financial institutions, banks that don’t invest in loyalty will lose the game.

In this article, we will consider the key factors affecting customer loyalty in the banking sector. Here we are also going to share our expert insights and tips that will help you get a comprehensive understanding of what is customer loyalty in banking. To build customer loyalty in digital banking, companies should do the following:

  1. Use mobile wallets for loyalty card management;
  2. Personalize digital banking experience;
  3. Attract and retain a younger audience, Generation Z;
  4. Incorporate a banking CRM system;
  5. Provide the omnichannel view of loyalty programs;
  6. Gamify loyalty programs;
  7. Use digital customer onboarding.

Go digital to drive loyalty

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 fintech innovators. At the age of digital transformation, customers feel more loyal to banks that digitize financial services since it helps them save time and effort in many cases. Virtual wallets, digital deposits, mobile banking applications, and other innovations can significantly improve the customer experience.

Illustration by Andrew McKay

An excellent example of progressive banking digitization is Frost Bank, based in Texas. In 2000, it became the first regional bank that launched online banking. It offered its customers options that helped considerably improve banking experience and increase loyalty. 

Understanding the importance of customer loyalty in digital banking, Frost Bank provided digital deposits, suggested customers joining Zell virtual wallet network, and allowed people to freeze their debit cards by merely replying to text messages. All these digital innovations helped Frost Bank lead the competition among American banks on Net Promoter Score.

7 Practices to increase loyalty in e-banking

To increase customer satisfaction and loyalty in e-banking, financial organizations started creating custom banking software aimed to improve customer experience. Here we will consider some of the digital banking tips and solutions.

1. Use mobile wallets for loyalty card management

The possibility to manage loyalty programs for digital banks directly from a digital wallet is a great feature that can significantly simplify user experience and increase loyalty even more. Capital One has become one of the first banks that have started incorporating this innovation in its system, managing customer loyalty programs in the banking industry through a mobile wallet. It is one of the most successful examples of customer loyalty programs in digital banking. 

Another excellent example that demonstrates how to build customer loyalty in banking is a forward-thinking Singaporean bank, DBS Bank Singapore. Its mobile wallet, DBS PayLah!, is the fastest-growing digital wallet with more than 785,000 users and 15,000 P2P transactions per day. One of its methods to boost customer loyalty for digital banks is the possibility to open a new deposit account online as well as transfer money using a QR code scan in real-time.

Animation by Johny Vino

2. Personalize digital banking experience

A great instance of the banking experience personalization is an innovation provided by S&T Bank. This financial institution has created the My Reward program for its customers who often use debit cards. The system offers personalized reward cards designed according to particular online shopping preferences of users.

My Reward program shows the user’s most favorite stores with a full range of in-store and online offers and discounts. This approach to customer loyalty in e-banking takes into consideration the customer’s tastes and preferences, granting even more chances for continuous interaction with a bank and increasing customer retention. 

3. Attract and retain a younger audience, Generation Z

The future is now dictated by a younger generation of tech-savvy customers – Generation Z. Regardless of the industry, a brand will lose out on the game if it won’t adjust its traditional system to innovations that satisfy the needs of Generation Z. The financial sector is not an exception. 

To mitigate the risk of losing these up-growing customers, Zions Bank has created the Pays for A’s program to reward students who have been particularly diligent in their studies and support education. The system is also aimed at student engagement and motivation in using more financial services in the future. 

The Pays for A’s program lets students earn one dollar for each A on a student report card that is deposited right to a deposit account at this bank. Furthermore, Zions Bank has organized a lottery for students. It gives a chance to each participant to earn a bonus of $100 or even a scholarship at a size of $1000. It sounds like an awesome opportunity for students and can considerably drive the loyalty of this demographic group. 

Besides, this loyalty program helps Zions Bank collect data about these students and build a new target audience for their future marketing campaigns.  

Animation by Latham Arnott

4. Incorporate a banking CRM system

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

A banking CRM helps make precise target audience segmentation according to income and demographical data, and even customer lifestyles and the buyer’s behavioral patterns. With a needed set of data in hand, banks can identify and target the most profitable customers. It also helps determine inefficient loyalty programs and stop them if needed.

5. Provide the omnichannel view of loyalty programs

Customers will like it if you provide the omnichannel view of their digital banking experiences. Let them track their reward points on various devices, from mobile phones to tablets and desktop computers. A great idea is also to allow users to set up automatic redemption toward deposit accounts, credit lines, or to purchase specific merchants’ gift cards.

6. Gamify loyalty programs 

Gamification is often used in mobile apps and websites as a tool for user engagement and customer loyalty in the banking sector. By applying gamification elements in customer loyalty programs, you can significantly boost the popularity of these programs among your target audience. Imagine, a cute and funny pop-up message congratulating users about receiving bonuses for keeping a desirable threshold money balance for a particular period.

7. Use digital customer onboarding

Usually, an onboarding process ends with a few interactions with customers aimed to gather their information and fill out a loan application. However, it can be much more if you take a creative approach to it. Customer onboarding is an excellent opportunity to show customers that a bank cares about them. You can create a feature of online assistance in your mobile banking app that helps users start using new financial products and services.

To make an onboarding process smoother, you can follow the next tips:

  1. pay particular attention to creating an intuitive navigation
  2. better not to redirect customers to physical channels, develop a mobile or web experience that can solve all customer problems online
  3. build a trustful online identity verification
  4. enable autofill to avoid answering customers the same questions
  5. provide fast access to the account or product after onboarding is complete.

To Wrap It Up

Hopefully, these practices on building customer loyalty in digital banking will help you challenge patterns of traditional banking systems and incorporate innovations that will engage your customers. To stay competitive on the market today, you need to adjust all the company’s processes to the requirements of the new digital transformation era. Find here the seven best tips and practices that will help you change the face of your financial institution and build strong customer loyalty.

If you want to build a highly secure banking app with visually appealing UI, our team is always glad to help. S-PRO has extensive expertise and domain knowledge that allows us to provide high-quality fintech software development services for our clients. We partner with world-known companies in economics, analytics, regulatory, and blockchain consulting fields to help you overcome fintech development challenges and create an excellent digital product.

Dana Kachan
Dana Kachan Content Marketing Manager and Writer with a good understanding of the processes in mobile app development, AI, ML, IoT, Blockchain, web development, and design industries.

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