Finacle Blog

At a time when markets are ruled by fickle customers, businesses of every denomination are scrambling to retain them. However, barring the odd exception, banks’ loyalty programs are longer on rhetoric than ideas. Most programs reward those who transact frequently. And therein lies the fundamental flaw – since banking is essentially about relationships that could last even a lifetime, it is somewhat myopic to only reward a certain type of transaction behaviour. Then again, loyalty programs favour the already loyal. While this is understandable, shouldn’t they also target those who are not? Therefore, it is no surprise that loyalty programs have failed to enthuse both customers and banking organizations.

If banks expect their loyalty programs to deliver, they need to break the mould. For starters, the programs must reward the depth and longevity of relationships and not just their dollar count. They must be made more accessible to the lowest customer segments. ICICI Bank seems to have the right idea with their rural business loyalty program. Banks can even consider rewarding communities such as families, club members or co-workers as a whole. Loyalty programs can also be a medium to encourage desirable behaviour. In a marked departure from the banking norm which penalizes branch customers, Barclays Bank awards points for usage of self-assisted channels.

Finally, banks must come to accept that shopping vouchers and gift hampers are passé. They need to offer creative reward options, which are both relevant and aspirational to their customers. Then again, some customers care more about recognition than reward – so what can their banks do to show their appreciation?

Here’s the acid test - successful loyalty programs are those that draw customers within their fold. To quote an anonymous wise one, “Loyalty demands participation, the rest is simply wishful thinking.”