January 21, 2016

U.S. banks must consider loyalty experience amid digital disruption

SAN FRANCISCO --Despite the wash of media attention, the fintech industry is a long way off from threatening the market share of the major financial players. Fintech products and services still do not offer the same level of security and convenience of established banks. However, the pace of innovation is recognizably fast, with 44 percent of the U.S. affluent middle class consumers now using a mobile banking application.

"Delivering a great digital experience is essential for banks to remain competitive in terms of attracting and retaining customers," said Christopher Evans, Director, Collinson Group. "Furthermore, if banks are able to deploy new technology, such as big data analytics, they will be able to better understand customer behavior. This would then allow them to deliver timely and contextually relevant marketing, and to potentially connect with their customers' emotional drivers."

Collinson Group research into the top 10-15 percent of earners, revealed four different groupings within the affluent middle class, that cut across traditional demographics. Each of these groups responds to digital differently, but all are embracing its benefits:

Prudent Planners continue to value face-to-face interactions as well as digital services, so retaining this as an option is key.

Stylish Spenders expect companies to know who they are, and offer highly tailored offers and content. As a result, they can be powerful advocates for brands that develop relevant and engaging digital experiences. Banks should look to build services with responsive platforms, as well as applications that provide access to account details and financial planning services.

Mid-Life Modernists want a seamless experience across digital channels and are the most active users of smartphones, tablets, smart TVs and apps. In the U.S., 90 percent of consumers use their mobile phone for ten hours or more per week.

Experientialists 'live for the moment' and expect fresh content, regular updates and unique experiences from their financial service providers.

Understanding the nuances between these four groups will help banks evolve their loyalty proposition. It is also important to note that experiences are increasingly the new currency for today's affluent middle classes. Where previously they were motivated by luxury goods, they now place a higher priority on family and life experiences such as travel, as well as those offered by the products and brands they favor.

This approach has led to innovative loyalty initiatives from brands such as American Express. The company recently enabled customers to use their reward points to pay for Uber rides. This illustrates the smooth transition between brands, and an incredibly convenient experience for users.

The importance of mobile can also no longer be understated. Customer benefits like lounge access, card assistance and insurance solutions need to be offered on mobile applications, and responsive websites to ensure a truly omni-channel experience. These modern loyalty strategies offer banks the opportunity to increase revenues, through greater uptake. And as the rewards are considered more valuable, banks can raise their card fees without fear of frustration or resentment from their customers.

"There is a real opportunity for the affluent middle class to become powerful brand advocates, who reward organizations that cater to their personal motivations," Christopher continued. "This can happen at various points of customer interaction as long as there is value exchange for customer participation. Our research has showed that 72 percent are willing to make a repeat purchase from a brand they feel loyal to, 70 percent would recommend that brand to friends and family, and 53 percent will choose a particular brand even if it is more expensive."

Collinson Group today suggests five ways that banks can improve the customer experience, and their approach to loyalty:

1. Personalized service: Personalized and consistent communications, rewards and service regardless of how customers choose to interact with a bank is important for the affluent middle class. Our research has found that customer engagement improves by a third amongst individuals who 'feel understood' by their bank and a further third for those who say they receive a seamless multichannel service.

2.Recognition and reward: our research found that not being rewarded for loyalty is the biggest frustration for affluent middle class consumers, cited by two thirds of respondents, ahead of poor interest rates and charging unnecessary fees.

3. Choice of reward is important in boosting loyalty: This includes a breadth of offering from concert tickets to unique, money-can't-buy experiences, which appeal to the changing motivations of affluent consumers.

4. Simplify redemption: A common perception is that many loyalty programs make it hard to earn enough points to access the best returns, and that redemption processes are too complex. Giving customers greater flexibility in how they access rewards will enhance the experience and differentiation of a program. For example, enabling consumers to pay with cash, points or a combination of both, and offering mobile wallet style services allows for accessible and convenient redemption.

5. Real-time engagement: Social media and mobile services encourage an 'always-on' attitude and mean consumers continually expect fresh content from reward programs. There is an opportunity for card providers to offer real-time, tailored promotions and redemption at the moment of purchase online, and in store.

Research conducted by online survey in Brazil, China, India, Singapore, the United Arab Emirates, USA and UK with 4,437 consumers within the top 10-15percent income during August 2014.