Brand loyalty isn’t what it used to be in financial services. Gone are the days where bank managers were considered trusted advisors and confidants to customers. They’ve been replaced by mobile apps and digital services designed to boost customer convenience. Combined with moves to facilitate faster account switching behaviour, the sector is certainly up against it when it comes to customer engagement and loyalty.

Recent research by Collinson Group confirms just how much hard work brands have ahead of them to engage customers and build genuine loyalty. We have just polled more than 6,100 affluent middle class consumers (the top 10 - 15 percent of earners) from across the world. Our research found that switching amongst this valuable audience is relatively low, with only 29 percent reporting they had changed bank in the past two years. But, this doesn’t mean that the remaining 71 percent of customers is loyal and engaged. In fact, far from it.

Just 40 percent of people said they have been with bank for more than two years and are happy with their level of service – this should sound alarm bells for banks. On top of that, 11 percent said they have been with their bank for more than two years only because it is too much effort to change, and a further six percent said they had been with their bank for more than two years and often think about switching. A further 16 percent of customers said they have been with their bank for more than two years and are neither happy or unhappy, a sentiment that is highest in the UK at 24 percent.

Clearly, apathy is high. When you consider that it’s between four to 10 times cheaper to keep existing customers than acquire new ones, it’s in banks’ best interests to invest to keep their customers engaged.

Meeting Great Expectations

One of the causes of the apathy in the banking sector is the divide between customer expectations and the level of service banks provide. For example, our research revealed that almost two-thirds (65 percent) of affluent middle class consumers expect their bank to reward them for their loyalty. More than half (56 percent) of customers want their bank to recognise them as an important customer and to be treated differently.

Loyalty programmes can seriously add value and build loyalty for brands, but they need to work harder to stand out and really excite customers. It is a crowded market and currently, many programmes are too generic providing little perceived value for customers. Programmes can be improved by evolving to be highly personalised and tailored to each individual’s preferences, lifestage and behaviour. When brands get it right, the research found that banking loyalty programmes encourage 82 percent of members to spend more, while credit card initiatives positively influenced 79 percent of respondents.

The good news for banks is they are best placed to succeed by creating targeted and personalised loyalty programmes, because of the amount of data they have on their customers. Globally 49 percent of people we surveyed agree that their bank knows and understands their needs. This is a 13 percent increase since 2014 and suggests the sector is learning the value of a relevant and personal customer experience, although just not at the pace that consumers expect. Another opportunity for banks is to create loyalty through their extended product suite. The research found that services such as insurance are highly valued by customers – with health insurance (72 percent), travel insurance (66 percent) and motor breakdown recovery (61 percent) most valued. These additional services can help banks form more emotional connections with their customers by providing a helpful and valuable service at a time of need and create a greater sense of loyalty towards their brand. Introducing bank wide loyalty initiatives, and rewarding customers across multiple product purchases, remains a clear opportunity for the retail banking sector.

Four tips to creating a loyalty programme that excites

• Recognise the value of relevance – The abundance of generic programmes has diluted the impact of loyalty programmes causing consumer fatigue. Brands need to balance programme objectives for motivating short-term behaviour and driving deeper engagement for long-term loyalty. Personalisation and breadth of rewards and benefits is key for brands to remain relevant.

• Address how loyalty programmes are funded –European Interchange Fee Regulation is coming into effect capping interchange fees at 0.3 percent for credit cards and 0.2 percent for debit cards in total, a reduction of up to 1.85%. This has created an immediate funding black hole for financial services organisations. By leveraging data and collaborating with merchants, both parties can create more innovative rewards programmes, personalised to their customer’s preferences. Customers benefit through more choice, better quality service and more relevant incentives. This also creates an opportunity to build bank-wide loyalty through account add-ons like insurance.

• Embrace digital – The smartphone is becoming the consumer device of choice for many brand interactions. Incorporating loyalty programmes and initiatives into payment card and mobile ecosystems will drive engagement and increase consumer brand affinity.

• Move beyond transactional rewards – Although discounts and cash-back provide instant gratification, they do little to drive long- term loyalty. Brands should instead get to the heart of what matters to their customers. For the affluent middle class, this is often their friends and families, so rewards should be more experiential, lifestyle and life-goal oriented.

Final thoughts

With apathy and low levels of customer engagement becoming a growing problem in the financial services industry, brands that demonstrate innovative, personalised solutions have the opportunity to secure customer loyalty through differentiation. By working with relevant partners and implementing the right loyalty and customer relationship strategies, brands can create a customer experience that encourages longer-term relationships which will ultimately result in profitability.