Marketing Services

Differentiating Credit Card and Retail Bank Loyalty Programs Across Global Regions

Staggering statistics associated with loyalty rewards programs have persisted into 2024, with some headline-worthy whoppers. According to Gartner, 1 in 3 businesses without a loyalty program today will establish one by 2027 to shore up first-party data collection and retain high-priority customers. That transformative potential has competitive B2C and B2B2C brands in financial services evaluating how to optimize customer loyalty to boost digital engagement.

But if loyalty is a mandate for every business everywhere, how can financial institutions differentiate and strike the right tone across regional and global markets?

If we accept loyalty as a feeling or attitude that nurtures devotion and commitment, then businesses should also view it as an emotional connection rather than a purely transactional relationship. Cultivating loyalty requires a deep understanding of your customers and their wants, desires, and needs. By developing this knowledge base, embracing creative and region-specific tactics, and customizing core loyalty features, your brand can create a program that’s meaningful to customers and impacts the bottom line.

An Ever-Changing Financial Services Market

Payment processors, banks, investment firms, insurance providers, mortgage lenders, and other subsets of the financial services industry have the unique benefit of helping customers take enormous life strides and, with time, achieve their financial goals. Financial brands can strengthen their emotional connection with customers by positioning themselves as lifelong partners.

However, they operate in a noisy loyalty marketing landscape that is already dense with effective strategies. Digital disruptors in financial technology (FinTech) continue to push boundaries by offering services like peer-to-peer lending and digital currency options, which are increasingly attractive to younger and cost-sensitive customers. Banks and payment processors that underestimate the threat from FinTech may see a continued loss in share while failing to take advantage of a growing value pool and gaining share among younger and new-to-credit customers.

Not only do customers have higher expectations of their experiences and value perception of a loyalty program, but they’re more savvy and benefit from lower barriers to switching brands than ever. 72% of marketers say meeting customer expectations is more difficult now than it was a year ago. The financial services environment is highly competitive, and the ease of switching banks, credit cards, and other services grows daily, especially when incentivized by attractive deals. Even when it comes to investments, a recent JD Power study states that 36% of surveyed millennials say they’re likely to switch financial advisory firms over the next 12 months.

Since 2021, U.S. consumers across industries are, on average, members of more than 16 loyalty programs, a trend that dilutes the impact of any single program. Simply having a payment processor or credit card loyalty program is not enough to stay competitive anymore – a loyalty experience must be powered by personalization and an obsession with providing customer value to convert acquisition to retention with lifetime value.

Global Research is a Must

A one-size-fits-all program is a thing of the past. Especially for a global firm, viewing all rewards customers as a monolith is not only detrimental to driving personalized value in a market that expects it like never before – but it also ignores the meaningful cultural, language, and value perception differences that exist country-to-country and region-to-region.

WillowTree’s data-driven approach leverages global teams to conduct unbiased, localized research, which becomes the foundation for effective customer engagement strategies for personalization and segmentation. This critical research reveals avenues to customer relevance.

In our recent global analysis of financial services loyalty programs, WillowTree Senior Product Researcher and relationship scientist Rachel Vanderbilt, PhD, surveyed 448 members worldwide and found that the differences between the five global regions evaluated  — Asia–Pacific, Europe, Middle East–Africa, North America, and South America — tremendously impact customer perception and interest in credit card loyalty offerings.

“These unique locales require individualized attention to make more personalized and tailored experiences that are going to be more sticky for customers and make them want to engage with more over time,” she explains in her study.

For instance, WillowTree’s research found that, among those surveyed, Asian-Pacific loyalty members were the most likely regional group to redeem points for use on unique experiences like concerts, while North Americans were the least likely.  

With an understanding of how geographic regions impact customer behavior, further segmentation by age and income level creates a more precise picture for a financial institution, guiding creative ideation around loyalty program features. Eventually, the goal is to create personalized content at an atomic level that serves 1:1 personalized experiences further refined by user interaction.

“Originally, you might do substantial segmentation work through manual analysis,” says WillowTree’s Jeremy Stern, Partner, Analytics and Optimization. “Eventually, artificial intelligence can handle the time-intensive work of expanding on that segmentation to the more granular, individual level. When you can bring in data from all of your customers, grouping them based on their behaviors and characteristics at that closer-to-individual level, you can more effectively message one-to-one. This is how you get to personalization at scale.”

Pursue Customer Value to Unearth Delight

With an understanding of globally diverse customer behavior and preferences, payment processors, credit cards, and other financial services brands can leverage this data to reimagine their loyalty programs with a commitment to customer value.

WillowTree research has shown that rewards customers want culturally and regionally relevant promotions, offers, benefits, and rewards from a credit card loyalty program. More specifically, they want personalized offerings that reflect their transaction history and how they’ve previously taken action to use rewards (e.g., discounts vs. gift cards vs. cash back vs. unique experiences). Effectively leveraging this personalization provides genuine value and demonstrates an authentic understanding of the customer, which can supercharge a digital experience with the power of delight.

Consider customer delight the guiding light in the quest to build the best bank loyalty program. It sparks creativity for idea generation and paves the way for innovation. In this episode of WillowTree’s Room For Growth podcast, WillowTree Partner and VP of Commercial Strategy Nate Wootten explains that, while it can be challenging to harness, delight’s impact can be industry-leading:

“Delight’s a bit of a moving target, so it's tricky,” Nate shared. “An example that I think resonates is that when the iPhone first came out, it had a touchscreen. Everyone freaked out. They were delighted. And now, if you think about it, you won't be delighted when you touch a touchscreen anymore. It's a must-have feature. It's a sliding scale over time. As technology becomes adopted, customer expectations continue to rise. So, if you don’t tackle delight features on your roadmap now, they'll soon become must-have features, and you're going to have to tackle them later anyway.”

By pursuing customer delight in a loyalty platform, a financial institution is not only deepening its connection with a user, it’s also staying ahead of the curve. Of course, there’s a balance between pushing the boundaries and maintaining a program’s integrity, but if you’re not actively flexing your creativity, you’re passively falling behind.

Power Digital Experiences with Loyalty Features

Financial services brands are poised to do much more with their loyalty programs than deliver table stakes. With the intention of meaningfully enhancing customer engagement, value, and delight, a differentiated financial services loyalty program has the power to shape and elevate a best-in-class digital customer experience, creating more opportunities for an institution’s products to coexist organically with customer benefits.

With an understanding that thinking customer-first reveals opportunities to incentivize customer behavior, let’s look at some building blocks and features of loyalty.

Powerful points and relevant rewards

Dollars-to-points-to-rewards functionality makes good sense as the foundation of a payment processor or credit card loyalty program. It helps reframe any negative feelings associated with monthly spending in terms of positive achievement. WillowTree’s global user research study revealed that the most essential features of a financial services loyalty program — regardless of age or geography — were centered around a points and rewards economy, focusing on the desire to:

  1. Watch points accumulate
  2. Easily redeem points
  3. Find local rewards opportunities
  4. View all rewards redemption and benefit info in one place
  5. Discover rewards recommendations based on prior spending habits

A credit card can lean into customers’ desire for rewards based on spending habits by giving weight to the big payments in customers’ lives, including home improvements, tuition, mortgage, and car payments. An example of a fast-moving FinTech disruptor capitalizing on this notion is Bilt. Launched in 2021, Bilt captured a younger, tech-savvy customer base by offering rewards based on a routine, often “unrewarding” experience: paying rent.

Point redemption offers substantial opportunities for personalization wins, but flexibility remains a powerful feature when in doubt. Perhaps an indication of financial times and perceived customer buying power, WillowTree’s study found that customers with less discretionary income identified “cash back” as the most popular way to use points, regardless of region and age.

Worthwhile exclusives and perks

WillowTree’s research also revealed that North American users proved to be an outlier with less point consumption than the rest of the world. Point accumulation can take time, and perks with instant benefits and access to third-party deals can motivate spending and increase enrollment rates.

Personalization remains as relevant in generating meaningful perks as it does with rewards. An offering that doesn’t uphold the exclusivity promoted in membership potentially undermines the promise of a financial services loyalty program. In fact, 27% of consumers’ consideration to identify alternatives to their current loyalty program can be predicted by the value perception they have of how exciting promotions are.

Embracing local seasonality and acknowledging where customers are in their lifecycle with a brand can create relevance and rapidly increase conversion rate which skyrockets return-on-investment for perks and exclusives. In particular, the financial services industry has the advantage of offering relief and solutions when world events, market forces, and shifting customer loyalty trends pose economic challenges.

Ecosystems rather than partnerships

An effective way to power rewards, experiences, and exclusives is to work with other businesses to create value for loyal customers. Traditionally, partnerships have been the way to do this. For instance, as a Delta SkyMiles member, you can earn points toward travel when you purchase coffee at Starbucks.

However, a loyalty ecosystem expands customer benefits to a multitude of businesses. Beyond perks, discounts, and gift cards, this synergized ecosystem funnels data into your customer data platform (CDP) to make real-time personalization possible. Now you can create VIP experiences that surprise and delight your customers at the right time and place.

Meaningful tiers

Service-oriented financial brands may find that points-driven programs aren’t the best fit for the structure of their loyalty programs. A tiered system offers a structured solution that promotes customer loyalty through feelings of status and achievable pathways to advancement through demonstrated actions such as frequency of shopping, total spend, and/or tenure of relationship.

For example, Bank of America’s Preferred Rewards program offers four tiers, defined by checking account minimum balances, with benefits that give members access to lower interest rates for other Bank of America products, such as auto loans and HELOCs.

However, tiers shouldn’t simply be a hierarchy of clever names with marginally improved upgrades. The status built into each tier must be meaningful, and the transition into a new tier has enough impact to make a customer genuinely proud of the achievement.

Omnichannel enablement

Being truly “omnichannel” is no longer the goal, but the expectation. Especially when questions or problems arise, customers expect to seamlessly transition between virtual customer support, live agents, mobile apps, SMS, and other channels without repeating their personal information or reason for contacting.

This, however, is easier said than done, especially for financial institutions that must strike a balance between legacy systems, security, data privacy, government regulation, and emerging technologies. In fact, in a survey conducted by Gartner in 2023, 60% of marketing leaders believe collecting first-party customer data with an appropriate balance of customer value exchange and privacy will become more challenging than ever.

Investing in underpinning technology and data infrastructure is critical to providing premium experiences that reduce friction, offer relief, and enhance satisfaction. This is true differentiation and an opportunity to generate delight.

Empowerment, goals, and gamification

Across all global regions, WillowTree found that the highest percentage of credit card loyalty program participants surveyed “felt they were financially able to meet most of their basic needs” but not save money, invest, and make big purchases without worry. Opportunity exists for financial institutions to build brand reputation and relationships with consumers through education and guidance towards pursuing financial goals (saving, investing, financing purchases, etc.) and thus earn their loyalty for a lifetime.

Artificial intelligence has made it easier than ever to digest large data sets and generate results at scale. An exciting use case on the horizon for financial institutions exists to dynamically generate unique visualizations of personal spending habits for users. This technology can be used to make recommendations and empower customers, helping them spend smartly and build toward life goals.

Gamifying customer-selected and deeply cared-for financial goals like saving money or managing existing loans can help customers reach financial freedom more quickly. As customers feel more empowered, positive brand sentiment builds for a program that allows them to actualize these achievements.

App customization

Never underestimate the impact of customization. Building in the ability to earn app skins, add widgets, or modify UX/UI loyalty program elements enhances users’ emotional investment in their digital experience.

Product experience and interaction experience, which have the biggest impact on customer loyalty, account for over 36% and 30% of change in customer loyalty, respectively.

Refine with Research and Design

Again, WillowTree Senior Product Researcher Rachel Vanderbilt explains how refinement of a financial services loyalty program results from continued collaboration between research and loyalty program design teams:

“We ideate together, and then we go our separate ways. While I research, they continue iterating on the design. Then we come back together to share those insights so that, in the end, we have the most consumer-friendly, beautiful experience possible for the end user, totally driven by research.”

With ongoing collaboration and attention to ever-updating customer data, a payment processor can create a brand-powered customer toolkit that amplifies customer joy, reduces moments of friction, and enhances brand affinity. Ideally, every customer interaction elevates relevant perks or discounts, and customer loyalty is reinforced with instantaneous channel notifications of points earned.

The Financial Upside

The implementation of a new loyalty program encourages customers to engage digitally. This allows payment processors, banks, credit cards, and other financial services brands to effectively track operational metrics and influence customer behavior. This helps them gain valuable insights about the brand and its impact on customers' lives.

Lastly, a well-executed loyalty program can enhance brand perception and customer satisfaction, leading to positive word-of-mouth referrals and attracting new clients, thereby expanding the company's customer base and increasing market share. Overall, revamping or launching a new customer loyalty program has the potential to not only significantly improve a brand’s perception, but also its bottom line.

See how WillowTree helps financial services companies like yours maximize their loyalty and rewards ROI with our loyalty strategy and customer experience consulting.

Table of Contents
Read the Video Transcript

One email, once a month.

Our latest thinking—delivered.
Thank you! You have been successfully added to our monthly email list.
Oops! Something went wrong while submitting the form.
More content

Let's talk.

Elegant, Performant Digital Products.
Personalized, Automated Marketing.
The Frontiers of Data and Generative AI.