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Today’s larger financial institutions face a loyalty problem. The annual churn rate on new customers can be as high as 25 percent, and 28 percent of consumers are open to switching to a new financial institution. That number is even higher among younger consumers: 40 percent of 18- to 21-year-olds and 35 percent of 22- to 37-year-olds are considering a move to a different institution.
Much of this attrition can be attributed to competitors, including retailers with cobranded cards and fintech companies offering easier account holder experiences and more lucrative benefits. Instead of focusing solely on card-based rewards, these competitors respond dynamically to their customers’ activity and offer flexible rewards like cash back. Traditional financial institutions are working hard to keep up; many are trying to compete by offering higher and higher reward cashback benefits.
Financial institutions are also experiencing attrition due to COVID-19, which is driving the need for digital solutions that facilitate immediate, contactless interactions. Fintech disruptors are not only making it easier for consumers to switch financial service providers, they are offering real-time access to account information, rewards and redemption options that today’s digitally savvy consumers expect.
Staying relevant in a shifting marketplace
In order to stay relevant and effectively attract and engage customers, financial institutions must move away from competing on card-only loyalty. They must embrace a more holistic view of customer loyalty and implement technology enabling a broader loyalty strategy that:
- Incentivizes account holders for their entire banking relationship, encompassing all accounts and services from credit and debit cards to loans and investments
- Offers a variety of differentiating rewards that add value to the relationship, such as lower interest rates, fee waivers, discounts and cash back
- Provides targeted, personalized promotions that drive long-term engagement
- Responds to changes in the customer relationship in real time
- Generates data analytics and revenue growth plans to help increase portfolio growth
It’s a lot to consider. But financial institutions don’t have to tackle it all on their own. Instead, they can leverage solutions like AI360 from FIS™ to create loyalty programs that effectively deepen and extend customer relationships.
AI360 rewards consumers for the strategic and aggregate value of each of their banking relationships. The more products, activity and higher-balance accounts consumers have with their financial institution, the more benefits they will earn as a result. The deeper the customer relationship, the richer the benefits.
A key feature of AI360 is the extendable rules engine, which allows a financial institution to evaluate relationships on an ongoing basis and adjust rewards as needed. The solution uses data across all areas of the financial institution, from the product mix to geographical locations, branch locations and total account activity.
Combining benefits is good for business
With market competition growing, card-only loyalty programs that work for smaller financial institutions may not be enough for larger institutions to retain and grow their customer base. Complementing transactional, card-based benefits with a solution that rewards the entire account holder relationship can help larger institutions stay competitive, increase account holder retention and drive profitability.
To learn what AI360 can offer your financial institution, contact your FIS relationship manager.