5 Innovation Trends Shaping Next Generation Bank Rewards Programs
Rewards programs as we know them today began in the 1890’s with Green Shield
stamps which could be earned for purchases at select merchants and exchanged for goods in catalogs. S+H Green Stamps in the 1930’s took the country by storm and later programs emerged from retailers to airlines. Reward programs in banking were largely defined by Diner’s Club and American Express in the 1980’s and retail banking has largely copied the model ever since. Typical for banks and credit unions today are simple programs with redemption catalogs attached to select card products or a reward checking account or an incentive for enrolling in a bank service – generally involving multiple vendors. The only real innovation since in the last few decades has been the availability of these rewards on mobile apps. Surprising little thought is given to the programs by boards or the C-suite. Most institutions are not sophisticated in rewards and simply adopt solutions from their cores, if they utilize any at all, and designate the programs as cost centers.
While little innovation has occurred in the this space, nearly every other area of our financial institutions (and businesses in general for that matter) has seen vast improvements in the quality and capabilities of tools and platforms available – examples include mobile banking, CRM, marketing automation, and other kinds of bank tech. Many of the tools have become fully integrated suites and robust cloud platforms that not only provide sophisticated abilities, they also drive competitive advantage and operating efficiency, often at a fraction of the cost.
Next Generation Loyalty and Rewards Platforms
The potential of powerful new platforms to be a “game changer” in this space is significant. But too see that, we need to re-frame the solution space starting with defining the terms. Rewards are incentives which modern economics tells us is the driver of nearly all activity, choices, and behavior change. Loyalty is the intangible propensity to stay with relationships and brands for reasons ranging from an enjoyable experience with products and services to a belief that there is invested value in the relationship today which will prove valuable later.
In an increasingly digital interaction space with retail banking consumers, who have myriad banking options and low switching cost, rewards are fundamental in engaging customers and a key dimension of attracting customers and forging lifelong and profitable relationships. These programs are not cost centers anymore. Next generation reward programs are true profit centers that have implications for the full range of banking functions and overall retail banking economics. How times have changed.
Today, these Next Generation Loyalty and Reward platforms are evolving to become essential components of your customer acquisition, CRM, and digital engagement strategies. Points, for example, are not “give aways”; they are investments in customers to reward profitable behavior and to engage customers in new and innovative ways.
You are paying forward at a time where your customers are demanding more value than ever.
The customer journey and experience should embrace these kinds of interactions across the range of customer interactions - more important than ever with fewer face to face interactions and less branch activity. The potential of these platform innovations can go beyond driving accounts and card utilization, it can also be foundational to lowering operational costs even driving adoption of other bank products (like mobile adoption).
Next Generation Platforms can have a transformational impact on organizations. Chase and Wells Fargo have made dramatic moves in this direction in the last few years. Chase uses its universal point currency in areas from card usage to attracting high value customers to rewarding new customer referral to mortgages. The 10,000+ other US banking institutions have a chance now to do the same to both compete and win in an increasingly competition landscape.
5 Innovation Trends Shaping Next Generation Rewards Programs
So, what does a Next Generation Loyalty and Rewards Platform look like? We have identified 5 trends that are already shaping the future of bank and credit union rewards programs and share them here. We hope these will also provide a good starting point for evaluating solutions and scoring options for your institution.
#1: Loyalty and Rewards as a Platform
The transformation of the space is first and foremost defined by principles of
modern and robust business applications and cloud-based architectures. These are not simply technical features and benefits but have far and long-lasting implications that range from lower implementation and support costs to improved flexibility and scalability. In addition, innovative and responsive pricing models are possible with a true platform approach.
• Platform capabilities that operate across all the ways you engage your customers
• Configurable to meet your business objectives
• Cloud-based and zero infrastructure implementation
• Rich branding and configuration options
• Bank grade security.
• Customized redemption options, unique to your FI, valuable to your customers
#2: Behavioral Targeting and Powerful Marketing Capabilities
At its core, next generation platforms become flexible marketing tools with broad applicability. Financial institutions can expect flexibility to define and target platforms in many ways that drive profitable behavior and reinforce desired banking activities to targeted segments. Gamification and longitudinal engagement campaigns should be powerful capabilities with platforms that have behavioral targeting capabilities.
• Engage customers in relevant and effective ways
• Segment customers to focus and amplify marketing effect and ROI
• Habitualize profitable behavior
• Utilize gamification and long term engage campaigns
• Target specific actions that enrich the consumer and institution
#3: Data Driven and Powered by Machine Learning
Utilizing customer data, both demographic and utilization, create tremendous opportunities to learn, improve, and target programs. While marketing has always been data savvy, next generation platforms are purpose built to utilize data to improve it function. Expect data analytics, program targeting, and real time platform actions based on real world data design to improve outcomes over time. Machine learning can go one step further and constantly identify and improve program aspects from ensuring the right incentives are offered to the right audiences at precisely the right time.
• Analyze and apply machine learning to inform customer segmentation
• Identify cost effective opportunities to improve engagement and loyalty in real time
• Maximize the value of rewards with dynamic marketing and offer targeting in real time
• Create 1:1 targeted personal experiences based on purchases, product utilization, etc.
API means Application Programming Interface. This is how modern applications can interact most easily with other programs and platforms seamlessly. Imagine your rewards platform working with your customer service system for applying a service-related credit in the form of points or your mortgage processing system having the ability to accept points for 0.25% off the loan origination fee in real time. All without the traditional overhead of expensive IT and integration costs. That is all easily made possible with modern APIs.
• Integration to Front and Back Office Systems
• Plug and Play with major vendors
• Easily and securely access core and other bank information on demand
• Enable omnichannel engagement and use of rewards infrastructure everywhere
• Data and capabilities available across the enterprise
Systems that are not API driven are soon to be islands and stovepipes.
#5: Enterprise Management and Self Service
Finally, financial institutions need to be able to do more than track points. They need to configure and manage the system as the needs of the institution change and evolve. This encompasses everything from setting rates to managing redemptions to launching new campaigns to customer service, all through the tools and without added costs or complexity. They also need access to operational metrics, robust reporting, and analysis tools to fully exploit the potential of the platform.
• Online real-time access to program operations
• Administer the program in-house for a seamless consumer experience
• Access program data and utilize business intelligence tools for analysis
• Configure and manage program campaigns on the fly
Next Generation Reward Platforms Require a Strategic Focus
Banks and Credit Unions should ask themselves whether they can benefit from next generation capabilities. Is your existing reward program a cost center or a profit center? Are we enabled or hobbled by current capabilities?
So, is your program a “game changer”? Is it a “needle mover”?
We asked bank and credit union executives what a truly strategic rewards platform could do for them and the replies were consistent:
• Improve customer acquisition and engagement
• Maximize Long Term Customer Value (LTCV)
• Drive revenue and profit contribution
• Differentiate the institution and products while enhancing the brand
• Leverage investments already being made in digital banking and data analytics
• Create agility in addressing changing customer needs and responding to competitive pressures
Consider elevating the conversation to the C-suite and BOD level. Ensure the institution has competent and knowledgeable leadership with clear objectives and priorities charged with the success of the program. Savvy advisors who understand the potential of these strategies and technologies can be invaluable. Actively measure and monitor progress and avoid the temptation to avoid attributing concrete goals and results. Require the program leadership to formally report on advances and ROI periodically to the executive team.
For banks and credit unions that see the future in an increasingly competitive landscape, this is a unique opportunity to change the game.
Now could be your time.