Cuts to loyalty programmes resulting from caps on interchange fees risk customer relationships 

A survey of 2,500 loyalty programme members released today by Collinson Group has found that financial services brands are generating value and support from customers through loyalty initiatives. The study found that 81 percent of loyalty programme members were part of a financial services programme, compared to airline carriers (53 percent) and hotel companies (42 percent). It also found that over half (53 percent) of the respondents said that their financial services loyalty programme is their favourite.

 The findings suggest that financial service organisations understand the rewards that consumers genuinely value in loyalty programmes and recognise that these help to build positive, ongoing relationships. Of those consumers who are members of a financial services provider’s loyalty programme, 63 percent said that they valued the wide range of rewards and offers. This was followed by the ability to collect points and spend rewards in-store (55 percent), and being able to spend their points on goods and services online (51 percent). More than half (57 percent) of those surveyed said that they like the ability to customise their loyalty programme to ensure that it is relevant to them. Financial services brands should continue to explore ways to offer flexibility and choice in both the collection and redemption aspects of reward programmes.

 But despite these latest findings from Collinson Group, loyalty programmes in the financial services sector remain under threat from EU legislation which has capped interchange fees. Analysis by First Annapolis Consulting found that in the first six months since the introduction of the cap on interchange fees, financial service brands reduced the value of their reward programmes and the number of reward options available[1].

 Additional research conducted by YouGov for Collinson Group and Future Agenda found that consumers believe they will have shorter relationships with brands in the future. More than half (53 percent) agreed that people’s loyalty to brands will be more short term and only 12 percent disagreed with this sentiment.

 Mark Roper, Commercial Director, Collinson Group said: “In a sector with more competition and disruption than ever, investment in customer loyalty remains vital for financial services organisations to attract and retain customers.

 “Brands need to ensure that they continue to invigorate their programmes and explore new ways of funding the right rewards that are still very much valued by their customers. Unlike other industries, the financial services sector is in a stronger position to build a deep understanding of their customers, and engage on an emotional level with them.  Loyalty programmes can be an opportunity to not only differentiate your brand from the crowd and build customer engagement, but can also become an additional revenue stream and help to replace the funding hole created by the cap on interchange fees.”

 Four golden rules for developing more engaging, loyal relationships with customers

1. Invest in loyalty as a revenue stream: Loyalty programmes not only have the potential to build emotional relationships with customers, they can generate repeat purchases and increased spend. Collinson Group research shows that 63 percent of loyalty programme redeemers make an additional purchase after redemption. Giving customers choice on how to collect rewards and how often they can claim rewards will help to drive additional spend.
2. Offer rewards beyond core business: Financial brands can foster loyalty and additional spend by offering additional services to fulfil the customer’s broader lifestyle needs – such as health and travel insurance or ID and lost card assistance. If customers can earn more points from purchasing a variety of goods that are not inherently linked to the organisation’s core range, and equally redeem on rewards outside their core inventory too, they will be encouraged to spend more.  Offering broader and richer benefits and rewards also provides the opportunity to build better profiles of profitable customers due to the expanded access to behavioural and transactional data.
3. Personalisation: Customers expect to have an experience tailored to their individual needs and brands that offer this level of customer empowerment will achieve engaged and loyal customers. Customers want a choice of rewards and benefits to best suit their tastes and interests and increasingly so in the digital age where real-time and dynamic interactions continue to drive customer expectations. Financial service organisations should be exploiting powerful data analytical tools to deliver more personal relationships with customers.
4. Quality data comes at a price: Data plays a vital role in providing personalised, contextually relevant offers and communications to customers, however the public are becoming less willing to share their personal data. Research by YouGov commissioned by Collinson Group and Future Agenda revealed that 54 percent of customers said they will share less information about themselves online, and 65 percent of consumers are aware of the value of providing their personal data. Customers are only willing to hand over data to the brands that offer a clear incentive or purpose for this value exchange.

Cuts to loyalty programmes resulting from caps on interchange fees risk customer relationships 

A survey of 2,500 loyalty programme members released today by Collinson Group has found that financial services brands are generating value and support from customers through loyalty initiatives. The study found that 81 percent of loyalty programme members were part of a financial services programme, compared to airline carriers (53 percent) and hotel companies (42 percent). It also found that over half (53 percent) of the respondents said that their financial services loyalty programme is their favourite.

 The findings suggest that financial service organisations understand the rewards that consumers genuinely value in loyalty programmes and recognise that these help to build positive, ongoing relationships. Of those consumers who are members of a financial services provider’s loyalty programme, 63 percent said that they valued the wide range of rewards and offers. This was followed by the ability to collect points and spend rewards in-store (55 percent), and being able to spend their points on goods and services online (51 percent). More than half (57 percent) of those surveyed said that they like the ability to customise their loyalty programme to ensure that it is relevant to them. Financial services brands should continue to explore ways to offer flexibility and choice in both the collection and redemption aspects of reward programmes.

 But despite these latest findings from Collinson Group, loyalty programmes in the financial services sector remain under threat from EU legislation which has capped interchange fees. Analysis by First Annapolis Consulting found that in the first six months since the introduction of the cap on interchange fees, financial service brands reduced the value of their reward programmes and the number of reward options available[1].

 Additional research conducted by YouGov for Collinson Group and Future Agenda found that consumers believe they will have shorter relationships with brands in the future. More than half (53 percent) agreed that people’s loyalty to brands will be more short term and only 12 percent disagreed with this sentiment.

 Mark Roper, Commercial Director, Collinson Group said: “In a sector with more competition and disruption than ever, investment in customer loyalty remains vital for financial services organisations to attract and retain customers.

 “Brands need to ensure that they continue to invigorate their programmes and explore new ways of funding the right rewards that are still very much valued by their customers. Unlike other industries, the financial services sector is in a stronger position to build a deep understanding of their customers, and engage on an emotional level with them.  Loyalty programmes can be an opportunity to not only differentiate your brand from the crowd and build customer engagement, but can also become an additional revenue stream and help to replace the funding hole created by the cap on interchange fees.”

 Four golden rules for developing more engaging, loyal relationships with customers

1. Invest in loyalty as a revenue stream: Loyalty programmes not only have the potential to build emotional relationships with customers, they can generate repeat purchases and increased spend. Collinson Group research shows that 63 percent of loyalty programme redeemers make an additional purchase after redemption. Giving customers choice on how to collect rewards and how often they can claim rewards will help to drive additional spend.
2. Offer rewards beyond core business: Financial brands can foster loyalty and additional spend by offering additional services to fulfil the customer’s broader lifestyle needs – such as health and travel insurance or ID and lost card assistance. If customers can earn more points from purchasing a variety of goods that are not inherently linked to the organisation’s core range, and equally redeem on rewards outside their core inventory too, they will be encouraged to spend more.  Offering broader and richer benefits and rewards also provides the opportunity to build better profiles of profitable customers due to the expanded access to behavioural and transactional data.
3. Personalisation: Customers expect to have an experience tailored to their individual needs and brands that offer this level of customer empowerment will achieve engaged and loyal customers. Customers want a choice of rewards and benefits to best suit their tastes and interests and increasingly so in the digital age where real-time and dynamic interactions continue to drive customer expectations. Financial service organisations should be exploiting powerful data analytical tools to deliver more personal relationships with customers.
4. Quality data comes at a price: Data plays a vital role in providing personalised, contextually relevant offers and communications to customers, however the public are becoming less willing to share their personal data. Research by YouGov commissioned by Collinson Group and Future Agenda revealed that 54 percent of customers said they will share less information about themselves online, and 65 percent of consumers are aware of the value of providing their personal data. Customers are only willing to hand over data to the brands that offer a clear incentive or purpose for this value exchange.