44% of Gen Z switched financial institutions last year

Banking customer loyalty has become increasingly challenged in recent years. With rising competition in the industry, customers have more options than ever when it comes to choosing a bank, credit union, fintech, or other financial services provider.

Because loyal customers tend to be more valuable than new ones, losing them can be costly and damaging to a bank’s bottom line in more ways than one.

Loyal customers are likely to recommend their bank up to six times more than non-loyal customers. This means they can help attract new customers without the bank having to spend money on marketing or advertising.

Plus, they spend more. Loyal customers spend an average of 25 percent more on their credit cards, which translates to increased revenue for the bank.

Finally, since loyal customers are less likely to switch to a competitor, losing them can result in damage to the bank’s brand and reputation.

Customers Today Are More Demanding

Advancements in technology, the rise of the internet and e-commerce, and the availability of on-demand services have led customers to expect a higher level of service and convenience. To meet these expectations, banks are investing in technology, increasing personalization, and providing value-added services to improve the customer experience. Additionally, banks are utilizing data and analytics to gain insights into customers’ needs and preferences, allowing them to tailor offers accordingly.

Future-focused banks recognize the importance of meeting customers’ evolving expectations. Here are FIVE WAYS banks can provide a higher level of service and convenience to retain loyal customers.

1. Time Everything Right

Using data to create well-timed and relevant messages improves the customer experience and increases loyalty. For example, you could offer personalized deals based on their spending habits, which are more likely to resonate. Additionally, you can proactively reach out to loan customers earlier than the usual 30-, 60-, or 90-day past due dates. By doing so, you may be able to prevent delinquency or identify customers who may be considering switching to another institution.

2. Get [More] Personal

Personalization in banking is becoming increasingly important in retaining customers. While basic personalization, such as addressing customers by name, is a good start, it’s not enough. Research shows that churn is highest (25%) during the first year of a customer’s relationship with a bank. However, personalization can help reduce churn. According to the BAI’s 2023 Banking Outlook Report, 33% of banking customers surveyed were willing to share more personal information in exchange for better product and service recommendations.

It’s important to understand what offers customers want to receive. For instance, recent studies show Gen Z customers want checking deposit offers (30%) and buy now, pay later offers (24%), while millennials prefer credit card offers (42%) and checking deposit offers (36%). Gen X customers, on the other hand, want debit or credit card purchase offers (42%) and checking deposit offers (40%). By using this information, banks can tailor their offers to their customers’ preferences and increase the likelihood of retaining them.

3. Create Rewarding Experiences

For customers to maintain their loyalty to a bank, it’s essential to create positive and rewarding experiences. According to Mintel, 77 percent of banking customers expect to be rewarded for their loyalty. However, rewarding customers should not only be about providing physical rewards but also about fostering a relationship and building trust. It’s important to create positive experiences and maintain ongoing communication with customers.

Offering relationship-based pricing, sending personalized birthday and anniversary greetings, and reaching out to customers who have submitted survey responses are also effective ways to create rewarding experiences. By providing these experiences, banks can differentiate themselves from their competitors and build long-term customer loyalty.

LOYALTY TIP: To engage, connect, and empower effectively, employ a range of communication methods such as personal/chat/text interactions, AI conversations, communications from leadership, Q&A/FAQ sessions, webinars, and community involvement.

4. Be a Cross-Generation Advisor

Each generation has its own financial priorities. Understanding their unique needs and preferences of banking customers is key to delivering personalized experiences. For instance, recent research on banking customers has shown that Gen Z customers prioritize advice and resources about savings (35%) and budgeting (34%), and they demand an omnichannel experience. They don’t want to be force-fed information but want it to be available. Millennials, instead, focus on advice and resources about savings (37%) and raising/understanding their credit scores (30%). This is because they are in the thick of managing their finances and are high-volume spenders due to various life activities in their late 20s to early 40s. Finally, Gen X customers prioritize advice and resources about budgeting (30%) and saving strategies (28%).

By understanding these different needs, banks can create customized resources and education programs that cater to each generation’s unique financial goals and preferences. This approach can help banks differentiate themselves from competitors and build long-term customer loyalty.

5. Invest in Innovative Banking Tech

Future-oriented banks invest in digital technology to enhance the customer experience and provide convenient, accessible banking services. This includes digital and mobile banking, and AI-driven digital interactions that offer a personalized and frictionless online account-opening experience with accurate product recommendations. Using guided product self-selection at account opening resulted in a 40 percent increase in customer satisfaction.

Technology has also enabled banks to collect and analyze large amounts of customer data, leading to more personalized and targeted marketing campaigns. However, it’s important not to overlook the value of investing in people. While technology can streamline processes and improve efficiency, it’s people who drive customer satisfaction and loyalty.

The most successful loyalty programs in balance technology with human interaction. This approach ensures that customers receive a seamless and personalized experience that meets their needs and preferences. Ultimately, investing in both technology and people is essential for building customer loyalty and enhancing the overall banking experience.

To remain competitive and retain customer loyalty, banks will need to continue to innovate and adapt to changing customer demands and preferences. By implementing these five strategies, banks can differentiate themselves from competitors and build long-term customer loyalty.

Watch the webcast, “Customer Loyalty is Dead, Or Is It?”, for more tips on how to increase your customers and members loyalty.