Top strategies to keep customers coming back for more

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

Because loyal customers are 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% 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. 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.  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: 

Time everything right: Using data to create well-timed, 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. This helps prevent delinquency or identify customers who may be considering switching to another institution. 

Get more personal: Personalization is becoming increasingly important in retaining banking customers. While basic personalization, such as addressing customers by name, is a good start, it’s not enough. Research shows that churn is highest during the first year of a customer’s relationship with a bank. Personalization can help reduce churn. According to 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. 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. 

Create rewarding experiences: For customers to stay loyal, it’s essential for banks to create positive and rewarding experiences. According to Mintel, 77% 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 relationships 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 and build long-term customer loyalty. 

Bonus loyalty tip: To engage, connect with and empower customers effectively, employ a range of communication methods such as personal/chat/text interactions, artificial intelligence-based conversations, communications from leadership, Q&A/FAQ sessions, webinars and community involvement. 

Be a cross-generational advisor: Each generation has its own financial priorities. Understanding the unique needs and preferences of each generation of banking customers is key to delivering personalized experiences.  

For instance, recent research 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 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. 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 add to a bank’s ability to stand out and establish customer loyalty.  

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% increase in customer satisfaction. Technology has also enabled banks to collect and analyze large amounts of customer data, leading to more personalized, targeted marketing campaigns. However, don’t 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 balance technology with human interaction. This approach ensures that customers receive a seamless, personalized experience that meets their needs and preferences. Investing in both technology and people is essential for building customer loyalty and enhancing the overall banking experience. 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. 

We offer actionable insights on other customer service-related topics that can benefit banking institutions in the BAI Executive Report, “Keeping the customer at the center of customer service.”  

Charlie Arcella is the vice president of financial services partnerships at Vericast.