Endearing customer loyalty is critical for businesses of every stripe, but for financial institutions, long-term customer loyalty is under threat. A recent industry analysis identifies declining loyalty as one of the five most pressing issues impacting the financial sector this year.
by Dave Parsons
With a loyalty landscape that is already largely undifferentiated in many consumers’ minds, along with the emergence of fintech competitors like SoFi and Chime, many banks are straining to stem customer churn. 
Outdated rewards structures, data silos, and regulatory pressures on credit card fees also put pressure on banks and card issuers’ loyalty strategies. But with innovative technology solutions, financial institutions can effectively maintain customer loyalty and sustain profitability.
What Customers Expect, What Card Issuers Are Delivering
Digital experiences – especially those that occur within the context of the rewards program – are integral to shaping positive brand perceptions in any industry. But for credit card issuers and banks, they are paramount. The main barrier lies in delivering seamless, “just-for-me” interactions that engage cardholders and provide meaningful value no matter where they encounter the brand. Cardholders and account holders expect a consistent experience across all channels—whether online banking, using apps, interacting with loyalty platforms, or receiving customer support—but outdated legacy systems make it difficult for many banks to meet these expectations.
Instead, cardholders are often faced with indistinguishable rewards portfolios, generic offerings, confusing user flows, lifestyle rewards that are irrelevant to them or not particularly valuable, and a general sense that they would enjoy the same benefits with another card or bank. This approach will not improve acquisition or retention rates, increase cardholder spending, or boost engagement. Credit card loyalty programs must evolve, and the right loyalty technology can help them.
Creating Personalized, Curated Experiences
Achieving personalization has been a goal of loyalty strategies across industries for years, and many brands (including many highly recognizable financial institutions) have made great strides in this area. Consumer behavior has encouraged these efforts; according to our recent Tipping Point for Travel Loyalty report series, 50% of travel loyalty program members said that receiving personalized offers is “extremely” or “very” important to them. But with many credit card reward programs still offering cardholders identical reward options and travel content, regardless of their preferences, past behavior, or program status, it is clear that the quest for more advanced personalization still has a long way to go.
Of course, the technical challenge associated with implementing personalization within credit card loyalty programs is not the quantity of data available; card issuers have this readily at their fingertips. Instead, managing and analyzing customer data in real time to deliver actionable insights that can be transformed into personalized experiences is the most common hurdle. This requires advanced data analytics capabilities, including AI and machine learning algorithms, to identify patterns and predict individual preferences accurately. A loyalty technology platform that can analyze and interpret this volume of data at scale is increasingly necessary to create dynamic bespoke offers and experiences cardholders expect.
Getting Travel Booking Right
Travel rewards are a central pillar of most financial institutions’ loyalty strategies. Our analysis of major credit card programs, the State of Loyalty: 2024 Credit Card Rewards report, found that almost all of them already include the “big three” travel rewards – flight (100%), hotel (92%), and car rental (92%) – as a part of their earning and redemption frameworks. The ubiquity of this reward type contributes to the difficulty card issuers have with differentiating their offerings, but it also creates opportunities to set themselves apart with an exemplary booking experience.
A streamlined, feature-rich travel booking experience that rivals the capabilities of major online travel agencies (OTAs) can effectively encourage cardholders to interact, engage, and spend with a particular credit card or bank brand. To achieve this, financial institutions need travel booking technology that makes planning and purchasing trip components as easy and intuitive as possible. The experience for cardholders should be accessible and include user-friendly features like a combined shopping cart, points plus cash payment options, and self-service capabilities.
Innovative loyalty technology solutions can be exactly what financial institutions are looking for to improve their retention, acquisition, engagement, and cardholder spending rates in a saturated and changing marketplace. Banks and card issuers should actively identify the technical capabilities and partners they need to optimize their loyalty strategies and rewards programs, as these are the keys to maintaining their competitive advantage and profitability. If they don’t, they risk losing cardholders—and revenue—to brands embracing more forward-thinking approaches.
Dave Parsons is Chief Customer Officer at iSeatz. Dave is a seasoned executive with over 30 years of experience in financial services and enterprise loyalty programs. He most recently served as the CEO of IMS, a technology company integrating experiential content into loyalty programs. Before that, he was the Customer Success Executive at Bridge2Solutions, a leading loyalty SaaS platform, where he contributed to serving top North American financial institutions, global airlines, and strategic partners like Apple.
Photo by Museums Victoria on Unsplash
