The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

When it comes to customer engagement, “hyper-personalisation” has become a key focus for banks. Loyalty programs present a unique opportunity for banks to realise this goal. However, current loyalty programs offered by UK banks often fail to deliver a genuinely personalised experience. It’s time for UK banks to rethink their loyalty offerings.

Why banks should rethink loyalty programs

UK banks currently lag international peers in the development and deployment of loyalty programs. Whilst banks in many international markets have deployed loyalty programs that are highly personalised and reward a variety of actions spanning the entirety of a customer’s relationship with the bank, in the UK efforts have largely been limited to traditional monoline offerings, typically on a credit card or current account. Such limited offerings miss the opportunity to address a much wider range of value driving behaviours and limit the potential for customer engagement. Today’s customers want more - they expect programs to reflect the full extent of their relationship, and to be tailored to their needs, life stages, preferences, and financial circumstances, offering a truly personalised experience.

The opportunity for banks and customers

A well-designed loyalty program that can engage customers at a personal level and reward them for their overall relationship with the bank can deliver significant benefits for both parties. 

For banks, such programs deepen customer relationships, encourage high-value behaviours, and enhance share of wallet by promoting engagement with a broader range of products. Attractive loyalty offerings can also differentiate a bank in a competitive marketplace, attracting new customers seeking better rewards. In an environment where established banks and new entrants like neo-banks compete for market share, a personalised, whole-of-bank program can help retain customers by incentivising them to consolidate their business with the bank.

For customers, these programs provide enhanced rewards alongside personalised offers and communications, resulting in a bespoke service that better meets their needs. Some banks have even expanded their loyalty initiatives to improve customers' financial health by providing wellness scores and rewarding them for achieving financial milestones.

Crafting a personalised loyalty program

Whether developing a new loyalty program or optimising an existing one, several key design questions must be considered. When it comes to personalisation, the most critical questions are: “Who to target?” and “How can we engage them?”. 

The target audience should align with strategic objectives and the value-driving behaviours banks wish to encourage. Many banks lack clarity in these areas, leading to a one-size-fits-all approach that fails to target specific customer segments. Recognising that each segment has different needs is essential; motivations vary widely across groups. Developing a program differentiated based on these needs marks the first step towards a genuinely personalised experience.

Creating a differentiated program is not enough; customer engagement is vital for success. An effective engagement strategy is crucial not only for personalisation but for the overall effectiveness of the rewards program. Without proper engagement, there’s a risk of rewarding customers who would have made purchases or maintained balances regardless. To deliver real value, the program must actively engage customers and encourage behaviours that extend beyond their usual activities.

Effective engagement involves delivering the right message at the right time, through the right channel, to the right customer. Personalising communication based on real-time data and historical behaviours can significantly enhance the likelihood of achieving the desired level of engagement. Furthermore, incorporating gamification and behavioural nudges can make loyalty programs more dynamic and personalised. 

When executed effectively, a differentiated program that engages customers on a personal level will enable banks to meet rising customer expectations, enhance loyalty, and cultivate long-term, mutually beneficial relationships. It’s time for UK banks to grab this opportunity!

Want to learn more?

In our recent whitepaper we delve deeper into how to develop a successful loyalty program. If you're interested in exploring further, you can find it here.