Why millennials want first-class loyalty schemes

Lenders must consider individual customer preferences to create personalised experiences

Customer expectations are higher than ever and points-based offers and benefits are no longer the primary motivators. Antonie Robertson / The National

Taking a step back and observing the world around us over the past two decades reveals that change has been the only constant.

The banking scene at the turn of the century bears little resemblance to the present day. The adoption of digital technology and the innovation spurred by increased consumer demand has exposed the market to new challenges and alternative ways of doing business.

Traditional banking access is dwindling as the emphasis shifts to online options; customers can manage their finances by using an app whenever and wherever they want.

At the same time, as competition from FinTechs and neo banks grows, core banking institutions must compete across a broader spectrum to remain relevant.

In addition, expectations are higher than ever and point-based offers and benefits are no longer the primary motivators.

How do banks navigate the changing landscape to connect with customers meaningfully, while ensuring reasonable returns?

Understanding and adapting to customer demands

In today’s digital age, banks must engage with consumers on their terms to build genuine and lasting loyalty.

This is because loyal customers spend 2.5 times more if the experience or product is right for them, regardless of the current market situation.

However, increasing price sensitivity among GCC consumers means banks must adapt their loyalty programmes to meet changing consumer demands.

Banks must consider individual customer preferences and wants to create personalised and effective loyalty programmes.

Loyalty rewards based solely on spending habits are no longer enough, and customers want recognition for their non-transactional behaviour.

Consumers want their commitment to be acknowledged and rewarded in ways that complement their lives and satisfy their current needs.

And since the majority of banking customers in the GCC region are millennials, they demand personalised involvement, prompt responses to requests and real-time access to information and services.

To build customer trust and enhance the customer experience, banks should be able to fully understand, predict and target individual customer behaviour.

In other words, they must embrace “bank-wide” loyalty by integrating their loyalty programme into their core operations.

The age of first-class loyalty has arrived

Banks are being pushed to rethink their business models for the first time in decades, resulting in a steady shift from financial service providers to lifestyle enablers.

In the current environment of rising competition and economic and geopolitical uncertainties, it is vital for banks in the GCC region wishing to retain or attract customers to offer them a reason to stay that is more substantial than “points-based” loyalty.

They must provide “first-class” loyalty. First-class loyalty requires a comprehensive view of customers’ engagement with the bank across all touchpoints.

With this level of visibility, banks can offer consumers relevant products from across their portfolio.

However, although banks now invest in sophisticated analytics, they may not be considering the level of engagement that data from bank-wide loyalty systems may generate.

A first-class loyalty programme is data-driven and engagement-based, making it easier to analyse consumer behaviour and uncover actionable insights.

Personalisation is well-received by consumers. A recent study by Insider Intelligence found that 73 per cent of consumers expect brands to understand their specific needs and expectations.

Demonstrating that you understand your customers and their unique habits and needs can go a long way in ensuring the success of your loyalty programme.

For instance, today’s consumers are socially conscious, according to research by Capillary Technologies, and many millennials in the Middle East and North Africa (Mena) region prefer socially responsible brands. They are driving the growth of socially and ecologically responsible products and services.

To motivate customers to make a positive impact on the world, banks must provide options for sustainable rewards as part of their first-class loyalty proposition.

Separately, a 2022 study by Pymnts.com highlights that half of the millennials are convenience seekers, while one-third seek financial well-being.

As a result, this influential group are likely to drive future demand for super apps.

With the advent of open finance and open data, banks can develop their own super apps to connect with more partners, promote their products and services to a larger audience, and delight their customers with contextual and relevant rewards.

Thankfully, financial institutions that want to upgrade to first-class loyalty need not reinvent the wheel.

The right loyalty partner can enable them to acquire, engage and retain the most profitable, yet demanding customers.

Priyanka Lakhani is senior vice president of EMEA commercial at Collinson