The past 19 months have been a game-changer for the financial industry, with social distancing and stay-at-home orders driving unprecedented numbers of consumers to bank digitally. Sixty-four percent of Americans used some form of digital banking this year, with 80% preferring it to visiting a brick-and-mortar establishment.
More financial institutions (FIs) than ever are deploying digital banking options to satisfy customer demand for remote offerings, which means consumers have more choices than ever when selecting FIs. Some might find digital-native FinTechs appealing, while others prefer traditional banks with universal name recognition, prompting many credit unions (CUs) to rely on loyalty and rewards programs to attract and retain members.
“We’ve offered loyalty rewards for many years through our consumer and business credit cards,” said Melissa Thomas, senior vice president of payments and operations for Jacksonville, Florida-based VyStar Credit Union. “And we do find that members do like that ability … to have rewards points that they could utilize for various purposes, such as travel, merchandise, giving to charities or gift cards.”
Providing tangible rewards is just half the equation, however. Thomas told PYMNTS during a recent interview that the CU drives member loyalty by offering rewards programs and cultivating relationships with members through their innovative services.
Cash Rewards to Incentivize Member Loyalty
Providing cash rewards programs is the first pillar of member retention for many CUs and other FIs. These programs typically revolve around offering monetary rewards for consumers who use FIs’ services, but VyStar found that personalizing rewards based on members’ locations and interests allowed it to craft a more targeted and enriching experience.
“We offer transaction-based cash rewards and merchant-funded rewards, where members can set up GPS locations and can find rewards at merchants closest to where they’re located,” Thomas said. “We also have a merchant-funded mall for our loyalty rewards, where, as members are using their credit cards, they can go to a digital mall that gives them the ability to earn additional cash rewards.”
Flexibility is the name of the game when it comes to rewards program success, however. Thomas explained that members desire the ability to earn cash rewards in a way that suits them, with some customers wanting the money immediately and others wanting to squirrel it away for a rainy day.
“For our cash back credit card, they can redeem their cash back on demand,” Thomas said. “They can get it paid out annually if they want to build up their cash back, or, if they want to be able to have that money sent to their checking or savings account or pay their credit cards, they can do that on demand at any time.”
However, simple transactional rewards are not the only way to foster member loyalty, however, and nearly all CUs find that superior customer service can be invaluable to winning over members.
Fostering Loyalty Through Customer Service
Rewards programs are not a silver bullet for member loyalty, and any FI that relies solely on these methods to prevent customer abandonment does so at its own peril. Loyalty must also be earned by providing exceptional customer service, which Thomas said sometimes includes implementing small, member-focused surprises that yield big results.
“We just implemented a system where we pay direct deposits up to two days early,” she said. “We want to assist members any way we can to help them with their financials and being able to offer this benefit, it really makes us stand apart.”
CUs also need to ensure that members believe they are getting the best deal possible with their banking services. Cash rewards can be beneficial, but CUs must also enable members to save money during everyday transactions if they wish to remain competitive with other FIs.
“For our card program and our loyalty program, we don’t charge an annual fee, we don’t expire points and we don’t charge a balance transfer fee,” Thomas said. “We really gained [member] loyalty by having no fees as a selling point.”
Member loyalty can be a fickle thing, and CUs must constantly work to earn and retain it. Rewards programs can go a long way, but maintaining a constant level of value and customer service is another crucial component that can turn casual members into devoted ones.
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