Whether it’s acquisition or retention, loyalty is becoming harder to pin down in banking.
In the U.S., inertia still defines how most people interact with their banks. The average adult keeps the same checking account for nearly
17 years, with many citing the only reason they haven’t switched because “it’s the account they’ve always had.” This kind of passive loyalty creates a major hurdle for banks trying to attract new customers.
Across the Atlantic, things are starting to shift. That same inertia once defined the UK market—but not anymore. In 2024 alone, more than
a million people switched banks, motivated by better digital experiences, richer rewards, and more meaningful value. The UK’s
seven-day switching service has made it easier than ever to move accounts, and younger customers are especially likely to make the leap.
While U.S. banks are struggling to acquire, UK banks are working hard to hold on. But regardless of which side of the equation a bank sits on, the message is clear: banks need to give people a reason to choose them—and keep choosing them—every day.
Customer engagement programmes are an impactful solution—but most fall short
Customer engagement programmes are a natural solution to banks’ challenges retaining and acquiring customers. The problem? Most traditional programmes miss the mark, offering clunky and outdated experiences. In some cases, customers don’t even know
these benefits or rewards exist. And when they do, they may find it too confusing, cumbersome, or not worth the effort.
Another common issue is that the rewards just don’t feel valuable enough. In fact,
58% of Millennials have abandoned loyalty programmes because the rewards didn’t feel relevant. The challenge is that many banks struggle to find the right balance of a cost-efficient programme that can provide valuable rewards for customers. Another big
hurdle? A lack of personalisation. Nearly
one third of cardholders now say personalised rewards are a must-have. Yet, many banks offer one-size-fits-all programmes that don’t reflect customers’ individual needs, preferences, or spending habits.
Behavioural rewards: The modern loyalty strategy
Banks looking to modernise their customer engagement programmes should consider behavioural rewards. This type of programme works by motivating customers to perform specific actions, big or small. For example, banks can offer rewards for switching accounts,
using a new card, setting up direct deposit, enabling alerts, logging into a banking app, and more. The rewards or benefits can range in scope to match the action, whether that’s points for a first login or high-value incentives like premium electronics or
travel vouchers for bigger commitments like opening a new account or a large deposit. Banks can even offer tiered incentives that grow with usage.
These programmes are highly effective at turning simple actions into lasting habits, helping integrate the account into a customer’s everyday financial routine and encourage more engagement over time. This can be more effective than the usual one-time sign-up
bonuses banks offer. Sure, those might get someone in the door, but they may just as easily go inactive or disappear altogether once a better offer comes along.
Behavioural rewards are one of the most effective ways for banks to modernise their loyalty strategy—helping attract new customers and deepen relationships with the ones they already have.
Why personalisation matters more than ever
Personalisation is critical today and should be part of a bank’s behavioural rewards strategy. Banks can achieve this by leveraging their customer data and behavioural insights to deliver personalised and dynamic reward experiences. These programmes should
be dynamic and adapt based on customer behaviour and evolving preferences to stay relevant over time. The reality is that static rewards will only lose their appeal. The most successful programmes should continuously adjust their rewards catalogue and even
their communication to match changing customer needs. Lifestyle-aligned rewards are also important to meet customers’ preferences. For example, banks can offer airline miles to travellers, restaurant cashback to foodies, wellness discounts to fitness enthusiasts,
or geo-targeted offers like a coffee shop discount after visiting a bookstore. These lifestyle-aligned awards will help encourage greater programme engagement.
Putting behavioural rewards into action
There are several factors to consider when implementing behaviour-based rewards, which include giving careful consideration to both the technical and operational factors, especially with personalisation. Banks have the data they need but must ensure they have
customer consent to tap into existing transactional and behavioural insights before using them to create dynamic rewards. This gives customers control and choice over their data while helping banks deliver the personalisation they need for their reward programme
to be successful. Because at the end of the day, success depends on how well the solution integrates with existing systems and if it offers a flexible rewards catalogue that can be personalised and tiered in real time.
Winning—and keeping—today’s banking customers
Banking is only going to get more competitive as more players enter the space and compete for acquisition and loyalty.
To stay ahead, banks have to give their customers compelling reasons to choose—and keep using—their financial products and services. Loyalty is one lever they can pull, and behavioural rewards can be that competitive differentiator to help their program
stand out from a sea of others.
