Bank of America and Barclays both recently updated parts of their loyalty programs amid signs consumers want a less transactional connection with the rewards they earn.
BofA revamped its Customized Cash Rewards credit to boost consumer experiences and gas station rewards, while Barclays expanded its co-branded loyalty program with JetBlue. The banks are both focused on improving how loyalty programs are accessed and used in digital channels, which consumers use at all times for multiple purposes.
"With everyone walking around with their phones, that's become an attractive channel for us," said Chris Curtin, senior vice president and head of digital and social rewards at Bank of America.
Digital channels are an opportunity for banks and other financial institutions to improve their connections with consumers, according to
Arizent's research found that banks' support of the digital channels that appeal to consumers is the second most important factor in fostering an emotional connection with them. Positive word of mouth — another byproduct of a strong emotional connection to a brand — is the top factor.
At the same time, banks score well with consumers in digital performance, with 43% saying banks provide better security than other industries such as general technology (20%) and health care (10%). Having a secure app or website is a head start to other features such as new products or incentives.
"Financial institutions are adept at many aspects of behavioral interactions and intellectual benefits," Arizent's research noted. "The biggest opportunity for banks in these areas involves enhancing loyalty and rewards strategies."
Arizent and the creative experience agency Monigle surveyed 5,500 consumers in March 2023. On a scale of -20 to 80, respondents gave banks a rating of about 20 points for loyalty rewards, behind challenger banks at 30 points and credit unions with 40 points.
"Where banks and their peers struggle the most is in fulfilling an emotional experience," the research report said.
That places financial institutions at a disadvantage, since the respondents listed loyalty as the seventh-most important emotional connection factor with consumers in 2023, up from 11th in 2022's survey. The survey ranked 18 factors in forming emotional connections between companies and consumers. Customer service ranked first in both 2022 and 2023.
"Promotional offers are key to attracting people to secondary financial institutions, while monetary incentives and rewards are a significant contributor to a positive intellectual experience," the report said. "Investing in this area should reap benefits for both finding and keeping customers."
Getting electric
BofA is looking for opportunities to add experiences, rewards and other incentives to digital and mobile channels. To this end, the bank has revamped its Customized Cash Rewards credit card, enabling consumer and small-business cardholders to earn 3% cash back at electric vehicle charging stations as part of the bank's expansion into car fueling rewards. Other moves include adding 3% cash back for cable, streaming, internet and phone plans in general shopping.
Since digital venues such as mobile apps enable real-time interaction, that's where the bank can produce benefits and experience that connect the bank's brand to its consumers, according to Curtin.
"Digital is not only the door, but it's the front door," Curtin said. "The best companies in the world at loyalty are looking at it that way."
Bank of America's
"Whether it's merchandise or personal services, consumers benchmark you to their best experiences," Curtin said, adding that the retention rate for the Customized Cash Rewards card is 98%.
Taking flight
Barclays and JetBlue, which have partnered on co-branded incentive marketing programs for seven years, this summer launched a new loyalty program that boosted points offered for participating restaurants and supermarkets, along with statement credits and the ability to jump to the higher "Mosaic" customer status faster. It's a mix of monetary incentives and experiences, designed to build an emotional connection to consumers along with an offer to save costs.
The bank-airline partnership has drawn accolades from
"With travel demand being so high, things like getting a seat upgrade or being able to board a plane earlier are a way to connect with consumers," said Doug Villone, head of cards and partnerships at Barclays' U.S. consumer bank. "There are also more ways to make the loyalty 'currency' more flexible and more usable."
Barclays in late August issued internal research that found incentives such as rewards will be necessary to take advantage of increased demand for travel in the face of higher prices.
The bank's research found that 50% of consumers say inflation made them them less likely to travel during the the past five years, while also stating a preference for incentives. Seventy-six percent of loyalty and reward program members say they "couldn't imagine" traveling without incentives. And 41% of Barclays cardholders use their cards strategically to optimize their rewards. Perks and status also matter; this suggests that consumers are interested in experiences or a personal connection with the bank, airline or both. Fifty-four percent of travelers cite perks as the top reason to use a travel loyalty program, while 51% listed improved travel experiences as the top reason, according to Barclays.
Seventy-four percent of millennials say earning the most rewards is more important than getting the lowest price on purchases, while 46% of Gen Z, 32% of Gen X and 12% of boomers have the same view. Barclays surveyed 1,000 adult travelers in May.
The consumer mix of wanting experiences or rewards while still being concerned about inflation is not unusual, according to Villone.
"More than one thing can be true at the same time," Villone said. "Because of inflation, people are looking to take trips at a lower cost. But people are also putting a premium on experiences and access to experiences."
