In today’s fast-moving world, banks face a loyalty crisis as rewards no longer suffice. Customers now expect relevance, trust and meaningful connection. True loyalty is built on value, relationships and consistency.
Loyalty used to be simple: offer a reward, provide good service and customers stay. Today, that approach no longer works. For many banks and financial services, customer loyalty is under pressure.
Reward programmes—points, cashback and perks—once formed the backbone of loyalty, but research shows they no longer drive meaningful engagement. This shift affects households, workers and small business owners, all of whom rely on strong banking relationships. When loyalty falters, everyone is impacted.
The loyalty landscape has shifted
Banks long relied on loyalty programmes, account perks and credit points when customers had fewer choices and slower digital engagement. Today, customers participate in multiple programmes and expect more than generic offers—they want services aligned with their real- life values and needs.
Personalised, meaningful engagement drives retention
Generic rewards can be ineffective if they don’t align with customer behaviour. For example, someone who rarely uses a credit card but pays bills regularly gains little from card-based rewards. Loyalty is about consistent, thoughtful treatment. Banks that understand households, offer timely support, and deliver reliable service, earn loyalty more effectively than those relying solely on points. Emotional connection matters.
Modern loyalty outperforms traditional rewards in driving retention
Figure 1. Rewards versus modern loyalty in banking
| Traditional Rewards Strategy | How It Works | Modern Loyalty Approach |
|---|---|---|
| Give points / cashback for usage | Customer uses card, earns a reward | Recognise and reward meaningful behaviour (saving, regular deposits, referrals) |
| One-size-fits-all offers | All customers get the same reward | Personalised offers based on data and life stage |
| Focus on transaction volume | Reward those who spend more | Focus on relationship value, trust and retention |
| Rewards catalogue lists | Customers pick a reward after spending | Experience, convenience and meaningful service are built in proactively |
| Rewards only after the fact | Customer earns a reward, then may leave | Ongoing engagement, proactive support, personalised journey |
Source: BankQuality
Banks must focus on trust and relationship value
For households managing budgets and planning for the future, loyalty comes from banks that understand their needs, provide transparent fees, and adapt services as life changes. Workers with fluctuating incomes or saving goals value flexible, supportive solutions. Small business owners expect partners who understand cash flow patterns, seasonal demands and risk management.
What should banks do instead?
Banks must leverage data to understand customer behaviour, life stage and financial needs. They should recognise loyal customers who may not spend the most but engage consistently over time.
The banking industry is facing a loyalty crisis. Rewards alone are no longer sufficient for banks to earn lasting customer loyalty. For households, workers, small business owners and investors alike, loyalty depends on more than points—it requires understanding, trust and consistent value. For insights on how banking quality is changing, how rewards fall short, and how to pick the right banking partner for the long term, visit BankQuality.