By Jessica Duncan, Senior Director of Insights

It is often said that customer retention is cheaper than customer attraction. In today’s volatile financial landscape it’s fair to assume institutions are doubling down on customer loyalty and retention.

The current financial services marketplace offers consumers a variety of product options, the technology to seamlessly open new accounts, and highly favorable deposit rates. Implementing relationship-based incentives or reward programs are not new loyalty practices, but these tactics are growing in popularity as financial institutions work to make (or keep) account relationships “sticky” across deposit and lending lines of business. In this Commentary, we feature notable examples of relationship-reward programs and products designed to provide greater benefits to engender deeper customer relationships.

Bank of America Preferred Rewards
Bank of America has offered a comprehensive incentive program, Preferred Rewards, for over a decade. The five-tiered program extends discounts and perks across most products/services, including investments perks for members of the highest tier, Diamond. Increased credit card earn rates, savings rate boosters, reduced origination fees on home loans, and discounted auto loan rates are just a few of the available benefits members can utilize. Customers with $20,000 or more in combined balances at Bank of America can become an entry-level Gold member, earning better benefits as their total balances increase.

The appeal of Preferred Rewards is twofold: the sheer variety of perks and discounts offered and the availability to a broad swath of customers (not necessarily limited to a higher net worth audience). The success of the program can also be attributed to Bank of America’s considerable and consistent marketing attention and investment. For example, Bank of America regularly triggers emails to encourage qualifying customers to enroll and take advantage of the benefits available through the program.

Plus, the marketing engagement that continues after program adoption includes best-in-class practices, like an official onboarding period and various milestone campaigns (e.g., members’ program anniversaries). In addition, marketing such as snapshot emails that summarize and track benefits keep the program top of mind for customers,

Credit Card Offer With Deposit Ties
Another trend Competiscan is monitoring involves credit card value propositions that offer deeper rewards if customers also have a deposit account at the institution. Typically, the credit card’s earning rate is increased if an individual has an active checking account. Here is a quick look at some of the available product offerings.

Fintech SoFi provides a good example of a linked credit card and deposit option with its SoFi Credit Card and its SoFi Checking and Savings Account. Since obtaining its bank charter in 2022, SoFi has worked to gain primary banking relationships. One of the methods SoFi has implemented is to connect its main deposit account to the introductory credit card offer. To earn an unlimited 3% cash back for the first 12 months on the SoFi Credit Card, cardholders must maintain a qualifying Direct Deposit every month with SoFi Checking and Savings. Otherwise, the credit card has a standard earning rate of 2% unlimited cash back.

Apple’s New High-Yield Savings
Apple and Goldman Sachs likely had loyalty and retention in mind when they developed their latest product, the Apple Savings account. The high-yield account currently offers 4.15% APY and is available only to Apple Card users. In a press release for the product launch, Apple’s Vice President of Apple Pay and Apple Wallet Jennifer Bailey stated, “Our goal is to build tools that help users lead healthier financial lives, and building Savings into Apple Card in Wallet enables them to spend, send, and save Daily Cash directly and seamlessly — all from one place.”

The Savings account is essentially a benefit of the credit card and has been incorporated into the credit card’s value proposition. Recent messaging (see examples below) illustrates how strongly Apple is working to differentiate its products in the marketplace:

-If your credit card isn’t Apple Card, you’re likely putting up with too many fees and confusing reward systems.

-Apple Card gives you unlimited cash back on every purchase that you can choose to grow over time in a high-yield Savings account.

-Apple Card gives you valuable benefits without annual fees. In fact, Apple Card and Savings have no fees and no minimums at all.

-Forget confusing banking apps and outdated interfaces. You can access your Savings within Apple Card inside the Wallet app.

-At a single glance, you can see how much money you have accumulated in your high-yield Savings account. And, when you need more cash, you can move money from Savings to Apple Cash instantly or to your linked bank account.

In closing, with the abundance of choices consumers have for their banking needs, loyalty is a critical component of a financial institution’s success. Relationship-based benefits can make a product or institution look more attractive in the long-term, but so can other business practices like consistent engagement, improvement of services, and a continued effort to understand and meet customers’ needs.

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