Customer Retention in the Digital Age: How Tech Helps Banks Stay Competitive

Fintechs are shaking up the financial services industry, leaving traditional banks struggling to keep pace. Challengers like Monzo and Revolut are leading the race, and some experts believe they could even overtake established banks.

This is not new news; Deloitte warned us back in 2014 that challengers will erode the competitive advantages of traditional banks. Revolut’s CEO even predicted the end of conventional banks within the next five years. But they have managed to hold their ground so far. The question is – for how long?

To remain relevant, financial institutions must adapt and innovate. The digital era has transformed how customers interact with financial services, and banks need to adopt a customer-centric approach.

Gaining ground in the financial race depends on how banks respond to 3 key challenges. And many brands are turning to tech to get a headstart.

The biggest challenges for traditional finance businesses

Challenge 1: Changing consumer expectations

In 2023, nearly a quarter of Brits have a digital-only bank account, compared to only 9% in 2019. Thousands of new customers are opening digital accounts each month, and these figures continue to grow. Why? Because they’re offering a great customer experience – one that meets consumer expectations.

Challenger banks have raised the bar for customer experience. Customers now expect a digital-first, engaging, and rewarding journey, similar to what they receive from other industries, like retail. But traditional banking falls short of meeting these expectations.

Take the typical banking user journey. The process of opening a new account with a digital bank takes a few clicks. High-street banks have a longer and more complicated process, requiring customers to visit a branch with identification and a utility bill.

Customers also expect to be treated as individuals. They want personalised services catered to their specific needs. According to KPMG, banks need to tap into the wealth of data available today and tailor services to individuals. Users should receive an experience that feels “like they are being treated as one”.

Challenge 2: Digitalisation

In the digital era, more and more customers expect to perform all banking activities via their mobile devices.

Most traditional banks have managed to keep up with tech-savvy customers by introducing digital assets like mobile banking. But this is the bare minimum. Thanks to the pandemic, we’re probably a decade ahead in financial technology – like contactless payments and digital wallets. Financial companies need to increasingly digitise their offerings. However, many financial institutions are held back by legacy systems.

Legacy technology stacks block companies from keeping up with changing consumer needs. Many companies also struggle with silos, which means data ends up trapped and fragmented throughout a business. Financial companies need to have the right technologies in place to manage digital data and start using it.

Challenge 3: Engagement

In the digital age, customers want to be engaged in the banking process beyond just making transactions. The challenge for traditional banks is to keep their customers engaged and satisfied, while competing with new digital-first players.

To provide a personalised and engaging customer experience, banks need access to insightful data. This is often where traditional companies struggle.

Challenger banks have also been able to keep customer engagement high by embracing innovative technologies and concepts, such as AI, machine learning, and gamification, which help create more engaging experiences.

Solution: Enhancing the customer experience with loyalty tech

Retention, acquisition, and loyalty are strongly influenced by customer experience. To prevent customer switching, businesses are increasing user satisfaction with loyalty technology.

With the right technology, financial institutions can offer personalised insights that help customers make better financial decisions. Doing so can also build long-term, consultative relationships with customers rather than just transactional ones. If a brand doesn’t provide personalised services, customers will switch to one that does.

Secondly, financial businesses that rely on legacy systems must embrace digital transformation and look for ways to integrate new digital systems into their existing data sources and tech stacks.

Finally, it’s essential to embrace technologies that help increase customer engagement. The financial sector might not seem like an obvious candidate for gamification, having traditionally been an unengaging, transactional-only field. But banks are now adopting gamification techniques in order to stay relevant with digitally-engaged consumers.

By introducing game-like features, financial services can create a more immersive experience for their customers. Rewards, badges, and challenges motivate customers to achieve financial goals. These enhancements can also help customers become more financially literate by engaging them in content that’s delivered in an interactive and fun way.

Case Study: SKB Bank

SKB bank, a leading bank in Eastern Europe and part of the OTP Group, recently implemented a gamified rewards program to increase customer engagement. The pilot program was designed to gamify the digital banking experience and uses rewards to build brand-customer relationships.

Using White Label Loyalty’s event-based technology, the solution delivered rewards to incentivise desired behaviours and actions. To maximise engagement, the banking group introduced a gamified tiered rewards structure with ‘challenges’ for users to complete.

The results of the pilot showcased the power of gamification in not only engaging customers but also driving significant business results. SKB Bank saw a 6.7x growth in new customers via referrals, a 60% engagement rate, and a 27% increase in credit card usage as a result of their task-based rewards structure.

The successful pilot has led to the planning of a full-scale, long-term rewards program.

Conclusion

Keeping customers loyal is ultimately a relationship business. Brands can build relationships by meeting consumer expectations and offering an enhanced experience.

Today’s consumers expect more from financial services companies than just deposits and withdrawals.

The banking industry is realising what users want: a digital-first, personalised, and engaging experience.

Loyalty tech is helping businesses collect data, personalise offerings and gamify a user’s experience. Gamification can better engage customers and motivate them to keep choosing a brand.

Some experts believe that only a few global players will succeed in the finance industry. However, when the right strategies and technologies are implemented, all financial services companies can still compete to win.