Building Customer Loyalty in Financial Services

A financial services loyalty program is a program a bank, credit union, card issuer, insurer, wealth firm or fintech runs to deepen customer relationships, recognizing customers for the breadth, tenure and health of their relationship with the institution rather than for single transactions alone. Card points, cashback and miles are the familiar version. The broader opportunity is to give customers reasons to bring more of their financial lives to one institution and stay.

Research from Gallup's retail banking studies suggests why depth and trust matter. The figures are older and show associations rather than proof of cause, but they point the same way:

Gallup's revenue and attrition figures come from panel studies run in 2011 and 2014, and its well-being findings from a November 2013 survey, so treat them as direction rather than current benchmarks. The figures compare the most and least engaged groups, which widens the gaps, and the direction can run both ways: customers who already bank mainly with an institution may report higher engagement because of that relationship, not only stay because they are engaged.

One principle runs through this guide: a financial loyalty program should never reward customers into behavior that harms their financial health. Deepening a relationship is a legitimate goal; rewarding unsuitable products, over-borrowing or over-trading is not. Financial services is heavily regulated, and the rules differ by product and line of business, so this guide is general information, not legal advice.

Three things set financial services apart from most loyalty categories.

• Trust carries the relationship. A customer hands an institution their savings, debts and financial data. A rewards program layered over fees the customer did not expect, or over terms that change without notice, can cost more trust than the rewards earn back.
• Card rewards are common. Points, cashback and miles are widespread in cards, so a rate alone is easy to match. In a May 2024 report, the CFPB said it analyzed "several hundred consumer complaints" about credit card rewards and found four recurring themes: "unexpected promotional conditions," "devaluation," "redemption problems" and "revocation." Rewards that are hard to earn or that lose value can damage the relationship they were meant to build.
• The institution can influence financial decisions. A bank or broker can shape how customers borrow, save and invest, so a program has to avoid rewarding behavior that is not in the customer's interest.

The posts on why points alone no longer build financial loyalty and the economics of financial loyalty programs cover card and bank program economics in more depth.

Most financial loyalty programs reward products in isolation: points on the card, a bonus on the checking account, a rate on savings. Customers with several products, longer tenure and regular engagement can be worth more over time, so a program can recognize the whole relationship instead.

Digital adoption needs care. The same Gallup research found that branches drive engagement more than online or mobile channels, and that customers who moved from branch to mobile banking were less engaged, so reward digital use without cutting customers off from people when they need them.

Three design choices make relationship rewards work:

• Define primacy. Decide what counts as a primary relationship, for example direct deposit plus a minimum number of products or active months, and make the definition visible to customers so they know how to qualify. Count only products that are funded and used, keep employee sales incentives separate from customer product-count rewards, and avoid tier rules that push customers to apply for credit they do not need.
• Use tiers customers can reach. Relationship tiers with clear thresholds, such as fee waivers, better rates or service levels, give customers a reason to consolidate. Customers tend to put in more effort as a threshold comes into view (the goal-gradient effect, shown in loyalty programs by Kivetz, Urminsky and Zheng), and once they hold a tier, the prospect of losing its benefits may give them a reason to stay (an application of loss aversion, from Kahneman and Tversky's work). The same effect cuts the other way, since a customer who drops a tier can feel the loss sharply and disengage, so show progress toward the next tier and give notice and a grace period before a customer drops one. The guide to tiered loyalty programs covers setting thresholds.
• Bring the data together. Products often sit in separate systems, so a relationship view needs a single customer record across deposits, cards, loans and investments before rewards can recognize the whole relationship. Because the program will handle customer and transaction data, put any rewards platform through the same vendor due diligence as other providers that touch customer data: security attestations, access controls and how data moves to rewards partners. Brandmovers holds SOC 2 Type II and PCI DSS.

In BLOYL™, Brandmovers' loyalty platform, a primacy definition like this can be set as earning rules by customer segment, behavioral action and time window, within tiered or hybrid structures, with bidirectional CRM and CDP data flows carrying the relationship view into the program.

Relationship rewards have a fairness question built in. Rewards based on balances or product count tend to favor wealthier customers, so check how tiers and offers land across customer groups, and give customers with smaller balances a path to recognition through actions such as regular saving or digital engagement.

Rewards that have been earned but not redeemed are a cost the institution carries until customers use them or they expire, so budget to expected redemption, not to points issued. A high unredeemed share can look like a saving on the books, but it can also mean customers find rewards hard to use, which is one of the redemption problems the CFPB found in rewards complaints. Cutting the value of points already earned to reduce that cost is the devaluation the CFPB's Circular 2024-07 warns credit card issuers against, and a risk for any program, so set expiry and redemption terms at launch and change them only with notice.

The Gallup findings suggest that customers who feel their institution looks out for their financial well-being are more engaged. Gallup did not test whether rewards create that feeling, so treat well-being rewards as a hypothesis to measure against a holdout. A program can make that support concrete by rewarding the actions that improve a customer's position.

• Reward completed actions, not clicks. Points for opening a budgeting tool are easy to collect without changing anything. Rewards for an automatic savings transfer kept for three months, a paid-down balance or an emergency fund that reaches a set amount reward the behavior itself.
• Make education useful. Short, relevant guidance at decision points, such as before a first mortgage or a large purchase, is a better bet than a library of modules customers click through for points, which rewards completion rather than learning.
• Keep the line clear. Reward actions that help the customer, and never tie rewards to borrowing more, carrying a balance or trading more often.
• Use data with consent. Well-being features rely on transaction data, so explain how it is used and keep any sharing within the privacy rules covered under Design Responsibly.

Engagement can also come from budgeting tools, savings features and design rather than rich points; once built, these add no reward cost per customer and fit the goal of improving customers' financial position.

Financial services covers businesses with different products, rules and customer relationships, so the program design changes with each.

Credit unions and community banks can start simply: one or two relationship tiers based on direct deposit and product count, with rewards that fit their budgets, such as fee waivers or rate bonuses. Larger institutions with several lines of business need to decide early whether customers see one program across all of them or separate programs by product. A single program usually means sharing customer data across affiliates, and the affiliate marketing rule under the Fair Credit Reporting Act (12 CFR 1022.21) generally requires notice and a chance to opt out before an affiliate uses certain shared data to market to a customer.

Each line of business funds rewards differently. A card program pays rewards from the revenue the card earns, a deposit program from the margin on the balances it attracts, and either one loses money when the reward cost is higher than the margin earned on the extra balances, products or retention it brings. Debit rewards are harder to fund at larger banks because Regulation II caps debit interchange fees for issuers that, with their affiliates, hold $10 billion or more in assets; banks and credit unions below that size are exempt from the cap (12 CFR 235.3 and 235.5).

In financial services, a points program on its own is easy to copy; a trusted relationship is not. Recognize the whole relationship rather than single products, reward actions that improve customers' financial health, fit the design to each line of business and stay within the rules on rewards, data, fair lending and insurance. Measured against a holdout, a program built that way shows whether it is deepening relationships and keeping the trust they depend on.