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In an era where the financial services landscape is evolving at an unprecedented pace, the traditional roles of the bank are undergoing what, for the industry, would be considered a radical transformation. Banking rewards and incentives have evolved from mere perks to essential loyalty drivers. Financial institutions are rethinking their banking incentives programs to offer more personalized, data-driven, and digital bank rewards that align with customer needs.
With Chase Bank’s foray into media platforms for advertisers, their existing successful CLO offering, and their travel platform, the time for incentive and reward to take center stage in the banking and financial services sector is now.
As the industry embraces AI-powered personalization and seamless digital experiences, traditional banking loyalty programs are no longer enough. Customers seek tailored rewards, flexible redemption options, and greater engagement. This blog explores why financial institutions incentives should be a priority in 2025 and how banks can leverage them for sustained growth.
Chase’s offering is understandable, given the size of their audience (80 million customers!). Still, their innovative approach and intelligent acquisitions highlight the growing importance of banking rewards programs as a customer engagement and loyalty driver. By integrating banking incentives programs into their ecosystem, financial institutions can move beyond transactions, offering personalized rewards and positioning themselves as next-generation super-apps.
The recent article by PYMNTS got me thinking about the intrinsic value that banking rewards and incentives bring not just to banks but also to their customers and merchants. This also presents an opportunity for European banks to look more closely at what Chase is doing and start to develop their own robust banking loyalty programs.
Why is this important? With daily banking considered a loss leader for most financial institutions, investing in a compelling customer incentives in banking strategy should be a top priority. Beyond improving retention, banking loyalty programs can drive increased usage, deepen customer relationships, and create sustainable revenue streams.
Deloitte’s recent 2024 banking and capital markets outlook outlined that organic growth for the sector will be modest, forcing financial institutions to “pursue new sources of value in a capital-scarce environment”. The report emphasized that fortifying customer relationships and owning the “sticky” share of wallet should be a priority for strategic planning in banking rewards programs.
Banking incentives programs serve as powerful tools for fostering deeper customer engagement. With retail banking customers spoiled for choice, switching accounts and spreading deposits across multiple institutions has never been easier. To build long-term customer loyalty, banks need a compelling reason for customers to stay and personalized rewards in banking can be a game-changer for that.
A report by Accenture found that “while the majority of banks claim to be customer-centric, less than 15% reward customers for their holistic relationship with a bank.” However, by leveraging banking loyalty programs, financial institutions can cultivate long-term relationships, increase customer advocacy, and drive loyalty. According to the same Accenture study, banks that prioritize customer incentives in banking could also boost revenue from primary banking customers by up to 20%.
Behavioral economics suggests that banking incentives play a pivotal role in shaping consumer behavior. Whether incentivizing savings, promoting responsible spending habits, or encouraging digital banking adoption, a well-designed banking rewards programs can be a catalyst for positive financial behavior change.
Implementing subtle cues and incentives, like nudging techniques and mental accounting, to offer personalized rewards in banking tied to specific economic activities helps build a stronger emotional connection with customers. This fosters trust and engagement, ultimately driving banking loyalty programs to become a long-term differentiator. Additionally, well-executed customer incentives in banking can drive revenue uplift, promote new product adoption, increase the use of a bank’s digital assets, reduce contact center interactions, and improve operational efficiency by encouraging self-service banking.
Banks and merchants share a symbiotic relationship, strengthened by banking rewards programs and customer incentives in banking. Merchants benefit from new customer acquisition, increased customer engagement, and higher spending behavior, driving foot traffic both in-store and online. These partnerships lead to higher transaction volumes and enhance brand visibility, making banking loyalty programs a strategic asset for both banks and retailers.
For banks, increased transaction volumes bring incremental revenue through merchant-funded rewards and loyalty-driven spending. Additionally, access to merchant data allows banks to gain deeper insights into customer purchasing behavior and preferences, enabling personalized rewards in banking that drive further engagement. Many banking incentives programs also create revenue opportunities through merchant-funded promotions and exclusive offers.
For customers, banking rewards programs that have partnered with merchants provide discounts, exclusive deals, and personalized offers, making their purchases more rewarding. This mutual value exchange fosters a win-win scenario, where banks enhance customer retention, merchants boost sales and visibility, and customers receive tangible benefits that strengthen long-term loyalty.
In today’s hyper-connected world, consumers want personalized experiences and expect that their bank will be able to provide the same level of engaging, relevant experience and recommendations they get from Amazon or Netflix regarding customer service and product recommendations. Accenture found that of those banks that do have a program in place, over 60% of banks offer limited rewards, primarily for credit card transactions, having products from two or more categories, or paying monthly for your account.
As a customer, I’m all too aware of the handful of static offers I receive from my banks that aren’t personalized (kids and baby offers for the 40-something child-free professional, anyone?). This lack of personalization can turn customers off, impacting NPS and making them less likely to engage as they feel there isn’t a level of understanding. I often wonder why, when my banks have so much information on where and how I spend my money, they can’t at least serve up something I’m likely to use!
Access to depth and breadth of content and multiple reward mechanisms means a bank can offer a truly personalized experience with offers that will resonate with their customer, whether they would be interested in specific merchant discounts, events, cinema tickets, digital downloads, or a free coffee. It also means they can segment their customers and look at driving behavioral outcomes with higher value rewards made available to customers of higher value to the bank, delivering an ability to cross-sell and up-sell relevant products based on personalization.
Bank of America is an excellent example of this by using customer intelligence to provide personalized collections of deposit and credit products. Its integrated loyalty program has also boosted customer satisfaction, achieving a 99% retention rate. It doubled the number of products held by each customer participating in the scheme based on research analysis of ECB data by Accenture.
Incentive and reward programs generate a treasure trove of data for banks, offering invaluable insights into consumer spending patterns, behaviors, preferences, and sentiment and helping to build a view of the customer that allows for a deeper understanding and the ability to segment based on a variety of metrics, including their value. Having a clear picture of the customer as an individual enables true personalization and the ability to effectively up-sell and cross-sell their product portfolio.
Not only that, but it’s also a way for banks to identify trends and anticipate customer needs. It allows banks to make data-driven decisions about product development, marketing campaigns, and other customer engagement initiatives, delivering cost savings and driving operational efficiency.
What Chase has built delivers value across the board for their customers, merchants, advertisers, and most importantly, their customers, who will enjoy a wealth of personalized benefits and rewards designed with them in mind.
The future of the banking and financial industry is all about transforming their banking rewards programs with deeper personalization, smarter technology, and enhanced customer engagement. Banks that prioritize customer incentives in banking will not only strengthen relationships but also gain a competitive edge in an increasingly digital landscape.
As financial institutions navigate evolving customer expectations, digital bank rewards and loyalty-driven strategies will define success in 2025. Investing in a robust banking loyalty program today means building long-term customer relationships and ensuring sustained profitability. Now is the time to rethink the approach to rewards and incentives because the future of banking loyalty is already here.
January 16, 2025 | 4 Min Read
Banks must rethink their rewards and incentives programs to