Banks should ditch cash to boost customer loyalty (Part 1)
The cashless society is not a new concept.
Debate about the future of cash has raged since the introduction of magnetic strip cards decades ago but in the age of the digital customer, banks are struggling to engage and retain customers, with millennials and generation Z proving the most challenging. Could ditching cash be the route to customer loyalty for the modern bank? Collinson Group research suggests yes and that it is a win for both customer and bank.
We polled 2,500 loyalty programme members across the globe and found that they used a mobile wallet (such as ApplePay or Android Pay) an average of seven times a month – this figure was as high as 10 times per month in the US. Our research also found that 71% favour brands that are early adopters of technology. Despite consumer interest in these services, a number of major banks have yet to announce plans to support services such as Android Pay, including Barclays, Natwest and Santander.
Convenience and reward
Mobile phones are an integral part of everyone’s lives – from capturing and sharing memories, to booking travel, grocery shopping and keeping up with news. There are now more mobile phones on the planet than people. With apps providing information on everything from how we eat, exercise and source entertainment, to how we sleep, it is natural for people to use their phones to complete financial transactions.
Using mobile as a payment technology makes customers’ lives easier and is more efficient. No more fumbling around for cash or trying to remember different pins – just a simple wave of a mobile device or a biometric scan and the transaction is complete. By making mobile payments even more accessible, banks will generate positive brand association and will build loyalty with their customers.
If they don’t they risk missing out on revenue. Research from financial analyst firm, Lafferty, reveals that non-bank players dominate the US mobile payments market, led by initiatives such as Walmart Pay, Abra and Samsung Pay. They also found that P2P transactions are gaining more popularity in the US, when compared to other countries. About $7.5 billion was transferred using Venmo, one of the most popular P2P money transfer services, during 2015.
Many customers only use banking services a few times a month but are likely to make contactless payments several times a day. Unlike a credit card, a mobile payment also creates the opportunity to deliver a relevant offer, reward or additional service to the customer. For example, a reminder about a balance and the opportunity to transfer more money; a chance to earn loyalty points in the future or to use those points to pay for purchases. These are powerful opportunities for banks to offer greater convenience, relevance, timeliness and rewards to customers.
Organisations are recognising the convergence between payments and loyalty, with First Data acquiring Perka (a loyalty platform) and Clover (a point of sale solution), and Visa investing in Square, so that it can offer a closed loop digital payment and retail system.