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Gone are the days of building relationships with customers during their visits to bank branches. In the era of digitalisation of services and payments, loyalty cards are also giving way to a digital currency of trust.

Building modern loyalty requires taking action that goes beyond the standard schemes. There's also no room for sentiment — either value is delivered on customers' terms, or there's a risk of them leaving.

Marriage of business and technology

Fintechs and neobanks initiated the technology race. By skillfully taking advantage of the Covid-19 situation and a growing tendency for using mobile services, they have offered their customers with a range of flexible solutions available at their fingertips, or rather on click.

The financial industry has realised fairly quickly that it would lose its privileged position as long as it did not join this race. Such move, however, requires a willingness to break with the strategies of a bygone era and greater openness, also in terms of cooperation and information-sharing. Nevertheless, the game is worth the candle, or rather the loyalty and customers’ engagement are worth taking the leap.

Without collaboration, it's very easy to lose ground to more flexible, more digitised competitors. This dependency was also quickly noticed by super apps’ providers — by creating a digital marketplace in a single app, they provide customers with an ecosystem of services related to their hobbies or lifestyles.

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Financial offers intertwined with discounts on weekend trips, along with other features, may be invaluable from the customer's perspective. In one place, they get answers to their problems (including those yet to appear) as well as to their needs, so they have no need to seek other suppliers. Thanks to personalisation, customers are also not getting overwhelmed by a multitude of offers, but are able to pick up only those that can actually add value.

Third-party companies also benefit from this, as the digital marketplace provides them with cost-effective access to a huge customer base, already divided into individual segments. All this makes it even easier to reach customers with tailored offers.

Of course, the bank also benefits from that: thanks to the holistic approach, it not only increases the chances of cross-selling but above all provides customers with unique values that cement their relationship with the bank.

In the beginning, there is data

Data is fuel for personalisation. But to be useful, it needs to be properly classified and processed, with the right conclusions drawn.

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This whole process goes hand in hand with highly advanced technology, the use of which is no longer a curiosity, but a necessity.

For example, each customer's online activity, purchase or payment is a kind of a fingerprint they leave behind. The skillful analysis of these fingerprints allows the banks to create a full picture of the customer — including their needs, purchase preferences and plans. However, the growing volume of data requires financial institutions to use digital helpers, which in this case are mechanisms based on artificial intelligence (AI) or machine learning (ML).

Application of AI to a range of processes — from improvements in communication through chat bots, to robo-advisory, or credit scoring — strengthens its role as one of the key technologies used by banks. The OECD Business and Finance Outlook 2021: AI in Business and Finance report states that global spending on artificial intelligence will double, growing from $50.1 billion in 2020 to over $110 billion in 2024.

The role of AI is also invaluable in the process of customer segmentation, as it allows to find relationships and dependencies marginalised in the standard approach, which assumes division based mainly on assets or demographics. Enriching the segmentation of behavioural factors allows banks to become a companion in daily lives of customers, based on their preferences.

ML, in turn, drives real-time predictions. Mechanisms based on this technology are not any kind of a crystal ball, however, i.e. they will not answer questions about the future with 100 per cent certainty. ML allows instead to formulate highly probable forecasts in real time, based on the analysis of various scenarios, rather than on what-if questions.

Getting ahead of tomorrow

In building modern loyalty, tomorrow can really start today, but it requires programme providers to be ready to implement solutions that seemed to be futuristic visions only a moment ago.

In building modern loyalty, tomorrow can really start today, but it requires programme providers to be ready to implement solutions that seemed to be futuristic visions only a moment ago.

- Justyna Piotrowicz, Business Consultant at Comarch

Not just the digitisation of processes or payments is becoming a fact, but also the digitisation of the whole world around us is already in full swing. The metaverse has become a particularly hot topic recently. Although there are at least a few visions or assumptions on how this space is supposed to work, it’s been well summed up by Matthew Ball: “It's about being within the computer rather than accessing the computer.”

In a nutshell, the metaverse — about which there has been a lot of fuss in the context of Facebook's rebranding — is a new version of the internet made up of a vast number of interconnected 3D virtual spaces in which, via modern hardware (such as VR goggles, AR glasses, or hepatic gloves), users can interact with the computer-generated environment and other users, or create new content.

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Before we are able to taste or smell via the internet, however (and it is supposed to be possible already in 2030!), it’s worth to take a closer look at how this trend affects loyalty.

William Gee, Partner at PwC Hong Kong, noted that “metaverse offers organisations new opportunities to create value through innovative business models as well as new ways to engage with customers and communities”.

By supporting new immersive experiences and ways to connect brands with customers, metaverse can be a good place to create highly advanced, unique customer experiences, also in the financial industry. The future may bring fully digital branches, and the use of AR or VR may enrich mobile banking with the visualisation of a wider range of data, for which smartphones or computers had not been created.

Importantly, it represents the intersection of human and digital experiences. By visiting a branch in person (well, a digital person), it becomes possible, for example, to interact with a bank advisor, which — even with increasingly sophisticated chat bots — is an important point in building relationships and getting to know the customer.

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An indispensable concept that functions alongside metaverse, is a non-fungible token (NFT). Each of these tokens is of unique value, which allows it to serve as proof of authenticity. This relationship is already used by some brands and marketplaces (e.g. Burberry and Alibaba Group). The uniqueness translates into the possibility of using NFT to create a community of superfans, which is useful not only in whisper marketing, but also in modernising loyalty programmes. By offering NFT, it is possible to identify key high-value customers: the most engaged, loyal ones and those willing to spend more money on brand products.

The dangers of carelessness

While both metaverse and NFT are trends worth watching, this cannot be done without a dose of criticism.

Some of the most controversial aspects are the environmental and ecological issues. Most of the NFT is stored in the Ethereum blockchain, where the energy needed for only one transaction is capable to power all the appliances in an average US apartment for about 8.5 days.

Staying with the issue of sustainability, ESG-related activities can also influence the development of modern loyalty programmes. According to the PwC research, 62 per cent of older millennials (33–36 years old) are more likely to choose products with transparent origin, and the younger group (23–26 years old) agree with this statement in 59 per cent of the answers. By offering solutions that are based on sustainable development, financial institutions gain a powerful advantage in building unique relationships with their customers.

The art of choice

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With an explosion of new technologies, trends and solutions, modernising the loyalty approach may be as necessary as it is costly. Juggling priorities and tight budgets, especially in dynamically changing circumstances, requires the multiple factor analysis. Therefore, the key foundation for redefining loyalty programmes is choosing the right tool that will not only allow banks and insurers to easily create user-oriented programmes, provide support for new technologies, and personalise offers but also support truly omnichannel communication with the customer.

And while the future will bring new questions along with the changes, choosing the right solution will allow the financial industry to respond to these, and to be prepared for the challenges that tomorrow may bring.

The writer is a Business Consultant at Comarch

This content comes from Reach by Gulf News, which is the branded content team of GN Media.