PricewaterhouseCoopers LLP published a paper “The New Digital Tipping Point” in late 2011. The report can be found here, and a blog post written by Chris Skinner providing insight to the post is worth a read. Many thanks to trusted colleague Richard Sanders to alerting me to this study.

PwC based the research on interviews with about 3,000 retail banking customers from a range of segments, and included samples from developing markets (China, India, Emirates) as well as developed markets (Canada, France, Poland).

The backdrop for the report is the residual impact of the global recession on the relationships consumers have with their banks. While consumers evidence less trust than ever for their bank, they also have changing expectations for how banking services (both offline and online) should be delivered.

In this case, “changing” translates to “greater expectations” and the report focuses on how the Millennial generation, finally arriving at a point where they will select their primary bank for the foreseeable future, are influenced by the way retailers are using digital strategies to engage and delight them online and in-store.

With this in mind, the PwC report puts forth the premise that there is a renewed opportunity for “banks to create shareholder value is through a focus on “relationship primacy” (being the preferred and main bank for a customer).” Why is relationship primacy so important?

1. According to PwC, it drives increased share of wallet, leading to higher revenue from that customer group, and ….
2. Research showed that 81% of Canadian customers surveyed preferred to purchase additional financial service products from their primary banking provider rather than any other source. Results were similar in Mexico 75%, India 77%, China 79% and UK 52%.

The learning is that banks “have them if they want them”. People are predisposed to stay where they are. Switching banks is neither easy nor fun. The question becomes, how can banks employ digital strategies and what should they consist of to engage consumers and seal the deal to retain “relationship primacy”? PwC concluded that banks need to develop digital strategy that goes beyond “building apps” and includes these key points:

1. User experience
2. Mobile devices and networks
3. Social media and collaboration
4. Customer analytics
5. Channel integration

The study found that customers are willing to pay for a new breed of banking services which transform the ordinary into a WOW moment when the information is delivered through a digital channel. These include receiving transaction notifications via via Twitter or Facebook, having availability of spending analysis tools, and receiving relevant third party promotional offers on occasion.

Loyalty was right in the middle of it all, as 65% of those surveyed in UK said they would be willing to pay for loyalty services provided by a bank and “storing loyalty cards and converting points to cash” were in the top 5 services noted by consumers. Consumers in the survey estimated an optimal price of £4.20 per month for loyalty services, a figure translating into additional annual fee income of about £50 per customer.

If banks take the hint and realize that the pot of gold they seek may just be in their own backyard, relationship primacy will be in the spotlight. In that case, data-driven customer strategies will receive even more attention as banks seek to rebuild lost trust, build engagement, and create a better value proposition for their customers.  Just remember that by executing a smart digital strategy and prioritizing relationship primacy, that banks can win not just with Millennials, but also the wider population of “Consumer 2.0″.

In the midst of holiday preparations, you might have missed the Cards and Loyalty Payment Conference held in New York on December 2.  I was able to attend in my capacity as North American Contributing Editor of the Wise Marketer and filed this report with the WiseMarketer.

Source Media’s second annual ‘Cards and Payments’ loyalty conference was held in New York earlier this month, addressing the theme of ‘the intersection of cost management and rewards programme repositioning’, as detailed here by The Wise Marketer’s contributing editor, Bill Hanifin.

The proceedings began with Rob Rosenblatt of Chase Card Services, who presented an overview of Chases’ new flagship rewards programme, ‘Ultimate Rewards’, which is offered on Chase Freedom as well as the new Chase Sapphire and Chase Ink (small business) products. Launched earlier in 2009, Ultimate Rewards was built as a unified platform that would help drive customer engagement while improving operating efficiency and also strengthening the brand.

An expert panel debated cost-per-point reduction strategies, with experts from SunTrust Banks, Merrill Lynch, Wyndham Hotels and US Bank explaining a variety of techniques that can be used to lower cost-per-point while keeping programme members engaged with the brand. The panel concluded that forming strategic partnerships with providers, using redemption targeting campaigns, and fine tuning programme rules should all lead to positive results even in a tough economy.

Crista Dewire and John Kryczka of PriceWaterhouseCoopers offered an in-depth discussion of loyalty programme liability management, outlining the actuarial methods used to project redemption rates and help programme operators manage liability. They pointed out that, while no conclusions have yet been reached on the treatment of loyalty liability within Generally Accepted Accounting Principles (GAAP), another body – the International Financial Reporting Standards (IFRIC) – has issued guidelines for currency management that are quite restrictive and could potentially impact the future of the loyalty industry.

Indeed, loyalty operators in Singapore, New Zealand, and Australia have already felt the effects of the IFRIC standards as they must now account for points on a “fair value” basis rather than actual internal cost. In addition, the guidelines mean that companies must account separately for the award portion of each sales transaction. The end result of these guidelines is to defer revenue and increase point cost, squeezing margins for loyalty marketers. It was concluded that loyalty software suppliers will also feel the impact of these guidelines because they will need to track every point issued with a time/date stamp, and be able to process redeemed points on a FIFO (first-in-first-out) basis.

Geri Green of Barclaycard US shared a number of loyalty strategies that should not be forgotten in tough economic times, including the principles of transparency, consistency, value, messaging, and trust. Rick Ferguson of Colloquy and Andrew Pyper of Saks Fifth Avenue presented a case study showing how retailers can use store charge cards as points-earning accelerators for programme members.

US Bank senior vice president Bob Daly explained how the bank reacted to the merger of Delta and Northwest Airlines by launching ‘Flexperks’ – a travel rewards programme designed to retain its portfolio of cardholders from the Northwest Worldperks programme that was being closed down. Daly noted how the bank had included benefits specifically to help cardholders with unbundled air travel, such as offering an ‘allowance’ with a redeemed ticket to help pay for baggage and seat selection charges. He also mentioned that employee training in the call centre had been a subtle but important key to the success of the programme.

The event ended with a discussion of the proliferation of debit card rewards programmes. According to research from First Annapolis Consulting, 53% of the top 100 debit card issuers already have debit rewards programmes, although there is a contrast in penetration by bank size (90% of the top 20 issuers offer debit rewards, while only 35% of the remaining 80 issuers do so).

The structure of debit rewards is also evolving along a line that begins with generic rewards (e.g. points or cash-back) and heads toward cobranded rewards (e.g. with airlines) and relationship rewards. It seems clear that US debit card issuers are anticipating the continued growth of debit card transaction growth and sales volume, and are crafting increasingly sophisticated rewards programmes to help drive consumer engagement, card usage, and to gather deposits.

This article is copyright 2009 TheWiseMarketer.com

In the midst of holiday preparations, you might have missed the Cards and Loyalty Payment Conference held in New York on December 2.  I was able to attend in my capacity as North American Contributing Editor of the Wise Marketer and filed this report with the WiseMarketer.

Source Media’s second annual ‘Cards and Payments’ loyalty conference was held in New York earlier this month, addressing the theme of ‘the intersection of cost management and rewards programme repositioning’, as detailed here by The Wise Marketer’s contributing editor, Bill Hanifin.

The proceedings began with Rob Rosenblatt of Chase Card Services, who presented an overview of Chases’ new flagship rewards programme, ‘Ultimate Rewards’, which is offered on Chase Freedom as well as the new Chase Sapphire and Chase Ink (small business) products. Launched earlier in 2009, Ultimate Rewards was built as a unified platform that would help drive customer engagement while improving operating efficiency and also strengthening the brand.

An expert panel debated cost-per-point reduction strategies, with experts from SunTrust Banks, Merrill Lynch, Wyndham Hotels and US Bank explaining a variety of techniques that can be used to lower cost-per-point while keeping programme members engaged with the brand. The panel concluded that forming strategic partnerships with providers, using redemption targeting campaigns, and fine tuning programme rules should all lead to positive results even in a tough economy.

Crista Dewire and John Kryczka of PriceWaterhouseCoopers offered an in-depth discussion of loyalty programme liability management, outlining the actuarial methods used to project redemption rates and help programme operators manage liability. They pointed out that, while no conclusions have yet been reached on the treatment of loyalty liability within Generally Accepted Accounting Principles (GAAP), another body – the International Financial Reporting Standards (IFRIC) – has issued guidelines for currency management that are quite restrictive and could potentially impact the future of the loyalty industry.

Indeed, loyalty operators in Singapore, New Zealand, and Australia have already felt the effects of the IFRIC standards as they must now account for points on a “fair value” basis rather than actual internal cost. In addition, the guidelines mean that companies must account separately for the award portion of each sales transaction. The end result of these guidelines is to defer revenue and increase point cost, squeezing margins for loyalty marketers. It was concluded that loyalty software suppliers will also feel the impact of these guidelines because they will need to track every point issued with a time/date stamp, and be able to process redeemed points on a FIFO (first-in-first-out) basis.

Geri Green of Barclaycard US shared a number of loyalty strategies that should not be forgotten in tough economic times, including the principles of transparency, consistency, value, messaging, and trust. Rick Ferguson of Colloquy and Andrew Pyper of Saks Fifth Avenue presented a case study showing how retailers can use store charge cards as points-earning accelerators for programme members.

US Bank senior vice president Bob Daly explained how the bank reacted to the merger of Delta and Northwest Airlines by launching ‘Flexperks’ – a travel rewards programme designed to retain its portfolio of cardholders from the Northwest Worldperks programme that was being closed down. Daly noted how the bank had included benefits specifically to help cardholders with unbundled air travel, such as offering an ‘allowance’ with a redeemed ticket to help pay for baggage and seat selection charges. He also mentioned that employee training in the call centre had been a subtle but important key to the success of the programme.

The event ended with a discussion of the proliferation of debit card rewards programmes. According to research from First Annapolis Consulting, 53% of the top 100 debit card issuers already have debit rewards programmes, although there is a contrast in penetration by bank size (90% of the top 20 issuers offer debit rewards, while only 35% of the remaining 80 issuers do so).

The structure of debit rewards is also evolving along a line that begins with generic rewards (e.g. points or cash-back) and heads toward cobranded rewards (e.g. with airlines) and relationship rewards. It seems clear that US debit card issuers are anticipating the continued growth of debit card transaction growth and sales volume, and are crafting increasingly sophisticated rewards programmes to help drive consumer engagement, card usage, and to gather deposits.

This article is copyright 2009 TheWiseMarketer.com