Banks should ditch cash to boost customer loyalty
By Christopher Evans, Director at Collinson Group
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. The average in the UAE is slightly lower than the global average, at six times a month; though this is higher than in Singapore (5) and in the UK (4). Our research also found that 93 per cent of respondents in the UAE favoured brands that are early adopters of technology.
The UAE’s government is taking a lead role in supporting the country’s transition to a cashless society and has signed a memorandum of understanding (MOU) with 16 of the largest banks in the UAE that will see the entities collaborate to develop a platform called “Mobile Wallet”. The UAE Banks Federation (UBF) announced the MoU, declaring it “an important milestone” for the nation’s development in mobile payments.
Indeed, the country is set to be one of the first in the world to get a fully integrated mobile wallet platform that has backing from the banking sector. Banks including Mashreq and Emirates NBD have launched their own contactless payment applications so that customers can be cashless. Mashreq, for example, has integrated its mobile banking app ‘Snapp’ with Apple’s Siri for a voice-powered payment service.
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.
Organisations are recognising the convergence between payments and loyalty, and last year Mastercard partnered with Beam Wallet to create the MasterCard Masterpass. This service offers a mobile payment solution that gives consumers the opportunity to earn a range of rewards at retail outlets. The MasterCard Masterpass is used by Emirates National Oil Company (Enoc), so that customers can fill cars at gas stations across the country with the option of making a payment through their mobile phone.
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.
Using data and digital wallets to become indispensable to consumers
Perhaps the biggest opportunity arising from the cashless experience is the chance to generate more data and use this to retain customers.
A traditional card payment gives the bank insight about a purchase based on outlet, time and location. For mobile payments, more information is available such as links to social media profiles, mobile browser history and other contextual information through collaboration and shared APIs. Analysis of this behavioural data, including real-time data can help banks to create better services, deliver great experiences and provide more valued rewards for customers.
Today the majority of consumers have used digital wallet services such as PayPal, increasingly for face-to-face as well as online transactions. Consumers will choose the fastest, most convenient and secure digital payment option and offering a frictionless, channel agnostic service is a way for brands to add value to consumer experiences.
To demonstrate the potential for banks, in China the two main players in this area – Tencent’s WeChatPay and Alibaba’s AliPay are far ahead of the West in terms of frequency of use and share of wallet across all demographics. Alibaba is also expanding into other areas of financial services, with its proposed acquisition of US-listed money transfer service, MoneyGram International.
Overcoming the barriers is the first step to success
Banks are taking steps towards a digital first engagement strategy but these changes are incremental. One of the biggest barriers banks face is overcoming legacy systems and infrastructure, with new platforms facilitating rapid analysis of big data and increased collaboration with third parties through open APIs. By working with the right partners and adopting a digital first mindset, such as facilitating the reduction of physical cash, banks have a massive opportunity to increase revenue and boost loyalty.
Banks have a significant opportunity to build real-time loyalty initiatives based on behavioural data, enabling customers to collect and redeem rewards that are relevant, personal and broad enough to engage more members, more of the time.
A completely cashless society is still a long way off, but there are many reasons why banks should champion contactless payments and couple this with loyalty programme apps or messaging platforms. It provides the opportunity for consumers to pay with points and cash, increasing the utilisation of loyalty currency, and presents an improved customer experience and more value to customers overall. For financial services brands, it offers the opportunity to deliver a differentiated, personal, relevant and unique customer experience. It is undoubtedly a win for customers and a win for banks.
About the research
Research commissioned by Collinson Group was conducted by Vanson Bourne. A total of 2,500 consumers were interviewed in September 2016. The respondents had to be members of at least one of the following loyalty programmes: airline, hotel or retail banking/credit card. Surveyed consumers could have been of any age and gender.
Interviews were conducted online in the US, the UK, Singapore and the UAE using a rigorous multi-level screening process to ensure that only suitable candidates were given the opportunity to participate.