Rebuilding banking loyalty for the digital age

Speakers: Jim Marous & Carson Kotnyek.

[Music Playing]

Jim Marous (00:11):

Welcome to Banking Transformed, the top podcast in retail banking, I’m your host Jim Marous.

Jim Marous (00:18):

We’re in a time where it’s so easy to switch banks. In fact, I can switch banks with just a few taps on my smartphone. Loyalty has actually shifted from something that’s nice to have, or a marketing tactic, to actually a business-critical survival strategy for most financial institutions.

Jim Marous (00:37):

Today’s banking customers don’t just want rewards in the traditional sense. They want relevance, personalization, and experiences that actually fit seamlessly into their daily routines, both within banking and even outside of banking.

Jim Marous (00:55):

This represents a change in more than just customer preferences. It’s fundamentally re-imagining how financial institutions can create value and foster lasting relationships by understanding the customer.

Jim Marous (01:11):

Understand their flow of funds, the relationships opens and closings, the different waves in which relationships grow and shrink, but actually building real time engagement that really moves a modern loyalty program to be more like the traditional and non-traditional financial institutions, and those outside the banking space.

Jim Marous (01:35):

Today, we’re going to explore the future of loyalty in financial services with Carson Kotnyek, the Vice President and Head of Loyalty and Ecosystems at Zafin. He’s going to share insights in how traditional banks can bridge the innovation gap and build loyalty programs that really make a difference in a customer’s life.

Jim Marous (01:57):

What once worked like transactional rewards, point systems, traditional credit card perks no longer wins over the hearts and wallets of today’s banking customers. We’re moving away from a transactional environment to much more of a loyalty-based environment that deals with personalization, empathy, and engagement. We’re witnessing an unprecedented shift as digital first neobanks redefine what customer loyalty really means and what traditional financial institutions struggle to do.

Jim Marous (02:34):

Welcome to the show, Carson. Before we get going, can you introduce yourself to our audience and share a little bit about what Zafin does?

Carson Kotnyek (02:41):

Absolutely. Really good to be here, Jim. And thanks for having me. I’ve been a fan and it’s good to have your voice in the industry. You ask the hard questions and push the industry forward. So, I’m looking forward to diving into loyalty today with you.

So, as part of that, my journey in the financial services world has been a bit of an indirect one. I have small town roots, as you and I were chatting just a little bit before the show here. Small town roots in Western Canada. Where I went to school, you ultimately had three options, was to be a carpenter, a mechanic, or a welder. And despite being a carpenter, I ended up as a welder in the skill trades for two years.

And a big part of that experience has been something that stuck with me even to this point in my career. And a big part of that has been learning what it took to be a frontline worker. And a big part of that shaped my disposition to being a doer and really to getting things done. And that has continued to serve me well throughout, not quite as exciting life in the corporate world.

Early part of my career, I was in real estate development, had a six-year career there. Then after going to business school, I spent time with a blockchain FinTech. I’ve since done some early-stage investing, and then I had a career with McKinsey & Company, which is ultimately what got me into the world of loyalty.

And there, I was extremely fortunate. I worked on some of the world’s leading loyalty programs, many of probably of which are on your phone today. I was able to design, reimagine, build and scale many of those programs and across industry. So, though I did a lot of work in financial services, I also have taken the best practices and really seen what’s worked across retail, QSR, and then in the tech world, both on consumer and the B2B side.

Ultimately, what I was looking for was to really have the biggest impact I could on transforming financial services. Personally, I see that’s where the biggest opportunity is in the loyalty space. And so, after meeting the team at Zafin (our CEO, Charbel, our chief product and tech officer, Shahir, some of the founders and really an impressive group of talented builders), I knew Zafin was the place for me to come and that’s where I head up loyalty and ecosystems now, today.

Jim Marous (05:09):

It’s interesting, we hear about the term loyalty in so many different ways and we sometimes forget what that really means, which is you really are committed to a certain company, be it an Amazon or at Uber, or maybe your gas company, and sometimes it does mean prizes and rewards. But really what we’re trying to do is stem attrition and make it so when a customer actually makes an engaging transaction or something in their banking functionality, that they do it with us.

Jim Marous (05:42):

So, in banking, actually, we’re hearing a lot about loyalty again, but not in the card world in the sense that it’s all about cards. What is changing the word loyalty in banking, and what’s driving the new sense of urgency?

It has been a very interesting time in the loyalty space, and this is of course, a conversation that I have every day, and there really is a massive range out there when we talk about what is loyalty in banking today.

And Jim, as you know, loyalty has been around for decades. Even before there were formal programs, there was of course relationships within the branch. A customer who had been a longstanding client could receive a free checkings account.

Then we got to the 80s and 90s where the first credit card programs were introduced: Citi, Bank of America, Wells Fargo. But you still have these discussions today, and I’m still surprised from time to time, but a lot of the discussions are still around. Well, doesn’t loyalty equal credit card points? Isn’t it an earn and burn program?

And it’s an interesting piece because what has happened historically is because financial services were so early to the loyalty space, that had ultimately been a bit of a gift and a curse, where because they were so early, there has then been stagnation where really, in this plateau where a lot of other industries have then gone and redefined and leapfrogged what loyalty ultimately is.

And just think of the Starbucks of the world, of course the hotels and airlines, what Marriott has done from Delta to United — that really has changed the game and loyalty and proved that versions of whole customer recognition really can drive behaviors, generate that stickiness and retention, but also really be that growth engine, including even new revenue streams.

And then there’s also the world of what super apps have done outside of North America. And though a carbon copy of the grabs of the world in Southeast Asia aren’t … you can’t really do one for one in North America. There is still a lot of inspiration, innovation that we can borrow and leverage into the financial loyalty ecosystem, because it all starts with payments. It all starts with where your money is.

Jim Marous (08:11):

So, when you look at what Zafin does, how does Zafin work with financial institutions to what I’ll call redefine loyalty and the foundational aspects of a loyalty program?

It has been a big part of what I’ve been brought on to do, and what I talk a lot about is whole customer loyalty. And as part of whole customer loyalty, this is of course going beyond credit card points, earn and burn, really to that entire relationship.

So, if we think about what do we want our customers to do, we really want this to be that win-win relationship. We want that customer to bring all of their banking activities under one roof, and that one roof within our bank, as opposed to what we’re seeing today. And this is a big reason for the sense of urgency as to why loyalty has really re-emerged as such a big topic, is we’ve really seen that fragmentation.

So, Jim, I think I was listening to one of your keynote speeches in Abu Dhabi. And you had spoken a little bit about — asking folks that you work with and saying, “Hey, in the last two years, have you signed up for a new FinTech?” And Jim, I think the answer that you get all the time is essentially a unanimous yes. Right?

Jim Marous (09:36):

Yeah. And so, as part of that, what’s happened is we’ve really seen this fragmentation where that old relationship where we used to say, “Well, 10-year equals loyalty. My parents opened this account for me 25 years ago, that’s why I still bank there today.”

But ultimately, what we’re seeing is we have these different archetypes of customers. Even if I am the archetype of a customer who still banks at a traditional institution, I’m testing the waters. And the first party research that we’ve done (to no surprise) shows that we’re now seeing well over half of consumers who now at least have two banking relationships, if not three or four.

And so, part of what we’re doing at Zafin really is to try and give these customers a reason. The win-win here is to say, “Bring all of your banking activities under one roof. Let’s make it easy for you, but let’s also reward you for doing so.”.

And that’s been a lot of the pain points over the past years is saying, “Well, maybe I have a great everyday banking solution, and I like my credit card at my traditional institution.” But on the wealth side of things, they don’t talk to one another.

Therefore, I may as well transition my IRA or my Roth retirement account over to a new FinTech like Robinhood. And by the way, I’m going to get a nice bonus to do so, but at the same time, there’s no consequences for me. So, if we’re able to, within the banking institution, let’s start with recognition — we see you across everything that you’re doing at the bank, and we want to reward you for all of that banking activity.

So, that’s a big part of what we’re doing, is we’re providing the technology, which is not just loyalty in a box that’s adjacent that we plug in or bolt on, but is yes, having the core loyalty tech, which is you need a loyalty engine where the rules happen, what the ledger is, the ability to earn points and redeem them or cash back. But it’s also embedding loyalty across the entire tech stack.

And Jim, I’ll just give you one example, and I’m curious to hear if this resonates. We talk a lot about behaviors. One of the things that we’re working on right now is in the world of fraud. And so, fraud, massive multi-billion-dollar problem. And despite email and education campaigns to do things like set up two-factor authentication or be able to have real-time text responses for transactions that seem abnormal …

If we can actually use a universal loyalty currency as that incentive to drive the behavior to say, “Hey, do a journey, take these three actions, set up some additional security pieces as part of your overall banking relationship,” that’s good for you as the customer. “By the way, we’re going to reward you with some points to do so.” And then also that’s great for the bank because you cut down a few points on fraud and you’re saving billions of dollars as the banking institutions.

Jim Marous (12:44):

So, what’s interesting is it sounds like you’re really moving from a transactional issue where spend, money get points to much more of an engagement issue. If you have engagement with this, if you do more things, if you retain certain things with us, we’ll reward you in certain ways based on that engagement level, correct?

Absolutely. And a few examples of that, is of course, beyond transactions. One of the more common ones we’re seeing now is more and more institutions are dipping their toes into total deposits and total balances. So, similar to the world of airlines and hotels, we’re starting to see the rise of tiering programs.

And so, tiering program is just one mechanism (it’s quite a good one) of saying, “We recognize all of the different products that you have across the bank. You are engaging with us in multiple different ways. Let us give you a unique set of rewards, that one that benefits you for reaching that savings goal, but also having a credit card with us, and also maybe having your mortgage with us.” But at the same point, it is those engagement touch points along the way that gives you that reward, gives you that recognition.

Jim Marous (14:05):

It’s interesting, I often talk to financial institutions, and I think one of the things that organizations don’t understand is because they keep the balances of a customer that’s been with them for 5, 10, 15 years, because there’s still some transactions going on, they feel they’ve retained the relationship.

Jim Marous (14:26):

And as you referenced in the speech I did in Abu Dhabi, the reality is customers are building their own open banking relationships. They’re going elsewhere. They’re dipping their toes with a Neobank, they’re using another organization for their car loan, another one for their mortgage loan, another one possibly for the regular savings, ongoing savings plan.

Jim Marous (14:47):

And we don’t understand this, financial institutions we often do not monitor flow of funds. What happens when the customer gets paid? Where do the funds go? Where do the funds on an ongoing basis go, in and out of the financial institution, and are we missing a huge opportunity because we think nothing’s changed?

Jim Marous (15:08):

How do you see the importance of looking at flow of funds, not just outside the organization, but even within the organization where you have different silos where transactions are going on that. Financial institutions sometimes separate them so much they don’t even know they’re happening.

Fantastic, Jim, you’re getting right to the heart of this. Here’s one of the most interesting scenarios, and again, back to this, where does this sense of urgency come from? Why is loyalty such a big topic once again?

I’ll share with you one of the discussions I’ve had the most, especially in the last six months, especially in the first quarter of this year, is exactly to your point on the flow of funds, is what has happened is if we look at the landscape of the different FinTech options.

And we know there’s the SoFis and the Chimes of the world that are starting as financial institutions on the basic products and moving upstream. But then there’s also the investing platforms and the Robinhoods of the world that are starting on the investing and wealth side, but moving downstream into those everyday financial products.

And so, to your point on flows, there has been a series of offers. And this is just one of many examples that says, “Hey, transfer your deposits over here and we’re going to give you a 1, 2, or 3% bonus.” And at first on the surface, that seems a little bit like a race to the bottom, where it’s just, oh, we’re just paying for deposits, and the next guy can do the same thing.

But ultimately, what’s happened is they’re using their loyalty programs; once those deposits have landed, the stickiness is built in. I’m automatically put into a tier because I’ve transferred over that money. I’m being rewarded over a period of time, not just all in once.

And so, what’s happened is … I did a bit of an analysis on this earlier this year where it’s estimated that about 10 to $15 billion, really in the 2024, 2025 tax season alone has walked out of the door of traditional financial institutions and walked into the door just off of really one series of campaigns.

And so, to your point on tracking the flows and knowing what to do with these flows, this really gets back to the tech stack. So, yes, we can have a loyalty program that rewards our customers for a whole banking relationship, but we also need to have the components of technology that can identify windfalls.

For example, we have a product called Dynamic Cohorts and Signals. What this does is it is it enabled to flag events and flag those events to the right folks. So, think of the world of customer service, whether a windfall has happened or that tester deposit has gone elsewhere, and we know where it’s gone …

Just making sure that you actually know that and you are giving your customer service folks, they’re armed with the right power and the right information to say, “Hey, we care about this customer. We care about this relationship. Let us try and do something to retain that customer.” So, it’s being armed with the tech stack to also take action on it and not just be reactive.

Jim Marous (18:23):

So, as financial institutions get more into understanding their digital technology, and actually more than just the mobile app, but actually building the back office better for a digital organization, does this make it easier to build an overarching loyalty program, because the fact that we have so many touch points and so many transactions we can now view in a very quick amount of time. It’s a more of immediacy thing. How do you bring relevance into the whole concept of stickiness when you look at digital interactions?

A big part of that to the discussion we were just having also starts on the technology front. So, if we think … pick a bank today, what is one of the challenges that they’re going through, is stern version, they’re at some point on the core modernization journey.

And so, as part of that, being able to squeeze out or thin out components of that core and being able to externalize the different solutions that you need so that they’re real time nimble, have the ability to act, that is one big component of it.

So, not just relying on, “Hey, we need to make a change, let’s go into our monolithic core. And by the way, that change is going to take us three to six months.” By the time it’s done, we’ve missed the opportunity to do that real time action.

And so, to your point, Jim, that is a major part of it, which is having the pieces of a loyalty program in place, yes, are important, but it is also being able to move beyond say, daily batch uploads to being able to do real-time events.

And so, part of that is, let’s take an example, which is the world of partnerships. More and more we’re seeing loyalty partnerships, whether it’s your fuel or your grocery store, and being able to have, whether it’s pay with points at the point of sale. So, if you’re, if you’re at the POS in the grocery store for the terminal to say, “Hey, you have a thousand points, do you want to use those thousand points for $10 off your grocery purchase?”

Those are the types of examples that are happening in real time that are increasing that customer stickiness as well as giving them those regular touch points to be reminded that, “Hey, my relationship here at the bank matters.” And I’m getting those dopamine hits of some rewards along the way.

Jim Marous (20:58):

So, when you take a financial institution today, what is the biggest challenge they have as you visit them and start talking about what Zafin offers. What’s the biggest challenge they have moving from the loyalty programs of yesterday to what they need from a standpoint of loyalty, retention, and actually, relevance today?

As you can imagine, it’s a big topic of discussion because it goes all the way from what is our technology and what can it enable us to do all the way through to the culture and the setup of the organization.

So, maybe where I’ll start on this one, Jim, is really around a lot of the discussions I have where we’ll start and talk about personalization and the one-to-one customer relationship and pricing at a one-to-one level. And we’ll have all these discussions about all of our unique customers.

And then I’ll see … well, we peel back the layers of the actual loyalty program and what the structure of it is, and I’ll see essentially a series of assumptions that assume your customers are perfectly economic rational actors. And we obviously know that this isn’t the case. Then we go through this discussion of three places I always like to start when we’re talking about loyalty programs, and to your point, how we go from the programs of yesterday to the programs of today.

There is the world of how customers see value, and that’s going to be unique to how they see it through their eyes. And this is how they perceive the value. So, when we think about how do we have an engaging program, there is often the scenario.

And a lot of the research that we do shows this, which is being able to get that flight to Greece on points and how that value is perceived, more so than say getting $40 in cash back every month, which I could then save up to actually redeem on that flight. There is a different way in how that value’s perceived.

Now, that’s not to say something like cashback doesn’t have its rightful place within loyalty (it absolutely does), but we need to have the flexibility and the spectrum as to how are our customers going to perceive the value of this program.

Then there’s the world … I like to have the conversation around identity. And an interesting one that I saw, I was actually on the subway a few weeks ago, former life in consulting and I overheard two interns who had just joined a consulting firm for the summer, and they were having this conversation about perks and points. And one was really celebrating that, “Hey, I have this new airport lounge access and special access to dinner reservations.” And they were essentially selling the other intern on how amazing the Amex Platinum was.

Now, when you think of the Amex platinum, there’s going to be some great benefits that come along with it, but it’s $695 per year. Now, I would guess that that intern maybe has a better use for those $695, but that’s another part of it, which is that identity and exclusivity of, in that case, the Amex Platinum Club, that matters. So, another thing that we don’t want to overlook there.

And then the last part of the conversation, which isn’t mutually exclusive from the other ones, but is really the emotional component. And as part of this, it can be incredibly strong. We’ve seen it in the world of hotels and airlines where it’s not just this earn and burn relationship, but it’s that holistic relationship. And so, as part of that, it is being able to tie the emotional component as part of loyalty, and that really brings it all together.

So, I often start that conversation when we’re talking about how do we bring these programs into the modern day, and we can’t just assume that it’s rational actors, and I only calculate exactly what my value and cash back is. It needs to be the broader entire recognition of that customer relationship.

Jim Marous (25:27):

So, today, in a traditional retail bank, what does a really well-constructed, well-designed and well-strategized loyalty program look like from your perspective, across the entire spectrum of services?

Yeah, fantastic. Some of the foundational components that need to be in place, and then of course, the X factor comes in as to how do you differentiate, but let’s start with some of the basics. I am very much a proponent that having a version of a universal currency matters.

Now, again, you’re always going to have some product within your catalog that does have a version of cash back, but I think by having a universal currency, you’re going to be able to go beyond just earning and burning those points to being able to drive behavior.

So, a lot of this as we’ve talked about thus far, is this component of saying, hey, we also need real time actions and we want to drive, whether it be the fraud example we talked about, whether it be helping a consumer with their savings goals and giving them a journey that is rewarding them along the way. We can drive those behaviors and use with rewards, and often a very good way to do those rewards is with a universal currency.

So, that’s often step one. Then as part of it is, what is that mechanism that makes sure that the customer knows and is recognized for all of the things that they do within the bank. And so, one of the more common ways that we’re seeing emerge now is back to the world of tiering, but being able to have, whether it’s a membership, a tiering program, whatever it may be, we see both paid as well as earned.

Both work in different contexts, the Revoluts of the world have five tiers, all of which you pay into those tiers. And of course, then there’s also the world of by total deposits, I’m moving up tiers and I can earn tiers that way.

But that’s a great mechanism of saying today you have an everyday banking account, you have a credit card, but if you have your wealth here as well, you’re going to be able to move into a tier. There’s going to be a win-win scenario where you’re going to get benefits and rewarded to do so, and you’re going to get benefited over the long term every month. Every year that you keep those deposits and grow those deposits, you’re going to continue to get rewarded for doing so.

Then a couple other components, is we talked about being able to drive the behaviors. So, often, I think about this as in the old days, we’d call this gamification, but this is essentially just giving journeys and activities, giving the customer that fun, exciting, engaging way to progress their financial health and their financial journey, but doing it in an engaging way.

And then lastly, as we get to this terminology of ecosystems, is really starting to build out the world of a banking ecosystem. And so, this is where you’re seeing a lot of the differentiation, and the real winners pull ahead.

One example of an ecosystem is — we’ve talked a little bit about partnerships, but partnerships that go beyond banking. And one of the examples we’re seeing is the world of mobile eSIM data plans and starting to get that through your financial institution. So, that’s one example of going beyond banking as part of your ecosystem.

Jim Marous (29:10):

Well, it brings it as we’re seeing embedded payments and embedded relationships, it really helps quite a bit when you cross over. I keep on thinking that healthcare and financial services will come together at some point, but we’ve seen it somewhat in insurance, but you look at all the different things that can be done together and reward good behaviors and could play out both ways.

Jim Marous (29:33):

When you look at legacy banking organizations, how much to the core and the way an organization is currently structured get in the way of building a really strong embedded loyalty system.

The core as we know elsewhere … and that’s really where Zafin actually got started, is in the world of products of pricing. The whole reason for that was because making the changes in a monolithic core were too difficult and took too long. So, being able to thin out that core and externalizing key components while being fully integrated to talk back and forth to the core is a very important part. And so, the loyalty’s no different.

The core continues to be a challenge for really modernizing what that loyalty program can look like. And think of some of the things that we’ve talked about, the agility one-to-one personalization, real time experiences, many legacy cores are not built this way. Data is stored in silos, fragmented formats, the modules for cards are different than savings, are different than loans. And so, when we think about what we need to achieve with a loyalty program today, this is often where externalizing the loyalty program and the capabilities of it from the core are important.

And so, as part of that, even if we think about batch cycles versus being able to have APIs in real time events, if we go back to the grocery store example, I need to be able to be recognized at the point of sale for who I am, what my loyalty program is, as well as being able to use points or being recognized through a partnership that actually gives me a discount. And so, being able to externalize those pieces from the core is definitely an important part.

Now, at the same time, as we think about the world of points, ledger, liabilities on the balance sheet, just as we need to have the nimble abilities of loyalty that are outside of the core, we also need to still be integrated to go back and forth. And so, as part of that a big piece of what we’ve built at Zafin, is something called Zafin Integrate & Orchestrate.

Point of it is so that whatever the bank needs to export out or whatever data transactions, you name it, needs to be provided to the loyalty program, enabling banks to just be able to give it as is, is something that we focused a lot on.

So, if we think about, “Hey, we want to set up if real time personalization,” well, it’s going to take us a year to be able to update how we provide transactions to be able to do that, because we need to change the data that often has to fit the loyalty program tech stack.

But what we’ve done with this Integrate & Orchestrate product is say, give it to us as is today in whatever format, this layer will convert it, manipulate it into whatever is needed to work with both, not only the loyalty program, but partners, your MarTech stack, whatever other components, be able to operate your modern loyalty program. But then at the same time, pass it back through this layer back to the core in how the core needs it.

So, there’s still a lot of discussion as to how our core’s evolving and there’s a lot of great work happening by core players there, but the reality is a lot of legacy cores exist today and are going to continue to exist for a long time. So, any loyalty program needs to be able to work with those legacy systems.

Jim Marous (33:32):

So, it’s interesting, we talk to solution providers often, and one of the questions I always ask is, there’s no bad solution that we’ve interviewed, they’re all really good solutions. But something obviously gets in the way sometimes when you’re trying to sell a financial institution on implementing your program. And they’ve called you in because they were interested in loyalty, let’s say.

Jim Marous (33:58):

What gets in the way of an organization actually saying yes and going forward? What are the stumbling blocks that an institution brings up that says, “Geez, not right now,” or whatever they say? What gets in the way of them going forward?

It’s a really interesting discussion, because it is once again, very common, where we will have the discussions about what the strategic roadmap is, how loyalty is going to be used to drive growth, how loyalty could even be used to decrease costs, we talked about the fraud example. But we, to your point, are always going to run up to reasons as to why now potentially doesn’t work.

And so, a few of those reasons that I often come across first ends up being cultural. And so, one of those big pieces culturally is that lines of business exist in silos as we all know. The credit card line of business is separate from the wealth, and therefore, it’s hard for them to come together and align as to who takes what, and what component.

But this is a piece that a lot of, in my role, I’m also providing. So, if you think of any technology solution provider, I also think part of our responsibility is to go beyond just selling what the technology is, because I spend a lot of my time on a strategic basis actually helping solve the why, and the how.

And so, part of that could be — let’s take cost. Cost is one of the scenarios that I often come across, which is even if we say, okay, we agree that it is worth the cost and we’re going to spend the money to do so, the next stage of the problem comes, well, who pays for what? And so, part-

Jim Marous (36:01):

It’s interesting because we always have talked about the data silos, but really, it’s the budget silos, it’s the responsibility silos. I mean, this is something that goes back for me, 40 years in banking where I remember sitting down, I was working with a direct marketing agency who were trying to build direct marketing programs, and you wanted them overarching the relationship the customer has.

Jim Marous (36:25):

And unfortunately, the bank still has people in charge of each division going, “Okay, are you going to pay for it? Am I going to pay for it? If I’m going to pay for it, even if it doesn’t warrant it, I’ve got to get this much of the budget assigned to make my products better.” And you’re going, “Well, that wasn’t where the customer was in the relationship.”

Jim Marous (36:45):

It gets back to, are you selling services again or are you actually responding to the behaviors? It’s that silo mentality and product mentality that really can get in the way sometimes.

Spot on. And as you know better than anyone, Jim, nothing has changed or at least not quite, not enough.

Jim Marous (37:07):

So, when you look at all the things going on in the financial service industry today, I mean, there’s a lot of change going on. What trends do you see that are going to influence the future of loyalty in banking over the next three years, let’s say?

This conversation is relevant now more than ever, and it’s happening fast. We’ve talked a lot about what’s happening in the FinTech world from the Revoluts, to the SoFis, to the Robinhoods, but the big players are also responding here.

So, of course, there is JPMC, Bank of America, like a lot of movements in the large financial institutions is happening here as well. And I spend a lot of my time thinking about not just solving loyalty where it is today, but where exactly to your point, where do we need to be three years from now?

My thesis here is around five big areas. One we’ve talked about already; this is the world of whole customer loyalty. Credit card transaction, points earn and burn, I think you opened with this. Like today, I would say is not enough, but especially over the next three years, you must recognize your entire customer relationship and reward it accordingly.

The next big one, which we’ve also touched on a little bit, is the world of behaviors and driving loyalty to really have these positive win-win set of behaviors. And so, this is journeys, challenges, activities.

There is the fraud example that we talked about, but this is really leveraging loyalty to drive all of the behaviors that both we want our customers to do that is in their best interest, help them save for a home, help them be more secure in their banking. And so, driving behaviors, which is going to be also a big vector of growth is going to be a big part of it.

Then there is the world of getting benefits and rewards right. And this is one of the most interesting spaces that I’m seeing, which is if we think about the world of loyalty redemptions. If I’m going to use those points, if I’m going to earn that platinum tier, what am I getting for it? And we’re now getting beyond being able to book the free flight. We’re getting into the world of how do I actually have the personalized choices that fit me?

So, one of the examples that we’re actively working on is having a menu. So, if I say I’ve moved up to the next tier, instead of just getting a … you get these six benefits, it is, choose four benefits that are really high-quality benefits from a menu of 10. And so, that might be something like … well, maybe I actually don’t travel that much, so I actually don’t want the airport lounge access, but I’m a big learner, therefore, the ability to have an annual masterclass membership is something that actually really moves the needle for me.

So, then there is — I think we’re going to … very quickly, which is already happening, but very quickly, the large financial institutions are going to have to continue to pull on this thread or this notion of the ecosystem, which goes beyond just traditional banking activities. And this is that extension of whether it be if you are moving for a job or you’re relocating, the ability to help with — for example, we’ve spent a bunch of time in the UAE, there are banks there helping you get the golden visa.

There’s also, a little bit, as we talked about the world of eSIM mobile phone plans, and so how are those telecom relationships going to work. This notion of the ecosystem is only going to become more relevant.

And then lastly is, we all hear this every day, but I think loyalty has a unique role to play in the AI story for banking. And a big part of that is, it’s connecting the dots of the above things that we know we really just chatted about which is, let’s take a churn prediction model.

If we have received that signal that a tester deposit has gone elsewhere, being able to have a churn prediction model that helps our customer service or helps us intervene to recognize and reward that relationship, loyalty is going to be a big common thread throughout that.

Jim Marous (42:01):

It’s interesting, it’s really a listening capability where you’re going to have to listen to, where are the transactions going? How are they happening between the customer? By the way, as we ask questions, what are the answers that come back around what loyalty means to me as opposed to you?

Jim Marous (42:22):

It’s interesting how dynamics have changed; my Delta membership, they changed their program a little bit, now you only get five visits to a club as part of the American Express membership at Delta. And if someone downloads three hours before a flight, unless you’re going international. And that’s a challenge sometimes in some of your flights, and it may be that much more important.

Jim Marous (42:46):

On the other hand, the ability to be at a different level where you get into a club a little bit before other people that may be in line, that can be an aspect; or the responsiveness on different channels, the ability to have a separate phone line. All these things to get to know who I am as that loyal customer and what really makes a difference. And we’re going to have to get better and that’s where AI can come in.

Jim Marous (43:10):

But then it gets down to communication, because I continually get into the frustration. It’s one thing for a company to say I’m at a certain level, is for them to actually listen and tell me I’m at that level and what that means.

Jim Marous (43:23):

American Express does a very good job of continually reinforcing their level of how active have you been? What are you using? Oh, by the way, you haven’t used your Uber hours, or your Uber trips this month, whatever it may be, to say, “Hey, you bought it for a reason. And by the way, if this is one of the reasons to pay off your thought on why was it worth it, this is a good way to do it.”

Jim Marous (43:47):

So, I think you’re right. I think as you look in the next three years, especially AI and generative AI, all those listing capabilities are going to become much more important than ever before at differentiating your loyalty versus my loyalty, which may be at the exact same level, driven by the exact same services, but we both view them differently. So, that’s going to be very interesting.

Jim Marous (44:08):

So, finally, when you’re looking at a financial institution just out of the blocks, what is the one thing, Carson, that you would recommend a financial institution do to start down that path of creating a better loyalty base?

You are right, it’s a big conversation. So, a lot of it does start … and we’re still in that place with many organizations today as to where do I start?

I think you need to start with this foundational notion of whole customer loyalty. And that to me really means any individual customer, it doesn’t matter if I have a hundred dollars in an everyday checking account, or if I’m a private banking customer who has eight figures in deposits — recognizing that customer … and then we have the technology and the tools now to be able to do so, so the lift across that recognition is doable.

And so, by recognizing that relationship is how we are going to incentivize customers to have that whole relationship under one roof. And it’s also how we’re going to help grow customers within the bank that leads to this win-win scenario, which is how does the customer have a better financial journey and achieve those financial goals, which is why you want them at the bank.

At the same time, the right design of the program is also going to increase that LTV of the customer, which is going to solve this challenge of, hey, a loyalty program sounds expensive, therefore, maybe we’re going to shy away from it. But we can find the economic models that still reward the entire customer relationship and recognize it and be able to do so profitably.

Jim Marous (46:01):

Yeah, that’s a very good point. That it’s not about how much you spend or how much you allocate to it, it’s at least recognizing the customer’s relationship. And I’ll get back down to it. I think it is understanding their lifestyle, their flow. Understand that this customer is sending money to another institution every month. If you at least recognize that you know that and try to do something about it, the customer goes, “Oh, they at least know me a little bit.”

Jim Marous (46:31):

I was saying that I said for years in my presentations, the customer wants you to know them, understand them, and reward them. But that doesn’t necessarily mean with points. It may just be in recognition, it may be in personalization. It may just be in knowing when you come into the branch, if you have a gated community in the branch, to be able to say, “Jim, welcome back.” And that feels good. That feel good moment to drive a deeper relationship.

[Music Playing]

Jim Marous (47:02):

Carson, thank you so much for being on the show today. I really appreciate your time and your insights into this scenario that we certainly haven’t probed enough in our podcast up to this point, but we’re going to probe more. Because it’s one thing to talk about personalization, it’s another thing to talk about the reward of that personalization at a deeper level. Thanks a lot.

My pleasure. Really enjoyed the conversation, Jim, and looking forward to doing it again.

Jim Marous (47:30):

Thanks for listening to Banking Transformed, the winner three international awards for podcast experts. If you enjoy our work, we would appreciate if you give us a positive review. Also, check out my recent articles on The Financial Brand and the research we’re doing for the Digital Banking Report.

Jim Marous (47:46):

This has been a production of Evergreen Podcasts. A special thank you to our senior producer Leah Haslage; audio engineer, Chris Fafalios, and video producer, Will Pritts.

Jim Marous (47:56):

To hear more about the future of loyalty and banking, be sure to catch our discussion with PWC, where they shared research on banking loyalty and engagement in the Banking Transformed Podcast.

Reinventing loyalty in UK banking

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Banking Blueprints
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Rebuilding banking loyalty for the digital age

Get answers to key questions on loyalty

Transcript

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Zafin Product & Pricing

Zafin Deal Lifecycle & Billing

Zafin Customers & Relationships

Zafin Data & AI

Zafin Integrate & Orchestrate

Our company

Reinventing loyalty in UK banking

Zafin Product & Pricing

Zafin Data & AI

Zafin Deal Lifecycle & Billing

Zafin Integrate & Orchestrate

Zafin Customers & Relationships

Zafin named to CNBC’s world’s top fintech companies 2025

Banking Leadership Summit - Europe

Banking BlueprintsPodcast

Rebuilding banking loyalty for the digital age

Get answers to key questions on loyalty

Transcript

Zafin Product & Pricing

Zafin Deal Lifecycle & Billing

Zafin Customers & Relationships

Zafin Data & AI

Zafin Integrate & Orchestrate

Banking Blueprints
Podcast