Loyalty fails with disputes, service requests and cross-channel handoffs: Those journeys are where it often gets destroyed. Vichare points to research showing customers in the Philippines keep money in PayPal rather than local banks, simply because PayPal’s dispute process is faster. “That is a hidden defection that no banks are looking at.”
Security can also be a core loyalty driver: Kotnyek points to a program he’s currently developing that uses small loyalty incentives to drive security behaviors. Banks typically see 5% open rates on emails asking customers to enable multi-factor authentication, with less than 1% taking action. “But if you implement through your loyalty program a small incentive to do a three-part security journey including multi-factor authentication, set up a recovery email and opt in for real-time notifications, your uptake is through the roof,” he says. “The ROI to reduce 5% to 10% of fraud losses is huge.”
The program rewards behaviors that protect both the customer and the institution — a model that builds trust rather than just burning through interchange revenue.
From Transactions to Relationships
Kaushal frames the evolution banks need as three distinct steps:
- Single-product credit card rewards. This is where most banks remain stuck.
- Multi-product loyalty spanning deposits, mortgages and cards.
- Layering in further emotional loyalty through tiers, subscriptions and AI driven personalization.
“It’s the Amazon model,” Kaushal explains. “They’re adding value, not just reducing friction. The customer doesn’t want to leave that holistic value.”
She cites BBVA as an institution that has achieved step three. By leveraging AI, they deliver proactive alerts — notifying customers before they overdraft, identifying unused subscriptions and surfacing savings opportunities. “Suddenly it’s like, oh, my bank cares about me,” Kaushal says. “Is it worth another few points going somewhere else when they’re teaching me about savings and watching out for me?”
Vichare sees similar potential in AI-powered coaching. “A lot of these advisors are kept to high net worth individuals,” he notes. “With AI, you have the opportunity to provide coaching to everyone, building trust that I really know you.” The key is making customers feel that their institution understands their complete financial picture, not just their transaction history.
Dig deeper:
Gamification and Tiered Models
“Gamification as an incentive:” The word often conjures gimmicky badges and leaderboards. But when done right, behavioral programs create stickiness that points programs can’t match.
“It’s not games,” Kaushal clarifies. “What they are doing is incentivizing behavior.” She points to Scotiabank Chile’s ScotiaRewards program, which uses missions and challenges to drive cross-product adoption. Complete certain actions — bring over your payroll, add a family member to your account, set up bill pay — and you unlock new tiers with better benefits.
The program creates a subscription-like dynamic without a subscription fee. “Now I’ve gotten to level one, two, three by doing these things,” Kaushal explains. “If I change my payroll to come to you, I unlock more. What they’re able to do is create multi-product loyalty and engagement through gamification.”
Vichare offers another proof point: household banking. “When two spouses start sharing accounts, the number of product holdings go up,” he says. One credit union found that certificate of deposits increased 4-5% and auto loans jumped 10-13% when customers began sharing accounts. “If you help them achieve their financial goals, loyalty automatically starts flowing.”
Emily Cisek, founder of Paige, extends the household concept across generations. Her platform helps families organize estate planning, documents and memories through community banks — combining the financial with the emotional. The stakes are significant: nearly 70% of heirs move their money after an inheritance. “When you help a family stay organized and supported long before a transition, the next generation already feels that trust,” Cisek says. “The future of loyalty isn’t about incentives. People don’t care about getting a toaster. And competing on rate is no way to build loyalty — someone else will come along with a better rate and they’ll be gone.”
The Community Bank Advantage
A counterintuitive opportunity: Community banks and credit unions are already winning on loyalty — they just don’t realize it.
“Our branches and our call centers know our customers. They know not just their names, but their stories,” says Brian McEvoy, chief retail banking officer at Webster Bank. “Our loyalty scores range in the 91 to 92 percentile. It’s not sexy, it’s just fundamentals.”
Large banks, McEvoy observes, have “almost as an intentional strategy, severed the emotional connection between the bank brand and the customer. The community banks and credit unions never did that.”
Paradoxically, smaller institutions often look at megabanks as the model to emulate when they should be doubling down on existing strengths. “You don’t know how good you’ve got it as a community bank,” Smith argues.
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