Feb 12, 2024
In the competitive world of credit and debit card issuers, standing out is essential. Achieving ‘top of wallet’ status means becoming the go-to card for customers’ everyday transactions. Figuring out how to ensure customer loyalty is a critical factor for success. How can card issuers get to the top of their cardholders’ wallets and stay there?
To stay top-of-wallet, card issuers must leverage data analytics to tailor experiences to individual customer preferences, spending habits, and lifestyle needs. By integrating transactional data with personalized card features, such as unique rewards and designs, issuers can meet the demand for personalization among 71% of consumers, as reported by McKinsey. This strategy not only fosters customer loyalty but also boosts satisfaction and profitability by up to 15% and 5-10% respectively, making the card more appealing and valuable to its users.
In the digital age, a seamless and intuitive online experience is crucial. Issuers are advised to invest in developing user-friendly mobile applications and digital wallets. These platforms should offer easy access to account information, transaction history, and customer support. A positive digital experience can significantly impact the frequency and preference of card usage and even help to increase the customer base in banks.
For example, Discover’s mobile app allows users to track spending, manage budgets, and redeem rewards seamlessly, creating a convenient and engaging experience. According to Statistica, mobile wallets accounted for roughly half of global e-commerce payment transactions in 2022, making the digital wallet the most popular online payment method in the world. This share is set to increase to over 54% in 2026.
Trust is the cornerstone of customer loyalty. According to the Federal Trade Commission 2023, credit card fraud has remained the most common type of identity theft through the first three quarters of 2023, with 318,000 reported cases. A specific form of credit card fraud, known as card-not-present (CNP) fraud, which encompasses transactions conducted online, via phone, or through mail orders, was responsible for about $9.49 billion in losses (73% of card payment fraud loss) during 2023, according to Insider Intelligence. Issuers must prioritize security features to protect customers from fraud and identity theft. In addition, issuers must strive to reduce false positive transaction declines that frustrate cardholders and harm the trust that they have built with their bank.
Incorporating Card-Linked Offers (CLOs) into rewards programs significantly enhances their appeal and effectiveness in promoting card usage and ensuring customer loyalty. These programs, ranging from cashback and points systems to travel benefits and exclusive event access, become even more attractive when they seamlessly offer personalized deals and discounts directly linked to card use. By staying abreast of the latest trends in rewards and creatively leveraging CLOs, issuers can ensure their cards stand out. This approach not only tailors rewards more closely to individual spending behaviors but also drives incremental spending. According to a 2023 report by Antavo, the lifetime value of members who spend points in a loyalty program is 6.3x higher than the average.
The popularity of Chase’s Sapphire Reserve card among affluent travelers highlights the effectiveness of well-crafted rewards programs combined with CLOs. The card is lauded for its travel rewards and airport lounge access, and consistently ranks high in consumer satisfaction surveys.
Collaborations with various businesses, such as retailers and travel companies, can offer customers additional benefits and convenience. Co-branded cards that combine the strengths of both parties can provide unique value propositions, making them more appealing to customers. In 2022, the top US co-branded credit card programs accounted for $757.9 billion in purchase volume. The most common co-branded cards are those affiliated with department stores, followed by Amazon/Prime, warehouse clubs like Costco, and airline/hotel chain cards. Many large retailers offer private label and co-branded cards, relying on the same issuer to handle both portfolios for consistency across new account acquisition initiatives, rewards accumulation paths, and customer service standards.
Effective communication and marketing are essential for promoting card products, engaging customers, and maintaining customer satisfaction. This includes leveraging social media, email marketing, and digital advertising to reach a wider audience. Personalized marketing messages based on customer data can increase engagement and ensure customer loyalty. Importantly, it can also lead to higher revenue. Marketers have found that segmented campaigns have led to a 760% increase in email revenue. For example, Bank of America utilizes targeted social media campaigns to resonate with specific customer segments, driving relevant product awareness and adoption.
Providing exceptional customer service is fundamental to building loyalty and increasing the customer base in banks. This entails not only addressing issues promptly but also exceeding customer expectations. Training customer service representatives to be knowledgeable, empathetic, and efficient can significantly enhance the customer experience especially after a customer experiences a card decline. Studies show that issuers can lose up to five future transactions after a single decline. Issuers can be proactive about reducing unnecessary card declines, or reactive by ensuring the customer service team has the skills to appease frustrated customers.
The financial landscape is constantly evolving, and issuers must adapt to stay relevant. For example, awareness of environmental and social governance (ESG) initiatives among consumers is a growing trend. According to the MasterCard Sustainability Report, 85% of consumers are prepared to engage in personal efforts to address environmental and sustainability challenges. Card processors-issuers like Nexi in Italy have built products around the concept of sustainability, with Sustainable cards made of recycled plastic, a carbon tracking app, and relevant donation options.
Achieving top-of-wallet status and ensuring customer loyalty is a challenge that requires a deep understanding of customer needs, commitment to innovation, and a focus on personalized experiences. By implementing these 8 strategies, issuers can drive customer loyalty, ensuring their cards are not only chosen more frequently but also valued and recommended by their users.