Learning From Banks: How Banks Reward Their Customers

The competition to satisfy customers is fierce in the banking industry. From fintech companies to online-only banks, there are plenty of financial institutions that are disrupting business-as-usual. This transformation has provided customers with options that were previously unavailable to them.

In an effort to attract (and retain) customers, many banks are offering loyalty and rewards programs. Studies show that customers are responding favorably to these programs. According to the experts at SoFi, 57% of adults in the United States have at least one rewards credit card. Below are a few ways that banks reward their customers. Read on to see which tactics can apply to your business.

1. Cash Back Rewards

The premise of cash back programs is simple. When customers make purchases using a debit or credit card, they receive a certain percentage as a cash incentive. Depending on the bank, the percentage can be as much as 5%. 

Here's how this program works with a 5% cash back offer. You buy a new refrigerator with your eligible bank card for $1,000. After your transaction has been processed, you will receive $50 back from your purchase. 

Common ways for customers to redeem their cash rewards are:

●      Direct Deposit

●      Paper Check

●      Gift Cards

●      Credit Card Balance Reduction

●      Charitable Contributions

2. Restaurant and Retail Offers

Banks understand how expensive it can be when their customers dine out and shop. That's why they offer restaurant and retail incentives with partner businesses. When customers use their debit or credit cards at certain stores, they can receive immediate discounts on goods and services. Deals may be available for gas, airline travel, furnishings, fast food, fine dining, coffee, groceries and drug stores.

3. Points Programs

Customers who are enrolled in this type of program accrue points for each purchase. After the points accumulate to a certain amount, they can redeem the points for a specific product or service. In addition to purchases, customers can earn points for maintaining a certain balance in their checking accounts each month. 

4. Reduction or Elimination of Overdraft Fees

Now that customers have more options, banks are finally starting to reduce their fees. A few years ago, the average bank overdraft fee was $35 per transaction. For people who were experiencing financial hardships, these fees made it more challenging for them to recover.

Overdraft fees can generate as much as $150 million in additional revenues for major banks. However, these high fees were wildly unpopular with customers. The sudden rise of online banks and third-party financial advisors made banking less expensive for customers.

In addition to the reduction of overdraft fees, some banks provide customers with an automatic line of credit in the event of an overdraft. This incentive gives customers time to get their accounts back to good standing.

When it comes to banking services, customers are demanding more and banks are listening. The cash back rewards, restaurant/retail offers, points programs and the reduction/elimination of overdraft fees create customer loyalty and satisfaction.