Winning loyalty in a digital-first world

January 28, 2022 | By Matthew Driver

As we move into 2022, two factors look set to continue to have a significant influence on our digital lives: (i) the ongoing impact of Covid-19 as new variant surges reinforce the importance of digital channels, tools, and devices to remain connected at work and at play, and (ii) the acceleration in the convergence of digital technologies such as Artificial Intelligence (AI), machine learning, cloud computing and blockchain, enabled by high-speed 5G connectivity, most commonly referred to as ‘Web 3.0’.

For the consumer loyalty landscape, and particularly in financial services, these factors will continue to quicken the adoption of more innovative, intuitively designed, digital-based solutions, especially by those aged under 35. With open banking further accelerating competition, new digital players are adding another dimension for traditional banking players to contend with, as consumers are becoming more open to having a banking relationship with these companies.

As such, future success will be increasingly centered on the ability to deliver the products, services and rewards that consumers desire through the online channels and platforms they prefer. For organizations to remain competitive in an increasingly crowded marketplace, they need to consider three key strategies for winning and retaining consumer’s loyalty: (1) delivering digital-first experiences; (2) engaging consumers with hyper-personalization; and (3) building trust through best-in-class data privacy and security.

A digital-first delivery model
Over the past two years we have witnessed unparalleled levels of digital adoption across all aspects of people's lives. Life during the pandemic accelerated the need for consumer solutions that are touchless, convenient and digital-first.

Today’s consumer is not only more digitally aware, but also more demanding in terms of the kind of engagements and experiences they expect, with more people turning first to online apps and platforms for many of their transaction needs. Indeed, in some advanced digital markets such as Korea, Singapore, and Hong Kong, we are already seeing the emergence of a digital-only approach, driven in no small part by the emergence of newer, fintech-powered companies that are introducing a new level of competition.

Traditional financial organizations, in particular, need to ensure they have the digital infrastructure to be able to meet both the consumer demand and the threat posed by new fintechs. An approach that can respond in real-time to consumers’ needs is vital, and the players that will emerge as the winners are those that can deliver to consumers a seamless, digital-first experience.  

Personalization and contextual engagement
Technology has also fundamentally changed how financial services are experienced by consumers. Long gone are the days of banking by appointment at the convenience of the bank manager. Instead, digital tools are putting individuals in control, driving demand for a highly-personalized approach, based around consumer choice, flexibility, and convenience.

If loyalty programs are to succeed within this new paradigm then they need to be able to implement a much higher degree of personalization throughout the entire loyalty program lifecycle, from acquisition and on-boarding to retention and usage.

Importantly, personalization needs to go beyond just offers and rewards and extend into how people engage with loyalty programs. Not only are consumers now looking for control over how and where their offers are redeemed and spent, they also expect rewards that are timely, personal, and contextually appropriate to their current needs and circumstances. Therefore, ensuring consumers receive the right offers through the right channels in the right sequence of events is crucial.

To achieve all of this, the use of Web 3.0 technology such as AI and machine learning to turn data into actionable insights that optimize against changing customer habits will be key. At Mastercard, for example, we are enhancing our personalization and contextual marketing capabilities with ethical AI, based on anonymized and aggregated purchasing and consumer permissioned data. This has allowed us to build an offers ecosystem that delivers a hyper-personalized user experience, powered by insights derived from high-quality data and a transparent and ethical framework. By enabling our partners to better target their existing and potential customers with useful and contextually relevant rewards, a much deeper sense of trust is established. In short, consumers have confidence that the program is delivering what they need, when they need it.

Building trust, particularly around data privacy
As the shift to digital quickens, one of the biggest issues many companies face is in ensuring that people’s data is fully secure. Loyalty is built around trust, and the extent to which an institution can guarantee online privacy and security for its customers will determine that trust. Consumers that are not confident that their data is wholly secure will simply take their business elsewhere.

We are now living in a world where individuals are able to own and manage their own data. New technologies such as blockchain are predicated on transparency and decentralization, with users able to see who has access to their data and what they are using that data for. This is helping pave the way for a more secure and customer-centric internet, and it is important that organizations are investing in the right tools and technologies needed to engender trust. Companies must provide consumers with the choice to opt-in or opt-out of sharing their data, as well the ability to access all their data and even ask for it to be modified or deleted if necessary.

This consumer-centric approach to data privacy is critical, which is why Mastercard prioritizes a “privacy-by design” approach, where a culture of protecting personal data is embedded across the organization.

Ultimately, nobody knows for certain how the next year will play out, or indeed what the overall impact new digital technologies will have on financial services. But what we do know is that a personalized, digital-first approach to consumer engagement that keeps privacy, transparency and fairness front and centre, will go a long way to winning and retaining loyal consumers.

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Matthew Driver, Executive Vice President, Head of Services, Asia Pacific, Mastercard