Bank loyalty programs need better customer data, Valuedynamx executive says

Bank loyalty programs risk overstating customer attachment when they treat monthly salary deposits as proof of a secure relationship, according to Campbell Shaw, VP Commercial, Financial Services at Valuedynamx. In a Finextra opinion post, Shaw said the commercial risk for retail banks is that spending activity may have moved to cards, wallets or other providers long before the primary account balance shows a clear outflow.

Shaw argued that salary payments are a weak measure of loyalty because they usually arrive through a standing instruction rather than a fresh customer choice each month. The more revealing signal, he wrote, is what customers do with that money in the period after it lands, from the first few seconds to the following weeks.

His view reflects a broader concern for incumbent banks: customers can keep a current account relationship while conducting more of their daily financial life elsewhere. Shaw cited open banking, embedded finance and challenger providers as forces that have reduced the friction of using multiple financial services firms at once.

Why are bank loyalty programs underperforming?

Shaw said many bank loyalty programs fall short because they are treated as short campaigns rather than long-term operating systems. In his assessment, banks need a single customer view across products, changing partnerships and offers that appear before customers spend, rather than after a transaction has already taken place.

Share of wallet refers to the portion of a customer’s total financial activity or spending captured by one provider. Shaw described it as a delayed signal when used as the main health measure, because a customer may have already shifted daily spending habits before the bank sees a material change in balances or product usage.

The data problem is internal as well as external, according to Shaw. He said banks often lack a joined-up view across mortgages, cards, current accounts and savings, leaving different product teams to treat the same person as separate customer records for practical marketing purposes.

Shaw said banks still have a potential advantage over retailers and technology firms because they can hold a long-term view of household spending across many categories. That view can include recurring and episodic expenses such as rent, childcare, holidays and home improvements, rather than purchases inside a single merchant ecosystem.

He argued that many institutions fail to use that advantage, instead offering generic cashback schemes tied to a narrow range of categories. In his view, that structure can exclude some of the broad-spending customers banks most want to retain, because those customers do not concentrate their activity in a few eligible areas.

Shaw set out three elements he believes are more effective:

• Broad everyday value available to a wide customer base.
• Offers linked to life events such as buying a first home, having a child or changing jobs.
• Selective premium partnerships that create differentiation beyond matching rates or rewards percentages.

The central point of Shaw’s argument is that a salary deposit should be treated as the beginning of an active relationship, not as evidence that the customer is secure. For banks, that places retention strategy closer to data infrastructure, product coordination and timely relevance than to periodic marketing refreshes.

This story draws on original reporting from Finextra Research.