Q&A: How Banks Can Drive Front-of-Wallet Loyalty in a Neobank World

Customer loyalty isn’t what it used to be. Consumers aren’t just shopping around, they’re switching around. In fact, 1 in 4 customers switch their primary card every year. It's clear that a transformation across the bank loyalty landscape is happening. Banks are being forced to rethink their loyalty strategy and ensure their cards and services are the go-to-choice. Gen Z alone is reshaping the landscape with their loyalty being directed to banks and brands that meet their demands of instant gratification, and preference for digital first engagement. Nearly 70% of this audience interacts with their bank app on a weekly basis which means if you are making your bank app a destination with embedded experiences that complement their daily digital routine, you’re on the right path to minimizing churn. Neobanks can operate 24/7 via mobile apps with intuitive interfaces.

Let's unpack some of the biggest challenges and opportunities facing marketers today. Spoiler alert: you’re already behind if your strategy stops at acquisition and retention.

Q: Let’s get started – what’s the #1 challenge for banks right now?

Personalization at scale. This means, banks need to invest in the right infrastructure and data analytics to communicate with their customers at a personal level and have hyper-targeted marketing. Banks and credit card programs have invaluable customer data, but some aren’t using that data to build a long-term relationship with their customer on an individual level. AI and machine learning is a great way to understand spending behaviors and understand what makes that customer tick. If you don’t have the tech in place to glean real-time insights about cardholder or customer behaviors, yep you guessed it, you’re behind.

Banks are realizing that acquiring a customer is just the beginning. The real value comes from how often they use your services.

Banks that are prioritizing performance marketing and customer first strategies are seeing stronger loyalty and retention.

Q: But if I’ve already acquired the customer, isn’t the hard part over?

Not even close

Acquisitions are great, but they must go hand-in-hand with retention. Banks need to consider the play beyond the first incentive. If you’re not giving customers a reason to stay – and consistently, at that – they won’t.

But it doesn’t just stop there. Banks need to consider early adoption, as well as Customer Lifetime Value and how important milestones and life stages fit into the cycle – basically, how do you show up when customers need you most? And do you know what’s important to your customer? We’re in a multigenerational banking evolution and Gen Z and Millennials will have very different expectations than Gen X or Boomers. For example, nearly half of our younger generation of up-and-coming power buyers are turning to social media for financial insights and social values to drive their decisions.

Q: What about neobanks, how are they changing the game?

Neobanks are causing a shake up in the bank industry and drawing in those digital first customers. On top of that, they can offer more attractive fees and interest rates because they don't have the same operational costs that brick-and-mortar banks have. This is disrupting the traditional banking model and forcing a better customer experience to avoid attrition.

Forbes research suggests that the number of US customers using a neobank as their main debit card has grown from 1% in 2020 to 9% in 2024. Neobanks are attractive because of their convenience and user experience.

Why? Because neobanks are designed to be front-of-wallet. They’ve baked in smart features – like budgeting tools, slick apps, and personalized touches – that drive this daily use. Traditional banks are playing catch-up.

And the big challenge that traditional banks face is that the goalposts keep changing, as neobanks evolve. Pay attention to the share shift and loss of market share in play.

Q: How can banks earn front-of-wallet status, then?

That’s the golden question financial marketing leaders are asking! They want to know how to improve transaction frequency and front-of-wallet behavior with existing customers, while continuing to attract new ones.

The answer is simple – it’ll have to be incentivized.

Banks need to use incentives to increase purchase frequency, giving their consumers a reason to choose their card over everyone else. But it’s not just about rewarding the customers they already have; they also need to use incentives to entice new customers.

What do those incentives look like?

Consumers care about one thing – what’s in it for me?

It’s all about creating a positive association with your brand by rewarding usage. You can’t incentivize consumers to spend more or overextend themselves, but you can incentivize using your card as their go-to. This means going beyond sign-up bonuses and thinking long-term.

The reality is, banking is a highly saturated market. That’s why you see the same offers – like cash incentives – over and over again, and why consumers find it so easy to switch between providers.

Cash incentives create a purely transactional relationship – you spend this, we give you that. This spikes sign-ups but kills long-term engagement, as customers leave as soon as they’ve got the money you promised. At the very least, you’ve become forgettable.

You need to stand out in a sea of sameness and differentiate your brand. Push beyond cash incentives to offer things your customers will truly value like experiences.

Put simply: give your customers something meaningful and personal. 80% of consumers are more likely to make a purchase when brands offer personalized experiences – so what’s stopping you?

Q: How do you know what your customers value?

Banks have all the data they need to understand their customers at their fingertips. The challenge is often time, tech or headspace to make sense of it.

Tap into your customers’ interests, needs and lifestyles, and offer experiences that align with these. Think dining rewards, wellness perks, personalized travel offers – things that feels aspirational but attainable. That’s what makes you memorable. Gen Z and Millennials long for local content and rewards that meet their values systems.

The best part is – the more a customer interacts with your brand, the more data you’ll have to provide experiences they’ll love. At TLC, we call this the Virtuous Data Loop, which allows you to tap into more moments that actually mean something to your customers and keep them coming back. Ask yourself: how can my strategy increase lifetime value, not just volume?

Cash incentives do work, so you shouldn’t stop these entirely. It’s about finding the balance between cash bonuses and valuable experiences that make your brand stand out. Banks are actively trying to bring down operational costs of their reward mix and increase both the efficiency and efficacy of their rewards.

Q: How can brands offer personalised incentives at scale?

Rewarding customers regularly with purely cash incentives just isn’t sustainable and it’s tough on your P&L. That’s why brands need to pivot into experiences. But if the cost of offering bigger and better incentives like this also seems daunting, that’s where TLC can help.

We partner with over 100,000 brands globally to offer a variety of choice, but this also allows us to keep costs affordable. This is our Reward Value-Cost Paradox. So, brands can reward their customers more generously, more often, without breaking the bank. Our experience-based reward network is a fraction of the cost of retail and easily solves your cost per point (CPP) and acquisition cost. It's proven in our case studies and why many of the world's largest brands choose us.

Q: How do you know if you’re getting it right?

You’ll know you’ve got a high-value customer when they use your account for everything – they put their salary into it, they spend on the card frequently, they explore other product offerings with you.

It’s about creating trust and transparency with your brand; an emotional connection that goes beyond numbers. And you do that by showing you understand them with personalized incentives that get better the longer they stay with you.

You’ll truly know you’ve got it right when customers not only stick around, they recommend you to others too. Over 70% of consumers are more likely to recommend a brand if it has a good loyalty program – so this needs to be a priority.

Transforming customers into loyal brand advocates is the ultimate goal.

Q: What’s the secret to lifelong customer loyalty?

Banks need to think beyond products to how they can show up for their customers throughout life’s key moments. This means thinking about banking as a lifecycle- from pocket money all the way to retirement.

Start the conversation early with student accounts, credit cards for young professionals, mortgages for families, and wealth management for retirees. How are you rewarding them with relevant incentives as you go? Think movie tickets, discounts on streaming services, free coffees for their morning commute…

The key is to ensure incentives get better the longer they stay, so introduce a tiered benefits strategy for the best results. Free movie tickets turn into wellness retreats, discounts on flights, and free hotel stays.

Give customers a reason to value you – by showing that you value them – and they’ll keep choosing you.

Q: Any final advice for Financial Services marketers stuck in the acquisition loop?

Start with one question: how are you earning your way into your customer’s daily habits?

Acquisition and retention aren’t separate funnels, they’re a loop. Once you’ve won a customer, what are you doing with them after that? If you're not activating customers fast, giving them something to stay for, and reinforcing usage, you're just funding someone else's future customer.

The brands that win in Financial Services don’t just open accounts – they build relationships.

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