Lloyds Banking Group has rolled out
an upgraded customer loyalty programme as it looks to meet
competitors head-on in the drive for UK current accounts. The bank
believes it will continue to be a frontrunner in what could be a
significant year of change for the country’s retail banking market.
Dan Jones
reports.
Halifax and Bank of Scotland (BoS),
two retail banking subsidiaries of the UK’s Lloyds Banking Group
(LBG), have launched a new customer loyalty programme in the latest
New Year salvo within the hotly contested UK retail banking
market.
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The initiative, named Rewards at Halifax and
Exclusives at BoS, will reward customers who fund their Halifax or
BoS current account with at least £1,000 ($1,629) per month by
offering them a range of discounts on other products and
services.
For Halifax, the initiative expands upon both
a range of current accounts launched in 2009 and the bank’s
previous loyalty-based product programme for current account
customers, Extras.
Speaking to RBI, Mike Regnier, director of
current accounts at Halifax, described the Halifax reward current
account, launched in February 2009, as having been “very
successful”.
Long history of loyalty
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By GlobalData“We have a long history of offering
loyalty-based products to our existing customers,” said
Regnier.
“We launched Extras at the beginning of 2009
and prior to this have featured a range of innovative products and
offers linked to cross product holdings.
“The relaunch of Halifax Extras as Halifax
Rewards extends the concept of rewarding our customers from our
current account range across to other areas.”
Those areas now encompass savings, mortgages
and credit cards. Current account customers taking a new product
with Halifax will enjoy an extra 0.2 percent on variable savings
products for one year; a reduction of at least 0.2 percent on the
interest rate charged on their mortgage; and an extra three months
at 0 percent on purchases using the Halifax All in One card – a
product which already offers 0 percent on balance transfers and
purchases for the first nine months.
The bank says that making full use of these
offers will make customers over £350 better off in their first year
alone, a figure which includes the £60 per year that customers can
make from Halifax’s existing Extras offer of a monthly reward
payment of £5 for customers who fund their account with £1,000 or
more per month.
That scheme is indicative of the UK retail
banking industry’s growing interest in giving back more to current
account customers. The trend could be seen as confounding
expectations: in 2009, when the threat of UK bank overdraft fees
being outlawed was still a distinct possibility, many observers
believed the industry could end up abandoning its tradition of
fee-free account provision.
But the customer loyalty push, exemplified by
LBG’s latest offering, will not necessarily preclude the
introduction of such fees.
Speaking at VRL’s Loyalty in Financial
Services round table in London in November 2009 (see RBI 624), Patrick Muir, head of marketing
at Citigroup’s UK direct bank Egg, said: “The customer now knows
there is no such thing as free banking but they want to understand
where it comes from and where it goes to.
“[With loyalty programmes] we can be upfront
about where the money comes from and goes to, how much we invest in
this and what the return is, and the amount of money you are paying
for the service, as long as we ensure you are getting full
value.”
In terms of existing current account deals, UK
retail banking customers can look not only to LBG; HSBC is offering
up to £100 to customers who open a current account with the bank as
part of its annual ‘January sale’ promotion.
Similarly, Alliance & Leicester, due to be
rebranded under the name of parent group Santander later this year,
has re-launched its own premier current account promotion giving
new customers a £100 signing-up bonus.
The much-vaunted retail banking debut from
supermarket chain Tesco, which intends to begin offering UK current
accounts later in 2010, is likely to further shake-up an industry
which has already undergone seismic changes over the past few
years.
“Rewards is all about building meaningful and
lasting relationships with new and existing customers,” said
Regnier.
“We have always had a clear strategy of
building long-term relationships with our customers so we can make
them better off across a broader range of their financial
needs.
We achieve this by continually striving to
meet their customer service needs as well as offering great value
products.”
Challenges ahead
For each competitor there will be
challenges: for Tesco, the task of gaining a foothold and new
customers in a highly entrenched market; for Santander and HSBC, to
find a way of reeling in market leaders LBG, Royal Bank of Scotland
and Barclays. In the aftermath of the financial crisis the core
issue for LBG itself, arguably, is one of reputation.
At the height of the crisis, rivals such as
Co-operative Financial Services said they were seeing a significant
number of new current account openings as a result of customers
migrating away from larger, more troubled institutions. But Regnier
remains confident that Halifax will continue to be a force to be
reckoned with.
“We are not stating any targets for Rewards,
but historically we have been a net beneficiary of the new and
switchers market and would look to maintain this,” he said.
