# Banks should ditch cash to boost customer loyalty
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2017-03-29
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: Ditching Cash: The Key to Customer Loyalty for Modern Banks?
Meta Description: Discover how ditching cash for mobile payment technologies could be the key to engaging and retaining customers in the digital age. Find out more!
URL: https://financedigest.com/banks-should-ditch-cash-to-boost-customer-loyaltyhtml

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_By **Christopher Evans**, Director at Collinson Group_

The cashless society is not a new concept. Debate about the future of cash has raged since the introduction of magnetic strip cards decades ago but in the age of the digital customer, banks are struggling to engage and retain customers, with millennials and generation Z proving the most challenging. Could ditching cash be the route to [customer loyalty for the modern bank](https://www.financedigest.com/the-bank-of-me-why-banks-need-to-be-totally-customer-centric.html "The bank of me – why banks need to be totally customer centric")? Collinson Group research suggests yes and that it is a win for both [customer and bank](https://www.financedigest.com/insight-into-tomorrows-retail-banking-customers.html "INSIGHT INTO TOMORROW’S RETAIL BANKING CUSTOMERS").

We polled 2,500 loyalty programme [members across](https://www.financedigest.com/gumgum-appoints-new-staff-members-across-germany.html "GumGum appoints new staff members across Germany") the globe and found that they used a mobile wallet (such as ApplePay or Android Pay) an average of seven times a month – this figure was as high as 10 times per month in the US. Our research also found that 71% favour brands that are early adopters of technology. Despite consumer interest in these services, [a number of major banks have yet to announce plans to support services such as Android Pay](http://www.telegraph.co.uk/technology/2016/05/18/barclays-has-no-plans-to-support-android-pay/), including Barclays, Natwest and Santander.

**Convenience and reward**

Mobile phones are an integral part of everyone’s lives – from capturing and sharing memories, to booking travel, grocery shopping and keeping up with news. There are now more mobile phones on the planet than people [\[1\]](#_ftn1). With [apps providing information on everything from how we eat](https://www.financedigest.com/analysis-eat-or-be-eaten-food-delivery-apps-have-knives-out-as-pandemic-boom-fades.html "Analysis-Eat or be eaten? Food delivery apps have knives out as pandemic boom fades"), exercise and source entertainment, to how we sleep, it is natural for people to use their phones to complete financial transactions.

Using [mobile as a payment technology](https://www.financedigest.com/the-cleanroom-technology-market-to-be-on-the-mobility-move.html "The Cleanroom Technology Market To Be On The Mobility Move") makes customers’ lives easier and is more efficient. No more fumbling around for cash or trying to remember different pins – just a simple wave of a mobile device or a biometric scan and the transaction is complete.By making mobile payments even more accessible, banks will generate positive brand association and will [build loyalty with their customers](https://www.financedigest.com/how-do-you-build-customer-loyalty-3-steps-to-follow.html "HOW DO YOU BUILD CUSTOMER LOYALTY? 3 STEPS TO FOLLOW").

If they don’t they risk missing out on revenue. Research from financial analyst firm, Lafferty, reveals that non-bank players dominate the US [mobile payments](https://www.financedigest.com/the-future-of-mobile-payments-and-e-wallets.html "The Future of Mobile Payments and E-Wallets") market, led by initiatives such as Walmart Pay, Abra and Samsung Pay. They also found that P2P transactions are gaining more popularity in the US, when compared to other countries. About $7.5 billion was transferred using Venmo, one of the most popular P2P money transfer services, during 2015. [\[2\]](#_ftn2)

Many [customers only use banking](https://www.financedigest.com/how-will-the-introduction-of-digital-banking-impact-customer-perception-and-overall-loyalty.html "HOW WILL THE INTRODUCTION OF DIGITAL BANKING IMPACT CUSTOMER PERCEPTION AND OVERALL LOYALTY?") services a few times a month but are likely to make contactless payments several times a day. Unlike a credit card, a mobile payment also [creates the opportunity](https://www.financedigest.com/tire-materials-market-to-create-an-incremental-opportunity-of-us-99-99-bn-by-the-end-of-2028-fmi.html "Tire Materials Market to create an incremental opportunity of US$ 99.99 Bn by the end of 2028 – FMI") to deliver a relevant offer, reward or additional service to the customer.  For example, a reminder about a balance and the [opportunity to transfer more money; a chance to earn loyalty points in the future or to use those points to pay for purchases](https://www.financedigest.com/with-the-end-of-easy-money-there-are-still-serious-opportunities-in-africa.html "With the end of ‘easy money’ there are still serious opportunities in Africa").  These are [powerful opportunities for banks to offer](https://www.financedigest.com/cycling-power-meter-market-to-offer-lucrative-growth-opportunities-for-players-during-the-forecast-period-2018-2026.html "Cycling Power Meter Market to Offer Lucrative Growth Opportunities for Players During the Forecast Period 2018 – 2026") greater convenience, relevance, timeliness and rewards to customers.

Organisations are recognising the convergence between payments and loyalty, with First Data acquiring Perka (a loyalty platform) and Clover (a point of sale solution), and Visa investing in Square, so that it can offer a closed loop digital payment and retail system.

**Using data and [digital wallets](https://www.financedigest.com/digital-wallets-bring-value-to-banks-and-retails.html "digital wallets") to become indispensable to consumers**

Perhaps the biggest [opportunity arising from the cashless experience is the chance to generate](https://www.financedigest.com/surgical-masks-market-emerging-trends-and-will-generate-new-growth-opportunities-status-2030.html "Surgical Masks Market: Emerging Trends and Will Generate New Growth Opportunities Status 2030") more data and use this to retain customers.

A traditional [card payment gives the bank](https://www.financedigest.com/goodbye-plastic-hello-titanium-why-metal-bank-cards-are-the-future-of-finance.html "Goodbye plastic, hello titanium: why metal bank cards are the future of finance") insight about a purchase based on outlet, time and location. For [mobile payments, more information is available such as links to social media profiles, mobile browser](https://www.financedigest.com/uk-investigating-apple-google-mobile-browser-dominance.html "UK investigating Apple, Google mobile browser dominance") history and other contextual information through collaboration and shared APIs. Analysis of this behavioural data, including real-time data can help banks to create better services, [deliver great experiences and provide more valued rewards for customers](https://www.financedigest.com/financial-companies-delivering-better-value-for-customers-in-loyalty-programmes-compared-to-other-sectors.html "Financial companies delivering better value for customers in loyalty programmes compared to other sectors").

Today the majority of consumers have used [digital wallet](https://www.financedigest.com/digital-wallets-the-new-way-to-pay.html "Digital Wallets: The New Way to Pay") services such as PayPal, increasingly for face-to-face as well as online transactions.  Consumers will choose the fastest, most convenient and [secure digital](https://www.financedigest.com/how-digital-identity-verification-will-revolutionize-security-defenses-in-the-financial-services-industry.html "How Digital Identity Verification Will Revolutionize Security Defenses in the Financial Services Industry") payment option and offering a frictionless, channel agnostic service is a way for brands to add value to consumer experiences.

To demonstrate the potential for banks, in China the two main players in this area – Tencent’s WeChatPay and Alibaba’s AliPay are far [ahead of the West in terms of frequency of use and share](https://www.financedigest.com/energy-stocks-boost-european-shares-ahead-of-ecb-minutes.html "Energy stocks boost European shares ahead of ECB minutes") of wallet across all demographics.   Alibaba is also expanding into other [areas](https://www.financedigest.com/4-areas-of-finance-you-should-be-watching.html "4 Areas of Finance You Should Be Watching") of financial services, with its proposed acquisition of US-listed money transfer service, MoneyGram International.

**Overcoming the barriers is the first** [step to success](https://www.financedigest.com/four-steps-to-a-successful-ma-workforce-integration.html "Four Steps to a Successful M&A Workforce Integration")

[Banks are taking steps towards a digital first engagement strategy](https://www.financedigest.com/can-ai-supercharge-your-banks-digital-transformation-strategy.html "Can AI supercharge your bank’s digital transformation strategy?") but these changes are incremental. One of the biggest barriers banks face is overcoming legacy systems and infrastructure, with new platforms facilitating rapid analysis of big data and increased collaboration with [third parties through open](https://www.financedigest.com/volvo-car-considers-opening-third-plant-in-europe.html "Volvo Car considers opening third plant in Europe") APIs. By working with the right partners and adopting a digital first mindset, such as facilitating the reduction of physical cash, banks have a [massive opportunity to increase revenue](https://www.financedigest.com/analysis-twitters-massive-revenue-drop-adds-to-heavy-debt-burden.html "Analysis-Twitter’s ‘massive’ revenue drop adds to heavy debt burden") and boost loyalty.

**Final thoughts**

[Banks have a significant opportunity to build real-time loyalty initiatives based on behavioural data](https://www.financedigest.com/asia-shares-edge-higher-wary-of-us-bank-data.html "Asia shares edge higher, wary of US bank data"), enabling customers to collect and redeem rewards that are relevant, personal and broad enough to engage more members, more of the time.

A completely [cashless society](https://www.financedigest.com/four-reasons-why-smes-in-developing-nations-should-embrace-a-cashless-society.html "Four reasons why SMEs in developing nations should embrace a cashless society") is still a long way off, but there are many reasons why banks should champion contactless payments and couple this with loyalty programme apps or messaging platforms. It provides the opportunity for [consumers to pay with points and cash](https://www.financedigest.com/big-companies-manage-to-pass-on-soaring-costs-to-cash-strapped-consumers.html "Big companies manage to pass on soaring costs to cash-strapped consumers"), increasing the utilisation of loyalty currency, and presents an improved customer experience and more value to customers overall.For financial services brands, it [offers the opportunity](https://www.financedigest.com/c-arms-market-to-offer-ample-growth-opportunities-by-2027.html "C-arms Market to Offer Ample Growth Opportunities by 2027") to deliver a differentiated, personal, relevant and unique customer experience. It is undoubtedly a [win for customers and a win for banks](https://www.financedigest.com/banking-crisis-breakthroughs-win-nobel-economics-prize-for-bernanke-diamond-dybvig.html "Banking crisis breakthroughs win Nobel economics prize for Bernanke, Diamond, Dybvig").


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