The battle for customers and their loyalty between banks was raised a notch this week, when United Arab Bank (UAB) launched its FlyWards programme.
Tom Smith, the Sharjah-based lender's executive vice president and the group head of retail banking, says loyalty programmes are becoming more important to retain and attract new customers - and what they want are air miles.
Why do banks offer loyalty programmes?
As the name suggests, it's to ensure, first of all, customer retention. So having acquired a customer, you don't want another bank coming to the door the following day with an offer that attracts the customer again. So I mean loyalty, by its very nature, you are saying you want the long-term relationship with the customer. You want to give them a reason to stay with you over a period of time and this is one of the primary ways of doing that. It's also a way of acquiring new customers.
Is this what consumers want?
Absolutely. We have conducted focus groups on what is the best way to both retain and acquire new customers. What customers look for most in a bank is they want the basics done well. They are not looking for anything glamorous any more, anything out there that is slightly different. If you've got a primary account, what you want typically is a debit card, a credit card and an account to help you do your daily transactions. On the credit-card side, among the customers we talked to, what attracts them to a credit-card programme is miles - air miles. Every single person we spoke to said that. So that was the genesis of FlyWards.
In the past, loyalty programmes have usually been skewed towards banks, such as encouraging spending on high-interest credit cards. What makes UAB's programme different?
What we believe makes the difference is that we are also encouraging areas like saving. Obviously, we offer points for people who transfer their salaries to us. Typically, you are going to save from your salary and income. We encourage people to save with us through FDs [fixed deposits] and give points through FDs as well. We also give points for debit-card transactions. You can use your debit card at the supermarket and you will actually get the points for doing that transaction as well. We think that's what makes us different from a lot of the programmes out there. A lot of non-banking financial institutions only offer credit-card programmes. Again, where we are different from the banks is that most of them offer one airline, whereas we are offering 360 airlines. [There are] no black-out dates on this programme. We can absolutely guarantee you will get the cheapest price on that day. Again, the cheapest flight may not be the airline you specifically want, but you will get the option of taking that airline also.
Will FlyWards be broadened to take in other deals, such as dining and shopping?
Absolutely. The main area people look at is travel and accommodation. So there are the 360 airlines and there are the 150,000 hotels available as well. We will have tie-ups with other merchants so you can get points when you eat out or shop. Discounts will also become available. We've started with some products, which are credit cards, debit cards, fixed deposits and salary transfers. But it will broaden into other products United Arab Bank offers, such as mortgages and personal loans. This time around, we haven't actually started with a loan because, obviously, we are attempting to encourage people to bring their primary account to us, to do their saving with us.
Do loyalty programmes offer value for money?
Definitely. Specifically, this programme guarantees you the best options available for you among the 360 airlines at the moment and that is in any class. At a macro level, loyalty programmes reward customers for choosing a financial institution. So recognising customers who are going to stay with us for a number of years, encouraging them to stay with us for those years, we're saying to them that we value you. The loyalty programme reflects how much value the bank puts on its customer base and I think it's worth highlighting to consumers what is available and the differentiation that exists with these programmes.