Customer Acquisition Costs in Financial Services are soaring – yet half of customers who churn don’t make it past the first 90 days after signing up.
So, you’re spending more than ever to acquire customers, only for 50% of them to leave almost immediately. Meanwhile, customer retention budgets remain shockingly low in comparison.
Something’s got to change.
Too many Financial Services brands rely on sign-up bonuses to acquire new customers as a quick win. But they’re costly, unsustainable and above all, do nothing to drive loyalty for your brand.
The reality is – acquisition isn’t the issue. Consumers love to sign-up for the cash bonus you’re giving away. The real problem is giving them a reason to stay once the cash is gone.
Spending more on customer acquisition won’t fix this. Spending smarter will. Keen to know more? Let’s dive in.
Financial Services brands are addicted to acquisition.
Success is tied to how many people they can get through the door, but there’s a huge problem – acquiring a new customer can be up to seven times more expensive than keeping an existing one engaged.
What’s more, marketing budgets fell by 15% in 2024 from 9.1% of the company’s revenue in 2023 to just 7.7%. Yet, the expectation to hit targets and do more with less keeps growing, especially in a competitive industry like banking.
So, why are so many Financial Services brands burning their budget on acquisition?
Competition in the sector is fierce with the rise of neobanks giving consumers more options than ever before. Everyone is locked in a bidding war for new customers, falling into the trap of relying on costly sign-up offers as the
only solution. When they want more sign-ups, they throw more money at acquisition.
But bigger budgets don’t always mean better results.
While cash incentives will always turn heads, they’re not sustainable – every pound you give away is a pound off your bottom line. This becomes a financial black hole when you’re signing up new customers with no promise of retention.
Cash bonuses are also generic and do nothing to build a relationship with your consumers. How can your brand stand out when it’s doing the same as every other brand in the market?
Banks need to think beyond numbers to the people behind them. In an age where consumers say their relationship with banks is becoming increasingly impersonal, banks need to push harder to turn transactions into connections. By building more meaningful personal relationships with their consumers, banks could increase revenue by up to 20%.
But how do you do this? Balance your strategy with short-term cash bonuses AND longer-term incentives designed to build engagement, ongoing value and above all, retention.
TLC can help you transform your acquisition program through experience-led incentives. Our pioneering network of over 100,000 experiences worldwide empowers you to offer customers personalised perks that match their interests and passions from day one – giving them a reason to stick around long after they’ve signed up.
Too many Financial Services brands are equating sign-ups to success. But those sign-ups mean nothing if they don’t become active users.
Not only do inactive users inflate your statistics, they run a higher risk of switching to rival banks – around 40%, to be exact.
So, how do you encourage customers to use your product? You need to give them a reason to. Research shows that customers who use a financial product within the first 30 days are 80% more likely to adopt it and continue using it over the long term – so you need to act quickly.
Offer personalised incentives tied to specific behaviours within the first month, such as card activation, frequent transactions or average spend. If customers are rewarded for the little things, this will have a big impact on retention.
Another way to encourage customers to stay is to make the onboarding process as painless as possible. This is particularly important in the age of digital banking when 63% of customers will abandon the process if it’s not seamless. You don’t want to lose customers before they even begin.
But sign-ups aren’t the only metrics skewing success:
These are all metrics that may look nice in reports, but do they translate into tangible results?
Move past these metrics to more meaningful numbers:
Ultimately, brands need to move away from short-term fixes to develop long-term customer retention strategies. The key? Building an emotional connection with customers by offering personalised perks, surprise and delight moments, and thoughtful touches that go beyond cash.
How can you create meaningful value at life’s milestones? Besides a loan, how can you support customers moving house? Maybe by taking care of hot meals with takeaway vouchers while they settle in. Beyond investment options, how can you make retirement even better? Offer travel perks so they can start ticking off their bucket list.
Studies show customers that have an emotional relationship with a brand have a 306% higher lifetime value. So, investing in the customers you have as well as acquiring new ones, is the secret to success.
Customer loyalty can no longer be an afterthought. Yet only 3% of banks capture over 80% of their customers’ share of wallet. Why are so many brands struggling to gain front-of-wallet status?
Let’s break it down:
Driving loyalty in today’s competitive financial landscape means consistently delivering value beyond transactions. Customers already expect you to keep their money safe, provide easy access to their cash, and trust you know what you’re doing – as the bare minimum. You need to go above and beyond expectations to unlock true loyalty.
The strongest brands know reputations are built on added value, not just the products and services they offer.
But how do you know what your customers value? Use the data you already have.
Banks are sitting on a goldmine of data that can be used to understand their customers’ interests, habits, passions, lifestyle – you name it. They just need to use it to offer the right incentive, at the right time.
Tapping into the life stage your customers are at will allow you to offer incentives they will truly value. Whether they’re a student at university, starting their first job, getting married or moving home, every financial decision is tied to real-
life needs.
Think about how you can help in these vital moments:
If you get this right, 83% of customers are willing to share their data to create a more personalised experience. And the more a customer interacts with your brand, the more data you have to provide more relevant experiences – we call this the Virtuous Loyalty Data Loop.
But loyalty doesn’t end there. If you want your customers to stay with you long-term, you need to keep giving them a reason to.
Implementing a tiered loyalty program is one of the best ways to keep giving higher value rewards to customers that stay, with the value continually increasing the longer they stick around. If you keep using the same incentives over and over, customers will get bored. They’ll also feel undervalued if you give new customers the exact same perks as them – you need to make them feel special.
If the cost of bigger and better rewards seems unscalable, that’s where TLC’s Reward Value-Cost Paradox comes in. We partner with thousands of global brands, as well as smaller local businesses to offer a variety of choice at a fraction of the cost. This empowers you to reward customers more generously and more often, tailoring each incentive to their unique interests to build an emotional connection that keeps them coming back.
With the rise of technology, customers not only expect banks to keep up, but to be ahead of the game. Neobanks like Monzo and Revolut have pushed the boundaries of what banking can be, forcing traditional banks to adapt or be left behind.
As the market shifts from legacy clients to a younger audience, 142 million tech-savvy, mobile-first Millennials and Gen Z consumers are reshaping marketing expectations. They demand more innovation, richer experiences, and deeper brand connections than any generation before them.
Digital transformation is a must to keep these consumers engaged. If your digital banking isn’t seamless, you’ll lose more than transactions – you’ll lose customers entirely.
Beyond smooth digital onboarding, consumers expect effortless integration with their digital wallet. This new payment method only continues to rise in popularity, with more than 60% of Americans expecting to have a digital wallet in the next two years. Not only that, but they expect to hold multiple wallets – so you need to work hard to be on top.
This shows that digital wallet adoption in South Africa is rising strongly, paralleling global trends and underscoring the need for businesses to prioritize digital wallet integration to stay competitive.
The best brands don’t just adopt digital channels; they integrate them into one cohesive system across all customer touchpoints. Nailing this unlocks the power of connected incentives, allowing customer behaviours to be rewarded in real time. Whether they’re banking online, using an app, or in branch, ensuring a consistent experience across all channels delivers the ultimate customer satisfaction.
Tracking how customers behave across each channel allows you to collect meaningful insights about them – which can be used to deliver hyper-personalised campaigns that foster engagement and long-term loyalty. It’s this deep insight into customer habits that allows you to transform transactions into meaningful connections.
To make the most of an omnichannel strategy, banks must deliver the right content, with the right channel, at the right time. To do this, customer segmentation is crucial. Once brands know which segment they belong to, they can tailor messages to suit, as well as personalise the content and timing of these for the best results.
The Financial Services brands winning today create an always-on ecosystem where their products and services, content, benefits and digital experiences all come together to keep customers engaged, spending and crucially – growing in lifetime value.
If your acquisition strategy is getting people through the door, what’s the problem? Because acquisition is only the beginning – activating customers is the real goal.
Pouring more money into acquisition with little thought given to long-term retention will only get you so far. With marketing budgets stretched more than ever, brands need to spend smarter, not harder.
Measuring the right metrics will help you keep track of Customer Lifetime Value, as well as Customer Acquisition Costs, which alone, could show a false sense of success.
Using data-led insights to craft a personalised incentives strategy that starts from day one is key to building an emotional connection with your consumers that will keep them around long after they open an account.
Give your customers a reason to stay with you through tailored loyalty programs and rewards that get better with time. All the while, their experience of your brand across all channels must be cohesive and optimised for the digital-first world we live in.
TLC has over 30 years’ experience helping the world’s biggest brands successfully transform their acquisition, loyalty
and retention strategies. Would you like to be one of them?
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