Less airport lounges, more carbon calculators - addressing the loyalty paradox

In a recent research done by Flybits we discovered? - when it comes to customer loyalty - there is a mismatch between what banks are offering and what customers really want. In Brazil, for example, only 3% of the respondents are actually interested in airport lounge access, which is a benefit that most credit card programmes are currently offering.?

Such mis-matches come at a price: Amex, for example, spent more than $4 billions to purchase air miles from Delta in 2021.?

Our research did confirm what cardholders do want: 50% of respondents want more personalized programmes; that are relevant and meaningful to them.?

Giving back to the environment as and when they purchase (or use bank services) could be one of the keys to loyalty; programmes that reward customers for lowering their carbon footprint. How cool would it be to receive benefits because I am being a good citizen?!

A recent Mastercard survey shows 54% of adults see reducing their carbon footprint as more important now than pre-pandemic. Financial institutions, taking heed of this interest are launching carbon calculation tools for consumers. Here we can see some examples of how banks and fintech are getting more aligned to customers goal

The fintech Klarna in 2021 added carbon impact calculations for payments through Doconmy's Aland Index, which measures CO2 emissions for payments. Klarna, which is based in Sweden, is best known as a buy now/pay later lender,?

Mastercard's carbon calculator collaboration with Doconomy became available to third parties in 2021 via an application programming interface, though the two firms had worked on carbon footprint based on payments for several years before an internal launch in 2019. The gauge measures the environmental impact of products that consumers purchase, and enables carbon offsets through United Nations-certified projects. Users can also use the data to inform investments in venture capital funds that are focused on environmentally sound outcomes.

Visa in November 2021 launched Eco Benefits, a bundle of sustainability-focused perks that issuers can use to encourage cardholders to adopt environmentally sound payments. Eco Benefits launched first in Europe and will be rolled out gradually this year.

Visa's bundle includes a carbon footprint calculator with a temperature score that helps consumers understand the climate impact of their personal spending behavior. Cards made with sustainable materials are additionally available.

As you can see there are many examples of how management of a customer’s carbon footprint can be used as a powerful tool to differentiate the bank's value proposition in the market. Giving the users the opportunity to improve the world and make it a better place is a dominant topic, with more than 80% of the population concerned about climate change.?

By helping their customers to have a better understanding of their carbon footprint banks can actually unlock the full power of loyalty and establish a joint mission with the customer. Additionally, the increase of the brand reputation, customer engagement and ESG performance are critical part of making a bank stand up among peers especially in the crowded south american markets.

Only last week, this US Bank BNY Mellon became the latest financial institution to use its customer loyalty programme to help address climate change by incentivizing clients to reduce paper and water usage in their banking transactions.? Through the loyalty programme customers will receive information such as how many checks they are using, how much payment volume is on ACH, wire transfer or the RTP rail, and how that mix impacts emissions.

Such incentives could prove critical - not just for the environment - but to the banks themselves, particularly in Latin America.?

Returning to our own research from Brazil: over a quarter of bank card holders (26.4%) claim to base their selection primarily on factors such as the loyalty and partnership programmes. At the same time, in practice, over a third (34.4%) admit to rarely or never leverage their cards’ loyalty programmes, while a similar proportion (34.6%) admit to rarely or never adjusting the purchase plans to take advantage of such offers.

Pivoting from airport lounges to carbon calculators could represent a ‘virtuous circle’ for all concerned!