iPhone app poised to help banks improve customer retention through rewards program
2010-08-27
While financial institutions nationwide are developing new mobile programs to allow customers to check their accounts, transfer funds and pay bills right on their smartphones, a new iPhone application could improve customer loyalty in banking by rewarding members when they shop.

The application, called "shopkick" after the Palo Alto, California-based startup that created it, gives consumers the chance to receive special discounts when they enter participating retailers' stores. Additional points - or "kickbucks" - are awarded to customers who buy specified items, American Banker reports.

Some experts believe that the application could be easily adapted to encourage mobile banking and retention efforts, especially if points were tied to specific card uses.

"I think, for [card] issuers, yes, there are definitely opportunities to tie their rewards capabilities with this type of solution," said Gwenn Bezard, a research director at Aite Group in Boston.

While shopkick's co-founder and chief executive, Cyriac Roeding, has said that the startup is not specifically pursuing partnerships with banks, it is open to the idea and has, in fact, previously partnered with Citigroup on a similar application.

CauseWorld, developed with the help of the bank, allows customers to earn "karma points" by visiting participating retailers. The redeemed points, which are partially funded by Citi's marketing budget, can then be donated to one of many charities from a provided list.

According to the magazine, Citi also provided $15 million in venture capital to the startup in a recent funding round.

While the bank has yet to comment on possible uses for the new application, Bezard suggested that FIs could develop their own shopkick-like rewards models.

"Let's say I go to Best Buy and I use the application. I could get messages that say, 'Hey, if you are a Citibank customer and you are paying with your Citibank card, you get extra benefits,'" Bezard told the magazine.

Neil Strother, practice director for mobile marketing strategies at ABI Research, said that for banks to really harness the new technology, they would have to understand how customers use the app and then determine how to adapt the process and make it work for their institutions.

Rewards programs are especially important in today's current uncertain economic climate. Bob Konsewicz, a strategic consultant for Maritz Loyalty, told Inc. magazine that loyalty programs should first and foremost target an FI's best customers - usually the top 10 percent most frequent or profitable patrons.

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