More than 3 million customers have enrolled in Bank of America’s no-fee rewards program since it launched in late May, and nearly one-third of those clients have engaged with deals.
That is almost three times higher than the level of engagement Bank of America saw in the past, according to Shikha Narula, head of consumer deposits and rewards.
For Bank of America, it is a sign of success. Its core loyalty strategy revolves around deepening relationships with its clients, Narula said
“It's not just our one aspect, one product, one feature,” Narula told CX Dive. “We want to reward them for their entire relationship with Bank of America.”
Deposit competition is hot, and banks are fighting to become customers’ primary bank. As loyalty and rewards have become increasingly important for retention, Bank of America wanted to revamp its existing Preferred Rewards program to bring in more customers and increase engagement.
The new program, BofA Rewards, is easier to join, requiring only an eligible Bank of America checking account and no minimum account balance. As such, it’s opened eligibility to millions more customers.
The previous Preferred Rewards program was effective at retention, with members exhibiting 94% primacy and 99% retention. But Bank of America wanted to expand the cohort eligible for the program and get more customers engaged, especially at a younger age.
The bank removed the minimum asset threshold of $20,000 and opened up eligibility to anyone who has an eligible checking account, changes that were designed with Gen Z in mind.
“Now, there's literally no barriers for the younger generation, for Gen Z, to engage with us, to engage with this program, and we believe it's our way of kind of building that relationship with them and trust with them early by giving them benefits that you know that'll resonate with them in where they are in their lives today,” Narula said.
A rewards economy
The bank provides deals on retail, gasoline, entertainment and food, with retail making up 45% of client engagement and gasoline 20%.
“We're seeing it's very much becoming a rewards economy,” Narula said. “Consumers are leaning on rewards not just as a perk. They're not just viewing it as a perk, but they are viewing it as somewhat of a way for them to meet their financial needs and part of their financial plan.”
A recent Bank of America survey found that 46% of U.S. consumers said they were going to use rewards as a way to fund their travel, according to Narula. That rate rises among Gen Z, with 80% of Gen Z clients saying they’d use rewards to fund travel.
Financial benefits are becoming table stakes, according to Halle Stern, director analyst in Gartner’s marketing practice. Consumers expect transactional rewards like cash back and discounts, but they also want experiential earning opportunities.
“That’s the differentiator,” Stern said. “So being able to earn rewards that don't necessarily involve me swiping my credit card, but taking other options, exhibiting other behaviors.”
“There's so much differentiation that's needed there, considering how much competition and oversaturation there is in the banking industry,” Stern said.
Bank of America’s rewards go beyond financial benefits. It designed its benefits for the generational spectrum, and the needs of Gen Z now, which means providing a financial boost, Narula said.
“For Gen Z clients between the ages of 18 and 25, we wanted to unlock benefits that would enable them, help them in their everyday lives, whether it's with deals, whether it's the ability to redeem rewards for travel. But then, as you grow in your financial lives, we do see there's a lean on experiential benefits.”
In the higher tiers, members can enjoy subscription credits, lifestyle benefits and access to premium events. The membership also provides fraud and identity monitoring.
“We do see it kind of somewhat depends on the generation, and we may design the programs so that it leans on both,” Narula said.
While it’s too early for the bank to share retention and primacy numbers, Narula and her team are encouraged by the engagement.
“What I will share is anecdotally what we are hearing from the branch,” she said. “We're talking a lot to our financial center associates, and we're hearing a lot of stories of clients bringing in more assets because you know that's how you can advance from member tier to preferred plus, preferred honors.”
The bank is confident that its program will meet the moment.
“From a competitive differentiation standpoint, I think the breadth of benefits, the fact that the program grows with clients and has benefits that resonate depending on the life stage they are in to me are some of the core differentiators,” she said.
Correction: This story has been updated with the correct tier name for preferred honors.
