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Banking relationships are becoming increasingly fragmented. The average customer now maintains two or more checking relationships, a 47% increase since 2019. At the same time, fintech companies that once focused primarily on paycheck-to-paycheck consumers are moving into rewards, loyalty and mass-market deposits.
These competitors are using attractive rates, low-fee products and targeted incentives to challenge traditional banks for primary customer relationships. Yet many established institutions continue to base loyalty benefits on whether customers meet qualification requirements today, rather than analyzing where their relationships are heading.
For a bank serving one million retail customers, this limited approach could represent an estimated $640 million in deposits left on the table. The opportunity comes from identifying customers who are building momentum before they reach premium thresholds and retaining those whose relationships may be weakening.
Key insight: Banks that understand where a customer relationship is headed, rather than simply measuring where it stands, will be better positioned to earn long-term loyalty.
Bank Loyalty Is Becoming More Difficult to Win
Fintechs are expanding beyond their traditional customer base and competing directly for deposits, everyday spending and primary banking status. Competitive interest rates, convenient digital experiences and no-fee account structures are helping these providers attract customers who may once have stayed with a traditional bank.
Tiered loyalty programs remain common across the banking industry and have historically delivered strong results. Customers typically receive more valuable benefits as they add products, increase balances or deepen their engagement.
According to Curinos data, banks perceived as rewarding loyalty achieve acquisition rates that are 75% higher than those viewed as failing to recognize loyal customers. Customers who develop loyal banking habits also maintain three to four times more in balances than customers without those habits. Establishing primary-bank status early can reduce attrition by 60%.
Some institutions are making progress by giving customers a continuous view of their relationship status. DBS’s Multiplier program in Singapore, for example, allows customers to monitor tier progress based on activities such as salary deposits, spending and savings. This approach provides an ongoing view of engagement instead of relying on an annual review or isolated account snapshot.
Why it matters: Traditional loyalty systems generally show whether a customer qualifies for a benefit at a specific moment. They do not explain whether that customer is becoming more valuable, losing interest or preparing to move funds elsewhere.
- Banks perceived as rewarding loyalty see a 75% higher acquisition rate.
- Establishing primacy early in the relationship can reduce attrition by 60%.
- Continuous visibility into progress can make loyalty programs more relevant and actionable.
Current Balances Do Not Reveal Customer Trajectory
Consider three customers who each hold $80,000 with the same bank. One has maintained that balance for a decade. Another transferred the money only recently and may still be comparing rates at other institutions. The third started with $2,000 and gradually saved until reaching $80,000.
A conventional tiering system may treat all three customers identically. However, their future value and retention risk could be very different. The long-standing customer may be highly stable, the recent transfer may be vulnerable to a competing offer, and the customer who steadily built savings may represent significant future growth.
This distinction is especially important below premium account thresholds. Approximately 80% of a typical bank’s customers hold only 14% of its deposits, while just 2% to 4% reach the highest loyalty tier. That can encourage institutions to focus resources on affluent customers while overlooking the long-term potential of mass-market households.
Deposit behavior, however, is not static. Over a five-year period, the share of total deposits held by a mass-market customer group can increase from about one-tenth to one-third, representing a 5.4-fold increase in balances. By comparison, balances among mass-affluent customers from the same starting group may decline to 0.7 times their original level.
Key insight: A customer tier shows what someone has already achieved. It does not show where that customer may be headed next.
- About 80% of customers currently hold only 14% of a bank’s deposits.
- Mass-market deposit share can grow substantially over a five-year period.
- The customers generating future growth may not be the ones receiving the most rewards today.
Why Triggers Alone Cannot Guide the Best Next Action
Most banks rely on two basic tools. A tier determines when a customer qualifies for benefits, while a trigger identifies an event such as a balance transfer, a new product opening or the establishment of a direct deposit relationship.
Triggers can prompt action, but they do not determine whether an intervention will produce a meaningful result. That requires what financial institutions increasingly refer to as decision intelligence: a framework that connects customer behavior and trajectory with the most appropriate business response.
For example, a customer transfers $80,000 into a new account. A basic trigger may automatically generate a promotional offer. Decision intelligence asks a more important question: Is the offer likely to change the customer’s behavior?
If the customer already demonstrates the habits of a primary banking relationship, a reward may simply provide a discount for behavior that would have occurred anyway. In that case, the more effective choice could be taking no action and directing the incentive budget toward a customer whose behavior can still be influenced.
This distinction can also improve the customer experience. Nearly half of consumers identify irrelevant offers as their leading complaint about bank communications. More outreach is not necessarily better outreach.
Why it matters: Every customer signal should lead to a decision, but not every signal should lead to an offer.
- A trigger identifies an event, while decision intelligence evaluates the likely value of a response.
- Rewarding behavior that would have happened anyway can waste loyalty and marketing budgets.
- In some cases, the most valuable decision is to take no action.
Identify Customer Momentum Before Traditional Tiers Do
Imagine a 28-year-old customer with a checking account, direct deposit and $100 in savings. Under many conventional loyalty programs, this customer would be considered low value and would not qualify for meaningful benefits.
However, the customer may also be an aggressive new saver who is steadily building a stronger financial relationship. That momentum may not be visible in the current balance, but it can signal significant future potential.
Using decision intelligence, a bank can recognize this behavior and provide relevant guidance, encouragement and financial tools. These actions can help the customer continue progressing instead of allowing a competitor to capture the relationship before it becomes more valuable.
How Banks Can Put Trajectory-Based Loyalty Into Practice
Financial institutions already possess much of the transactional and behavioral data needed to identify customer momentum. The challenge is converting those signals into a consistent, governed decision process.
- Evaluate customers based on account and relationship trajectory, not only current balances.
- Use existing transaction and engagement data to identify early signs of savings or relationship growth.
- Direct incentives toward customers whose behavior can genuinely be influenced.
- Use guidance and reinforcement to support customers who are still below premium thresholds.
- Measure whether each offer improves retention, balances or primary-bank status.
The Future of Bank Loyalty Depends on Better Decisions
Tiered loyalty programs remain useful because they provide consistency and clear qualification standards. However, customers increasingly divide their financial lives among multiple institutions, making it more important for banks to understand relationship direction, not just account size.
For a bank with one million retail customers, the cost of overlooking customer momentum could amount to an estimated $640 million in deposits that competitors are able to capture. Waiting for a customer to qualify for a higher tier may mean waiting until the relationship has already become difficult to save.
The data, technology and analytical capabilities needed to evaluate customer trajectories are available today. By combining those resources with decision intelligence, banks can make loyalty more relevant, allocate incentives more effectively and demonstrate value through timely, personalized actions.
Sarah Welch is Managing Director at Curinos, where she leads onboarding, retention and loyalty strategy for banks and credit unions. Her work focuses on turning customer behavior data into decisions that support measurable growth.
Source: TheFinancialBrand.com