5 Steps to Winning the Tender Wars

Competition, technology and changing consumer expectations are changing the face of the financial industry. Major banks and financial institutions are seeing a portion of their diverse customer base attracted by uniquely positioned new financial technologies that offer consumers enticing perks, generous cash back or other rewards offers, and other ways to payment.

Essentially, a new front in the battle for market share is that of payment bidding – indeed, we are witnessing “the bidding war”.

If you’re worn down by the tender, tumultuous wars, you’re not alone. That said, a revamped loyalty and rewards strategy can help you regain your competitiveness.

Why is the industry changing?

Customers have increasing expectations for cashback and rewards. What was once a differentiating feature – rewards – is now seen as table stakes by consumers. They simply expect rewards. As a result, financial service providers are forced to offer ever better rewards programs and other perks to retain their customers.

The reality in many situations is nimble, new challenger banks are hijacking key niches from big banks and financial institutions by offering distinct vertical consumers new and creative services that directly relate to their demographics or psychographics, as well as reducing fees and providing other cost-saving features for the customer.

Take for example green light, which offers a suite of financial services including debit cards, educational resources, investments, cashback, and more. Sounds pretty standard, right? The differentiator is that Greenlight targets families with children, with a mission to advance financial literacy in children.

With the constant emergence of new financial technologies offering unique value propositions and rewards to customers in every corner of the market, we can expect virtually endless new benefits and offers that threaten to rob established financial institutions of their activities.

Fintech investments have exceeded $91 billion in 2021, nearly doubling the total from 2020, supporting thousands of fintechs and challenger banks that fragment the market, compete for consumers, make retention harder and increase CAC (customer acquisition cost).

New Tender Choices

Consumers today have a wide range of choices about how they pay, from which bank accounts and how often. In the past, financial industries could reasonably expect consumers to pay for goods and services in advance, in full, with a debit or credit card.

Today, however, options like PayPal make shopping online even easier for consumers. Using PayPal at checkout is essentially frictionless and often smoother than using a credit card.

In addition to cardless payment, new “buy now, pay later” bidding options add a layer of flexibility to online shopping. These give consumers the power to shop and make payments for their purchases in the way that works best for them. Now, almost everywhere you shop, you see payment options including cardless payments, buy it now, pay later, and other booming trends like cryptocurrency payment.

In order to stay competitive, established institutions need to beat start-ups at their own game. Here are five steps to get there.

Step One: Develop a Portfolio Strategy

The decentralization of payment options makes it difficult for large traditional players to retain market share. Agile fintechs will continue to capture niches in the market as fintech continues to thrive.

Every bank on the planet is currently having a discussion about “what is our portfolio strategy?” »

PayPal and host of other mainstream payment platforms aren’t going away. The convenience they bring to take advantage of payment options leads to a battle for the primacy of payment at checkout.

To compete with the convenience of options like PayPal, banks need better ways to capture their customers’ attention earlier in the checkout process instead of relying on them to remember a particular card and then type the information of this card when paying online. On the one hand, banks need to create a digital wallet that can centralize consumers’ multiple payment types in one place and allow them to seamlessly choose a payment type at checkout.

A wallet strategy also creates a way for institutions to “market” their type of bidding to the consumer, similar to how PayPal displays its logo prominently on millions of e-commerce site payment pages. . Banks can now offer offers alongside their payment offer, such as cash back, to make customers aware of the offer and encourage its use. For example, they can email an offer such as “Get limited time double cash back for online purchases made with [your company’s] type of tender in the next 2 days.

Providing customers with better rewards, along with the freedom to attach credit cards, bank accounts, investment accounts, and more, helps centralize value in the wallet and builds consumer trust and connection.

Step Two: Use Technology to Provide End-User Flexibility

As a financial service provider, you want to make payments for your customers as easy as possible. This means providing maximum flexibility at the end point. It is not enough to simply offer your customers checking accounts and credit cards. Instead, you’ll need to offer a range of other options, especially when it comes to paying for online purchases.

This flexibility can mean providing financing options. It can also mean offering cash back or other rewards to incentivize an online purchase with your offer.

Step Three: Optimize Merchant Reach

As you move toward the laudable goal of providing more flexibility and offerings to your users, it’s only natural to look to increase merchant reach as well. The more expansive your payment method is (for example, the more options your customers have to pay), the more likely they are to use it to purchase from these locations.

Successful rewards, loyalty, and cashback programs succeed in large part because of where customers can leverage them. You need to be where your customers are buying. Period.

Today, expanding merchant reach sounds great in theory, but the time and energy it takes to develop and manage merchant relationships internally is often tedious for even the largest institutions.

To avoid shuffling a list of merchants piecemeal, consider partnering with a network that gives you access to thousands of merchants your customers are already buying from. Often, these networks will give you access to pools of merchants that would take months to build manually, in days.

Step Four: Implement a Loyalty and Rewards Program

As mentioned above, consumers expect rewards when they shop. With online shopping more popular than ever and inflation on the rise, customers are looking for ways to get more bang for their buck in the places they already shop.

To capture more wallet share, financial service providers need to present themselves to consumers early in the buying process, and at the most relevant time. By incorporating a loyalty program with rewards such as cashback on online purchases, businesses can incentivize shoppers to use a particular tender/card before they even add an item to their cart.

Tools like a branded browser extension, popularized by companies like Capital One Shopping, can give your customers real-time alerts about merchant cashback opportunities, right as they shop. These tools serve as an ongoing brand for your business and type of bidding, even before buyers reach the checkout page.

By using a browser extension customized for your business, you can use the power of rewards to increase your brand exposure while customers shop like they usually do, and further establish your offer as a preferred payment method.

Fifth step: optimize the user experience

The cornerstone of customer acquisition and retention comes down to the best user experience.

Take PayPal’s journey as a little case study in UX. PayPal offered the consumer a less cumbersome way to pay, with multiple touchpoints between payment options all in one place. On top of that, they gave the consumer access to great rewards and cash back opportunities with their $4 billion. Acquisition of Honey.

What smaller, nimble fintechs are able to do is challenge the big banks and take part in offering one or more of the dimensions outlined by PayPal’s plan.

When optimizing the user experience, consider hitting these notes:

Ideally, you should offer customers all of the above. The more options you can provide, the better positioned you are.

Win the tender wars

Customer loyalty is a commodity that businesses cannot afford to lose. Gaining visibility for your type of tender and providing more value at multiple touchpoints throughout the buyer’s journey, such as through rewards, will be key to driving such loyalty.

While staying competitive in a crowded marketplace can seem like a losing battle, implementing these proven strategies will help you avoid customer churn, deliver more value to your customers, and assert yours in as the preferred tender type.

Joseph P. Harris