Bank loyalty programs are expanding beyond traditional credit card rewards as financial institutions look for new ways to deepen customer relationships across banking and investment products. By rewarding customers for maintaining multiple relationships with the same institution, banks can encourage greater engagement while providing tangible benefits based on the value of the overall relationship.
Bank of America’s Preferred Rewards program takes this approach by connecting benefits across eligible banking and Merrill Edge investment relationships. Following an initial rollout in June, the program is expanding into additional states as Bank of America moves toward nationwide availability.
Preferred Rewards, a groundbreaking program that recognizes and rewards clients for choosing Bank of America for more of their banking and Merrill Edge for their investment needs, is now available for clients in Michigan, Illinois, Tennessee, North Carolina, Georgia and Florida. These states are within wave three of a four-wave national rollout of the program that began in June and will be completed by the end of September
Preferred Rewards extends the traditional rewards concept beyond individual products by recognizing the customer’s broader relationship with the financial institution. By connecting banking and investment activity, Bank of America can provide additional incentives for customers to consolidate more of their financial business within the organization.
“Preferred Rewards is the first program of its kind to offer clients benefits and rewards for everyday banking,” said Dean Athanasia, president of Preferred and Small Business Banking and co-head of Consumer Banking at Bank of America. “It is the result of deep client research to develop and deliver a simple program that provides clients benefits and rewards they will actually use, and shows them how much we appreciate it when they choose to do more business with us.”
Banks and credit unions have long been aware of the value that rewards programs have on their customers and members, particularly with their credit card programs. More recently, an increasing number of financial institutions are realizing that rewards and loyalty programs can have on a wider array of banking products and services. FIs are anticipating a larger share-of-wallet and increased loyalty with these programs, as well as the potential for greater penetration in the wealth management market.
Rewards programs have traditionally been closely associated with credit cards, but relationship-based programs give financial institutions an opportunity to apply the same loyalty principles across a broader range of products and services. Instead of rewarding customers primarily for transactions, these programs can recognize the overall value of their banking and investment relationships.
For Bank of America, Preferred Rewards creates incentives for customers to deepen their relationships with both the bank and Merrill Edge. This approach can potentially increase share of wallet, improve customer retention, and introduce banking customers to investment and wealth management services they might otherwise obtain from another provider.
The model also demonstrates how bank loyalty programs can become a strategic relationship-management tool rather than simply a promotional benefit. Customers receive benefits based on their broader financial relationship, while the institution gains an opportunity to strengthen engagement across multiple products.
As financial institutions compete for increasingly valuable customer relationships, programs that connect banking, investing, and rewards could become an important differentiator. The success of Preferred Rewards will help demonstrate whether customers value relationship-based benefits enough to consolidate more of their financial activity with a single institution.
Overview by Ed O’Brien, Director, Banking Channels Mercator Advisory Group
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