Amid mounting economic pressures and intensifying competition from FinTechs and challenger banks, financial institutions (FIs) are navigating a rapidly evolving landscape. Consumers now favor innovative, tech-driven financial solutions, challenging traditional banks to differentiate themselves.

To stay competitive, FIs must double down on loyalty, seamless payment systems, advanced fraud protection and agile technologies. These components are critical not only for meeting rising consumer expectations but also for maintaining operational efficiency and trust. By adopting customer-centric strategies that create emotional resonance and functional value, FIs can fortify their relevance, retain users and drive long-term engagement—even in times of financial uncertainty.

Amid Economic Challenges, Rewards Are Key to Loyalty

In today’s changing economic environment, enterprise rewards-based loyalty programs have become a critical differentiator for FIs seeking to secure top-of-wallet status for their cards.

Enterprise rewards programs drive loyalty.

Research from PYMNTS Intelligence shows that more than 25% of cardholders with multiple cards carefully rotate their card usage when shopping so as to maximize reward benefits. With only 23% of multiple cardholders limiting their usage primarily to a single card, competition among cards is fierce. The differentiator? Exceptional rewards. In fact, 21% of users said rewards benefits were the top reason they’d recommend their cards, surpassing even referral bonuses.

Flexibility and personalization are vital when it comes to rewards.

As noted by FIS, consumers are increasingly drawn to flexible reward options like cash equivalents or gift cards, often favoring them over traditional travel rewards. Real-time redemption allows users to apply rewards immediately at checkout, delivering instant satisfaction. This immediacy not only reduces banks’ liability for unredeemed rewards but also increases spending by encouraging more frequent card use.

Research from Accenture further reinforces the emotional element: 60% of customers want rewards tailored to their relationships with their card providers, but just 45% feel satisfied with the current rewards on offer. The key lies in personalized, real-time incentives. Use of data analytics enables banks to offer a discount precisely when a user taps to pay for a transit ride or walks by a coffee shop, enhancing card relevance and value.

Partnerships can help FIs deliver enticing rewards systems.

FIS’s partnership with Bilt Banking Solutions exemplifies this shift to personalized rewards. The FIS Premium Playback solution allows customers to unlock real-time savings at checkout, a seamless and intuitive rewards experience that meets modern expectations. Mladen Vladic, General Manager of Loyalty Services at FIS, noted that as demand for meaningful rewards grows, technology must rise to meet the moment:

“The current economy is significantly increasing the demand for loyalty programs that maximize the utility of money,” he said in a press release. “In the fight for customer loyalty, every payment card program is a vital opportunity to seize competitive advantage and drive growth.”

FIS’s Jim Johnson, Co-President of Banking Solutions, emphasized that rewards are just one part of a broader shift toward real-time, data-powered personalization. By integrating installment payments, such as buy now, pay later (BNPL) via Affirm, or turning rent payments into rewards via Bilt, FIs are redefining what loyalty looks like. These strategies not only appeal to cardholders but also empower issuers and merchants to collaborate pre-transaction to improve outcomes across the board.

Seamlessness and Security Are Nonnegotiable

Rewards are becoming a powerful incentive for establishing customer loyalty, but seamlessness and security have always been—and will remain—table stakes.

Customers demand convenient and seamless payments that fit their personal financial lifestyles.

The overarching drive for convenience is so important, in fact, that its absence can sometimes lead consumers backward. Research from MX found that more consumers in the United States turned to spreadsheets and manual processes to manage their finances last year, with nearly one-quarter using spreadsheets to track money and 65% paying bills manually each month. Why? Because these processes are easier for them to understand (65%) and thus give them better control (57%). Even worse, 22% admitted they avoid checking their finances altogether, particularly among Gen Z and millennials.

These behaviors reflect gaps in digital banking experiences. With finances a growing priority, FIs have the opportunity to offer personalized digital tools through their card offerings that consolidate financial views and streamline payments. Consumers both want and expect these improvements, with 55% saying they would share more data with their FIs if it improved their experiences—and 58% assuming their providers will leverage this data to do so.

Security is equally top-of-mind for customers choosing which cards to use.

Hand in hand with convenience, airtight security is now an unwavering expectation for banking users. Jumio reported that 59% of U.S. banking consumers are worried their banks aren’t doing enough to protect against evolving fraud threats such as deepfakes. Moreover, 69% would switch banks if they perceive inadequate fraud protection.

According to KPMG, 65% of FIs say artificial intelligence (AI) and machine learning (ML) are highly effective for detection of fraudulent activity, with 64% relying on “normal” customer behavior modeling to flag anomalies during real-time transaction monitoring. Here, again, customers’ personal data can be leveraged to ensure robust fraud prevention, building trust into user interfaces along with convenience and ease of use.

Targeted Marketing Is Essential to Communicate Value

In an era of fragmented consumer attention, hyper-personalized, multichannel communication is not optional. It’s a strategic imperative that fosters loyalty, deepens relationships and positions financial institutions as indispensable partners in their customers’ financial lives.

Customers want to feel seen and heard by their banks and card providers.

The remedy? Build a “digital memory” that aggregates each customer’s data across all channels—branches, apps, call centers and ATMs—connected in real time. Generative AI can interpret behavioral cues, anticipate needs and respond with relevant, timely solutions. Adaptive products evolve with customer life stages, and AI can scale this personalized experience to the mass market.

Banks must ensure they communicate with customers over their preferred channels.

Kobie Marketing found that consumers prefer different channels for different message types: urgent content via phone or text, lighter content via social or email. This channel fit is critical to message impact.

Omnichannel strategies also improve outcomes. Vericast reported that 46% of consumers are receptive to email offers and 44% to direct mail. Gen Z and millennials, meanwhile, show strong preference for digital channels, especially social. In fact, 26% of Gen Z favor social media ads, double the average across all age groups.

Nowhere is this more evident than in the rise of so-called FinTok. According to PYMNTS Intelligence, 79% of millennials and Gen Z rely on social platforms for financial advice. Meanwhile, Spruce reports that 68% of Gen Z say content directly influences their financial behavior. FIs hoping to reach this demographic must invest in short-form, educational, influencer-led content that matches the cohort’s lifestyle.

A Roadmap for Cardholder Retention and Growth

To thrive in today’s volatile financial environment, FIs must adopt a four-pronged strategy to retain and grow cardholder engagement:

1. Elevate rewards programs. Design flexible, personalized rewards that offer immediate value, such as real-time redemption at the point of sale. Integrate lifestyle-specific perks like BNPL or rent rewards to meet evolving needs.
2. Ensure seamless payment networks. Eliminate friction with intuitive digital tools and fast, reliable processing across channels. Enable omnichannel payment access that adapts to consumer preferences.
3. Strengthen security with proactive technologies. Deploy advanced fraud detection leveraging AI and behavioral analytics. Implement real-time alerts, transaction monitoring and secure data-sharing to build trust.
4. Deploy data-driven, targeted marketing. Segment audiences by behavior and life stage, not just demographics. Use AI to craft adaptive campaigns across email, mobile, social and direct mail channels. Embrace platforms like TikTok to reach Gen Z authentically.

Each of these initiatives addresses at least one of the core consumer expectations: relevance, convenience, security and value. Together, they form an integrated loyalty framework that helps financial institutions remain not only top-of-wallet but also top-of-mind.