Banks Capturing Coalition Loyalty Programs Could Be the Key to Get UK SMBs Over the Single Merchant Loyalty Setback

Loyalty programs and other special offerings are popular in the U.K., where 76% of all consumers receive regular rewards or discounts from at least one of the businesses with which they shop. This was among the findings in a recent PYMNTS report, Making Loyalty Work For Small Businesses, published in collaboration with U.K.-based software firm Pollinate.

Read: PYMNTS Report: Making Loyalty Work For Small Businesses

The research also showed that many of the 40 million active loyalty program users in the U.K. are keen to sign up for more programs, while 52% of U.K. consumers who already use loyalty programs say they would be “very” or “extremely” interested in signing up for services that would allow them to receive rewards and other offerings when shopping with their local small and medium-sized businesses (SMBs).

However, the study found that loyalty program users are unhappy with the ones they currently have and are therefore seeking new offerings.

For example, of the 76% of U.K. consumers who use at least one loyalty program, almost half of them (34%) were not satisfied with the loyalty and discount offerings from their local merchants, a sign that local businesses will need to revamp their rewards offerings in order to win over these potential customers.

Banks: Opportunity Knocking

Tapping into the power of coalition loyalty programs could be the way local SMBs are able to turn loyalty program-related customer dissatisfaction around.

This could be a more attractive alternative for SMBs to boost engagement with U.K. consumers, who the PYMNTS’ research found are eager to patronize the roughly 6 million SMBs in the country that employ 60% of the country’s workforce.

Nectar’s merchant-sponsored offers scheme is the largest and most recognized loyalty program in the U.K., boasting several major brands covering sectors like retail, travel, eCommerce, finance and newspapers as partner companies. These brands include Sainsbury’s, British Airways, Ebay and the Daily Mail Group and the company issues 50 billion Nectar points annually to over the 17 million members in its network.

See: Pollinate CEO: Post-Brexit UK Plans New Order To Compete On Global Stage

But since consumers are more trusting of financial institutions, banks can capitalize on this huge opportunity to enter the coalition-type loyalty program market, bridging the “trust gap” between the consumer and the merchant.

The PYMNTS data revealed that as many as 44% of U.K. consumers say they would trust banks with their personal data than any other type of organization like technology companies, global payments giants like Mastercard and Visa or local merchants. This is compared to just 7% who would trust businesses in their local commercial districts to keep their personal data information safe.

Related: Payments Will Be Most Transformational When Businesses Move Beyond Payments

In an April interview with PYMNTS, Pollinate CEO Jonathan Hughes said one of the most powerful ways banks can collaborate with SMBs is by merging payments and loyalty programs into a centralized app offered by a bank, which gives consumers the ability to redeem several merchants’ rewards through a single interface.

Consumers can link any bank card to the app and automatically collect points to redeem rewards or offers, Hughes said, removing friction for the customer as well as reducing overhead for businesses as they can leverage the existing transactional data they have.

And as the numbers show, tapping into banks’ trusted position could help merchants across the U.K. maximize the returns on their loyalty offerings, capturing more than six times as many potential shoppers as they could on their own.

It would also be an opportunity to win over the 14% of consumers who say they are not interested in loyalty programs because of the concerns they have about their personal data security.

So as much as U.K. consumers want to support local SMBs, which they see as critical to their communities’ economic well-beings, they would need incentives in the form of digital loyalty programs and discount offerings backed by the banks they trust to in order to patronize local SMBs.

Further reading: Pollinate: The Payments Industry Cannot Be Complacent About Supporting Small Businesses