Why Banks Are Now Losing Loyalty

The Inventors Are Losing Their Own Game

Banks invented modern loyalty. The airline miles model was born from a partnership between American Airlines and Citibank in 1987. The cashback credit card, still one of the most powerful loyalty mechanics ever designed, was a bank product from inception. For three decades, financial services institutions had the most sophisticated, most generously funded, and most commercially impactful loyalty programmes in any sector.

And yet, in 2025, a significant and growing proportion of consumers report that the fintech product on their phone, Revolut, Monzo, Starling, Curve, or one of hundreds of regional equivalents, delivers a better loyalty and rewards experience than their primary bank of fifteen years. The inventors of modern loyalty are losing the engagement war to companies that did not exist when the first Nectar card was issued.

14 weeks is the average time for a major UK retail bank to implement a significant loyalty programme change, versus 6 days for a leading fintech. (TLP Technology Audit, 2023)

Three Structural Problems That Fintechs Do Not Share

Problem 1: Legacy Technology Architecture

Most major bank loyalty platforms were built in the 2000s, integrated with core banking systems that update on overnight batch cycles, and are maintained by technology organisations that prioritise stability and compliance over rapid iteration. Changing earn rates, launching a new challenge mechanic, or integrating a new redemption partner can take quarters, not weeks.

The technology constraint is not primarily about the loyalty platform itself. It is about the core banking infrastructure that the loyalty platform sits on top of. A bank cannot implement real-time points notification if its transaction processing runs on an overnight batch cycle. A bank cannot offer embedded redemption at checkout if its payment authorisation system cannot query a loyalty balance in real time. The loyalty limitation is a symptom of a deeper technology architecture problem.

Problem 2: Regulatory Caution Applied to Product Design

Financial services is the most heavily regulated consumer sector, and for good reason. The protections that regulation provides to consumers are genuine and important. But the culture of regulatory caution that pervades most large banks extends well beyond the areas where regulation actually requires it. Loyalty programme design, reward mechanics, and communication strategy are not heavily regulated. Yet they are often treated with the same slow, committee-heavy approval process as regulated financial products.

The result is that banks move at regulatory speed on product decisions that could move at commercial speed. A new challenge mechanic that would take a fintech a week to design, test, and launch takes a bank three months to approve. By the time the bank's committee has signed off, the opportunity has passed.

Problem 3: Loyalty as a Marketing Function

At most large banks, the loyalty programme sits within the marketing function. Marketing reports to the CMO. The CMO is accountable for campaign metrics: impressions, response rates, new customer acquisition. Retention, engagement depth, and member lifetime value are secondary concerns.

The result is a loyalty programme that is designed and measured as a marketing channel rather than as a customer relationship investment. Short-term campaign performance is optimised at the expense of long-term member experience quality. The quarterly earn-and-burn promotion takes precedence over the onboarding journey improvement that would drive 12-month retention.

What Fintechs Are Actually Doing Differently

Loyalty as a Product Feature

At Revolut, Starling, and most fintechs, rewards and loyalty features are built by the product team and owned by the product roadmap. They are not a marketing programme bolted onto the side of the main product. They are features of the core product, updated with the same cadence as all other product features, measured with the same rigour as all other product metrics.

This structural difference has profound practical implications. A product team that owns loyalty can iterate weekly. They can ship a new feature, measure its impact on engagement, and improve it the following week. A marketing team that manages a loyalty programme as a campaign channel operates on quarterly planning cycles and annual budget rounds.

Real-Time as the Default

Fintech loyalty is real-time by default because fintech products are built on real-time infrastructure. Cashback appears in the transaction feed immediately. Streak progress updates the moment a qualifying transaction is processed. Tier changes are visible within seconds. This is not a loyalty design choice. It is a product architecture consequence. Fintechs built on modern infrastructure are simply incapable of the batch-processing delay that defines legacy bank loyalty.

Simplicity as a Competitive Advantage

Fintech reward propositions tend to be significantly simpler than legacy bank loyalty programmes. Revolut Premium gives 1% cashback on purchases, paid to your account instantly. No partner-specific earn rates, no category exclusions, no minimum redemption threshold, no points expiry, no loyalty card. The proposition can be explained in one sentence. 79% of fintech loyalty members can accurately explain their earn rate. Only 42% of bank loyalty members can do the same.

Complexity is not a feature. It is a failure mode. Members who do not understand their loyalty proposition do not engage with it. The simplicity of fintech loyalty propositions is not an accident. It is a deliberate design choice that reflects a customer-centric product philosophy.

The Performance Gap in Numbers

The performance gap between legacy bank loyalty and fintech loyalty is measurable across every key dimension. Legacy bank app experience NPS averages 31. Fintech averages 58. Legacy bank feature iteration speed is quarterly or annual. Fintech is weekly or fortnightly. Only 42% of bank loyalty members can explain their earn rate. 79% of fintech loyalty members can. The average time to implement a significant loyalty change is 14 weeks for a major UK retail bank and 6 days for a leading fintech.

The Incumbent Response: What Is and Is Not Working

The major banks have not been passive. Most have launched or relaunched their loyalty propositions in the past three years, with significant investment in mobile app experience, real-time points notification, and offer personalisation. Some have made genuine progress. Barclays' Avios partnership, NatWest Rewards, and Lloyds Everyday Offers all represent meaningfully improved loyalty propositions compared to five years ago.

But the structural disadvantages, legacy technology, organisational separation, and regulatory caution, remain largely unresolved. Improved front-end experience on a slow, inflexible back end is cosmetic improvement, not structural change. The banks that are making genuine progress are those that have committed to structural rather than cosmetic change: rebuilding loyalty on modern infrastructure, moving programme ownership closer to product, and creating a genuine path to product-speed iteration.

The banks that will win the loyalty war are not those that build a better points programme. They are those that restructure loyalty as a product capability with a product team, a product roadmap, and product-speed iteration.

The Practical Roadmap for Legacy Banks

1. Consolidate the intelligence. Build a complete programme P&L and unified member behavioural dataset. The commercial case for structural change almost always emerges from this work alone.
2. Restructure loyalty as a product function. Move programme ownership from marketing to product, with engineering resource and a genuine product roadmap.
3. Build product-speed iteration. Commit to weekly or fortnightly programme releases. Accept that some changes will not perform and use the data to improve quickly.
4. Address the core banking integration. The most important loyalty infrastructure investment is connecting the loyalty engine to real-time transaction processing, not upgrading the loyalty platform itself.

Continue the Conversation

The financial services loyalty gap is one of the most consequential structural challenges in the industry, and it affects both the banks that are falling behind and the fintechs that are setting new benchmarks. If you work in financial services loyalty and want to discuss the structural change required to close the gap, or if you have first-hand experience of a successful legacy bank loyalty transformation, TLP Collective is where that conversation belongs. Join at tlpcollective.co

TLP Collective is the professional community for loyalty, CRM and customer strategy practitioners. Join at tlpcollective.co