Issue 1, 2014. February-March



Keti Khukhunashvili, TBC Bank Investor Relations Manager

The holiday season is probably one of the most promising times for retailers. Discounts and special offers lure shoppers in to spend their savings, salaries and - in certain cases - their credit. In addition to the steals and deals offered by businesses, onemay find that banks have a hand in organizing a successful shopping season as well. Akin to their foreign counterparts, Georgian banks are gearing up their loyalty programs to capture and encourage more holiday spending.

The Georgian banking sector is considered relatively underdeveloped. According to a recent study by the International School of Economics at Tbilisi State University (ISET), low real sector penetration is one of the factors hindering progress in the financial sector. Thus, expanding the customer base - both in terms of income level and geographical reach - is as important a task for Georgian banks as securing cheaper funding. The three leading banks in the country - Bank of Georgia (BoG), TBC Bank and Liberty Bank - have successful and creative loyalty programs that aim to attract new clients and retain existing ones.

A recent report from McKinsey & Company advises that bank customers exhibit two main types of loyalty - behavioral and attitudinal. People, as it turns out, may be quite unhappy with their banks but still maintain allegiance simply due to comfort and convenience. Attitudinal loyalty is harder to create and helps banks capture an ever larger customer base through, among other things, existing client recommendations. Georgian banks' loyalty programs seem to strive to achieve this exact effect.

"To ensure high customer loyalty, BoG offers programs that go with various BoG products to different segments of customers: AmEx Membership Rewards, AmEx Selects program and short-term campaigns; AmEx Blue card cash-back program; Express Card Express Bonus program and several others," explains the BoG PR department.

As an interesting addition to the more traditional "points programs" developed for the American Express cards, Bank of Georgia came up with iDeals - a customer loyalty project operated through its subsidiary iPay. iDeals is a discount deal site that has recently gained popularity in the Georgian e-shopping market. The website features products and services with deep group or individual markdowns. Visitors are encouraged to acquire BoG cards in order to take advantage of the maximum discount possible. According to the official source for iDeals, the project has successfully fulfilled its initial purpose of "creat[ing] one more loyalty platform and offer[ing] innovation to the existing BoG customers and attract[ing] new ones." Each BoG customer now uses an average of seven products - an achievement attributed to the effectiveness of the iDeals loyalty program as well.

Liberty Bank offers a similar loyalty program through its website Swoop. The Bank cross-sells various products through this platform, including e-Loans, plastic cards, gift cards, and others. Swoop regularly features a large number of discounts and deals daily, with tailored promotions for the holiday season.

TBC Bank's Smart Club loyalty platform slightly differs in execution, but also targets increased product usage per customer. All of the Bank's clients receive special "Smart Cards" tied to their accounts that accumulate points based on the type and number of processed non-cash transactions. Smart points can then be exchanged for cash to buy goods and services from TBC Bank's partner retailers. In conjunction with Smart Club, TBC offers a special cash-back program for its newest credit card, Prime Card.

Apart from offering deals to their customers, customer loyalty programs provide large benefits for banks - despite their initial cost.A recent report on retail banking loyalty programs from Research and Markets consulting group found that rewards programs actually add to the banks' expenses even if they share costs with partner merchants. These expenses, however, are justified with the "emotional connection" they help create with the banks' clients. Such connections win attitudinal loyalty from the old customers and generate interest among the new ones. The report noted that rewards programs "are [now] being viewed as important revenue-driving tool and have been proven to reduce customer acquisition costs."

Georgian banks have indeed done a good job developing innovative loyalty programs. From iDeals and Swoops to TBC Bank's Smart Club, all of these projects have a crystal-clear purpose: gain and sustain client satisfaction, and a customer-friendly structure.

What is more important, loyalty programs are an invaluable trove of customer behavioral statistics for banks. Georgian banks' foreign counterparts seem to be more successful in collecting and using this data for all aspects of business development. Data-driven product decisions with more effective cross-selling and wider income-level targeting can only be beneficial for all parties involved - customers, retailers, and their banks.

Lack of concrete statistical data on the success of these programs may just be due to the banks' reluctance to give up their findings, or the programs' relative novelty on the market. Nevertheless, we wish for even more pleasant surprises in banking innovations.