We find out how African Bank’s Audacious Rewards program is incentivizing positive financial behavior for all customers.
In contrast to other loyalty programs, which simply reward customers for transacting with one brand, Audacious Rewards creates incentives for positive financial behavior, such as customers improving their credit score. The custom-built program has been created to work for all African Bank customers and allows members to earn and redeem loyalty points with an exciting network of partners – covering day-to-day purchases like groceries and mobile data/airtime, as well as exclusive aspirational rewards.
This initiative ties in with African Bank’s vision to build a bank for the people, by the people, serving the people, as defined by its audacious Excelerate25 strategy. Key to that vision is the ability to deliver sustainable, accessible, and inclusive financial services to all South Africans. To do that, African Bank embraced technology that enables partnering with organizations who can enhance its rewards offerings to customers that ultimately drive smart / healthy customer behaviors.
To create their new loyalty program, African Bank teamed up with Loylogic, the global leader in loyalty and engagement solutions and an established loyalty marketing powerhouse. Through its partners, African Bank will also be able to accurately measure the impact of Audacious Rewards (click here to find out more about the program) on the business, bringing loyalty metrics to the boardroom.
In this podcast, Dr Nceba Hene, Head of Loyalty and Rewards at African Bank, and Gabi Kool, CEO of Loylogic, discuss how African Bank’s Audacious Rewards program is incentivizing positive financial behavior for all customers. Together, we delve into:
- How the program is enabling members to earn and redeem loyalty points with an exciting network of partners – covering day-to-day purchases, as well as exclusive aspirational rewards, all without having to deal with unnecessary red tape or jump through hoops.
- The mechanics of the program, including how cost and attribution are being calculated.
- The customer messaging and the rewards that are behind the rapid growth of this program.
Click below to listen to the episode in full, or check out the full transcription of the discussion.
(2:16) Can you tell us more about why African Bank decided there was a need for a custom made loyalty program that is rewarding the previously unrewarded?
Dr Nceba Hene: "African Bank, at the heart of it, is a customer centric bank. It means we will always consider our customers when we're designing our financial solutions. This approach lies at the heart of who African Bank is. We're a bank for the people, by the people and serving the people. That is the key to the delivery of our vision. And that is why we've delivered Audacious Rewards, because we want it to be sustainable, accessible, and inclusive to all South Africans. But also equally important in the context of South Africa, and the unrewarded, financial literacy is a major challenge. Therefore, it's important that you incentivize positive financial lifestyle modification in this regard, so that you can advance people's lives."
(3:16) So how did you go about developing and setting up the Audacious Rewards program? What drove you to be so innovative and challenge the status quo when it comes to banking rewards?
Nceba: "At African Bank, everything is inspired by our rich heritage. We had founders who decided to put some money together to build a bank. That is sheer audacity. Imagine people coming from the township saying, we need to support our people, so that they can have access to funding so they can build businesses. And that is where the vision came from. And therefore with that audacity, we decided to name our program Audacious Rewards.
"One thing that you may be aware of is that the majority of South Africans are excluded from rewards programs, especially within the financial sector, due to two reasons. Firstly, most programs are required to pay a monthly subscription. With Audacious Rewards it's free! Also, most programs are tiered, which means it's based on your earning potential, or the number of financial solutions you hold. If you are struggling to make ends meet, it's very difficult for you to have a number of solutions and you get disheartened because you are being punished or you feel punished for not having money at that point in time.
"Because we are audacious, and we are ambitious, we said, 'let us partner with the best in the market. We've partnered with Loylogic, who are internationally acclaimed, who have worked with a number of rewards programs, and also Pinnacle locally, which are specialized in the financial services loyalty programs."
(5:15) From Loylogic's perspective, what was it like working with Nceba and the Audacious Rewards team? And what for you made them stand out in the delivery and creation of what has already become a much-acclaimed loyalty program?
Gabi Kool: "The partnership between our companies has now been in place approaching two years already. What makes this partnership quite unique is that from day one, the executive team of the bank, including the CEO, took a real deep and personal interest in how such a program should be built. Also making sure that that would be measurable along the way, with metrics that would resonate in the boardroom of the bank. I would say the level of executive sponsorship, and also the deep understanding of the program, and its offering is something that we don't come across often when we are designing and implementing such programs. And that probably helps to really set this program apart in the industry.
"If you fast forward from these kind of initial discussions that we had, almost two years ago, you will now find a program that includes a lot of beloved local brands, as part of the proposition as well as global brands, lots more to come actually in that space as well what the teams are working on. But it was not just on the program itself, the bank also committed on different layers. They said, if we want to launch a program like this, and run it and grow it, and really make a difference in the market, then we need to have our own world class in-house loyalty team and structure ourselves accordingly. I think Nceba is probably the biggest testament. So they brought him in, from an external kind of environment to spearhead the loyalty team based on his own rich experience as well in the South African loyalty landscape, coming from different industries. It's a very exciting partnership, a very exciting proposition."
(7:32) How are Audacious Rewards members being rewarded? What's the driver?
Nceba: "Thank you, Gabi, for your kind words. I think we've equally enjoyed working with Loylogic. It's a great partnership, it's very seldom you'll find people who have got mutual interest in one thing, and that is what you call a partnership. In my language, I would say it's a marriage made in heaven!
"Having said that, there are two drivers, which are key to us: the immediacy of rewards, and incentivizing for improved financial health. Audacious Rewards members immediately earn points for everyday banking, that is key for us. And that is a major differentiator and the driver. For example, when they swipe the African Bank card, they immediately earn points, which they can redeem for vouchers, groceries airtime data, convert the points to cash. We call this 'points you can count on'. We believe that a person must get points immediately.
"And then secondly, it's important that we incentivize people for positive financial behavior. One example would be a credit report. So if you request a credit report, you earn points. But the most important element is that, a year down the line, if your credit score has improved, then you get additional points. What we're saying is that, use your funds accordingly, responsibly. Yes, take a loan with us, but we don't want that loan to be at the expense of your financial position."
(9:21) That immediacy is something that that we don't normally experience or certainly don't often experience with a loyalty program. Is that key for you?
Nceba: "It’s extremely key, if you think about it this way. An average South African is battling to make ends meet. By the time they get paid at the end of the month, they don't have funds. Now, if you're rewarding people the points at the end of the month, when their salary is in their bank account, it's good, but hey, what about this, I've just made a transaction I've made a purchase that in a day or two days time, I've got points which I can supplement my income or my disposable income, or I can add on to what I need to purchase. There is being there for the customer, at the moment of truth, the moment of reality. In the South African context, after five to ten days, they have spent their salary. So what happens for the remainder of the month, when they need the points, and those the points that they earn in the first 10 days of transacting, or in their everyday banking."
(10:24) Audacious Rewards clearly comes with costs associated to it. So how do you predict those costs? And how do you work out the return on investment, how can you manage risk, and where does cost point management come into play?
Gabi: "The key approach that we took in that space to make sure that the bank and the management have got full visibility and transparency in how to optimize the investment in such a program for the benefit of both the bank and for the customers, was to use member equity as the main way to determine the value that the program creates. So what that means in reality is that every month, the data gets extracted, whereby each individual member is kind of re-scored, on what is called their expected future profit on an individual level.
"This basically is a measurement, similar to customer lifetime value, but also taking into account the predicted cost of the loyalty points that you are planning to issue to the members over the next coming years. Then, if you aggregate the sum of these expected future profits on individual customer level, that then amounts to what is called member equity, which is the term used in discussions with the bank's executive team to monitor if the program is delivering the value it's expected to deliver for the bank. So based on our solutions that we have in play, in that sense, we can then customize also the cost per point investment for the various redemption categories so that the bank has got the tools in place to drive the right level of member engagement on one hand, against the right level of investment in the reward cost."
Nceba: "Another element, which is quite a high cost driver is the retention redemption cost. It's one of the largest expenses in the loyalty business model. It's always difficult to calculate return of investment, or you cannot. Let me be blunt about it, without understanding the redemption cost. Redemption cost is different from other costs, because it's an unknown. You do not know how your customers or your members are going to redeem. So the only way you can actually really do it is predict, because some people will redeem the points, immediately as they've earned it. And some are hoarders of points. They'll keep them for a number of years. I like to keep my points for 10 years so I can buy something big. Or, there are people that never spend them and they expire. So it's very difficult to establish return of investment.
"Fortunately for African Bank, it's not something that I have to wrack my brain about, because we're fortunate that we've got some clever people, we've got an actuarial firm, which is called Kyros. And I can openly say these guys are the best of the best. Why do I say that? Because they're the only actuarial firm in the world that is solely focused on loyalty programs. Therefore, they help us estimate the redemption costs. And they monitor the risk in order to understand what is our return on investment. And they've been doing a good job thus far in advising us and making sure that we sail into a safe space."
13:57: In just 10 months, the Audacious Rewards program has reached 28% of African Bank's debit and credit card customers, which I think is phenomenal. What messaging are you using? And how do you make sure you know which rewards really encourage customers to take action?
Nceba: "So we use multiple platforms to communicate to our customers and prospective customers. One approach that we've taken has been to do a lot of test and burn., because this is a new territory for African Bank. Therefore, what we do, we spend a lot of time having a holding group and having some test groups in order to see how is it going to do? For example, if we're going to send out a message, we'll have a holding group and we'll have different messaging based on behavioral science, terminology and language and messaging. Then we send to our membership base, and we'll see which one of these is the most effective. Whatever we find most effective we will then know that in future we will scale that element. There are some instances whereby none of them have worked, so we then go back to the drawing board and say, how do we enhance this? How do we work on that? And that is what we do on a month to month basis. So A/B testing is our bread and butter at African Bank.”
(15:20) I would like to ask you about some of the challenges you faced with Audacious Rewards, including around attribution. If you can give us quick overview of the major challenges you've come across and how you've overcome them?
Nceba: "One that has caused sleepless nights for me, because it's not an exact science and is quite difficult when it comes to the boardroom, is around attribution. That, for me has been the biggest challenge, because the leadership asks, 'Nceba, prove to us that it is Audacious Rewards that is making the impact and not everything else that we are doing in the bank'.
"So what is attribution is basically, what would happen if the program was not in existence? With the inclusion of the program, does it have an impact? You have to do an estimation, but one that I have found favor on is what I call the 'lookalike analysis'. We take two groups, one group, which are members, and other with non-members, but with the exact same characteristics, and compare the two. What we found as a business was that we are having an uplift amongst those individuals who are rewards members."
(17:18) Gabi, earlier on, you referred to the fact that Audacious Rewards points can be used to buy everyday essentials, and/or to create memorable moments. So what does this mean from a Loylogic perspective for the brand partnerships and marketplace content you enable within the program?
Gabi: "That's of course a topic close to our heart! In general, we always very firmly believe in connecting the right brands in such a marketplace to the right community. And everything starts in a great loyalty or engagement program in general by offering the relevant and motivational rewards for that particular audience in a program.
"If you take a step back, Platinum members in a frequent flyer program, of course, would be a very different audience, versus the members in a problem like Audacious Rewards where consumers might sit in a different income segment level, and might be on a different kind of stage in their own path to prosperity for their families. While the level of income, of course, might be an important indicator, it would be a gross mistake to translate that into very simplistic thinking around okay, that should then mean lower cost rewards. If you think about deeply, deeply understanding the audience, their wants their wishes, their dreams in life, that will then allow you to shape a program, which is full of rewards, which will resonate with the audience, and truly excite them. So that's normally where we would like to start. Understand the community. Think about brands which can add value to the lives of these members, then get very creative on how you identify rewards, which matter which might have a high perceived value for the audience. And ideally, also a lower actual cost for the bank in the in the execution, and then bring it alive with really great creative execution.
"That's why you will see in the Audacious Rewards offering that members can now redeem points at a very wide selection of much loved brands in the South African context., such as pick and pay or Shoprite, or Cell C or MTN, or Uber and well, I can go on... But they are brands that are understood and loved by the audience in the program. So then these members can shop online and do the reward shop. They can even convert points actually to cash in the offering. And you heard Nceba talking earlier on about knowing how challenging the South African financial climate is for many consumers. The fact that African Bank can uses world-leading AI scoring and machine learning to guide its constantly redefining of the program, onboarding new programs and our products and brands and transactions that I think makes this program so, so unique.
"What is also interesting, and of course we're here in audio environment so visually we don't have the benefit of showing kind of elements in there, but the loyalty team of the bank also works extremely closely with the chief marketing officer and his team at the bank. This program is a real extension of the whole brand positioning and brand identity of the bank. So the creative execution, and I would encourage the listeners to look at some of the creative executions that the bank has done, is a wonderful expression of the program and what the brand stands for.
"I think summing all of that part up when the collective teams come together of the bank and the various agencies involved, I think we're on a journey to move consumers who are interested in the African Bank brand and services, making sure that these members get involved with the brands by using more and more services and more and more often. And in the end, we're trying to lead them to a stage where as many customers as possible have made African Bank part of the daily lives, driving digital adoption in the banking services, also creating the behavioral changes that the bank is also seeking from a business perspective, all underpinned by supporting customers in their journey to financial wellness."
Nceba: "To add on what Gabi's saying, one of the most important things for anybody is to dream. If you take away people's dreams, and aspirations, you kill the human spirit within them. And the nice thing here, and what Gabi is making reference to, is that our partners are aspirational partners, which for the person who wants to keep their points so they can buy an Apple Watch, which we've got on our store, drives them on. We're humans, we interact, we want what other people want. We want to advance our lives. Advancing life means therefore, you can have a better life for yourself, in whichever way you determine, or you find value in. And that is what we do. We allow African Bank customers, people who are on a low salaries, to keep their points and enable them to end up buying an Apple Watch. And for them, that's a status symbol. That's what keeps them alive. And with that status symbol in their world, they then start to exercise. And therefore they then say, actually, let me improve my financial health, because it's got good returns for me as individual."
(22:56) Given what you've said, what impact is African Bank and Audacious Rewards having on everyday South Africans, and what impact you predict it will have in the future?
Nceba: "In a short period of time, I'm happy to say that we're seeing a positive impact and some very good green shoots in the program. And I'll make reference to two elements which are key to our strategic drivers.
"One of our strategic drivers in African Bank is digital adoption, is how do we get more people using our products digitally? That's quite key. So then you ask the question, has Audacious Rewards made an impact in that area? And I'm happy to say that, first of all, members have a higher adoption of the digital services. Why is that? Because the redemption happens digitally. Overall, 60% of rewards members log into the African Bank app, versus 7.5% of non-members. In other words, that is a big differentiator, which means it's driving that digital adoption, and we keep on seeing it growing from month to month.
"Also, the existence of any bank is to cross-sell. You want the customers, when they can afford it, to choose your product. In other words, to create stickiness. What you've seen in this area is that the cross-sell ratio of rewards members is higher than non members, with 57.5% of members having at least two African Bank products, versus 46.1% of non-members. What is most exciting for us as the bank is that the Audacious Rewards members are younger than non-members, which means we can build a closer relationship with them for the foreseeable future, which then will increase our customer lifetime value."
(25:09) One question I do have, is there an issue with digital literacy here? And what are you doing to attract those people that don't have access to the relevant smartphones or other devices that that can access to Audacious Rewards digitally?
Nceba: "When I first joined banking, I made an assumption that people do not have the devices which will digitally enable them to transact. That was my assumption. However, the more I talked to people, and when I visited branches, we did a lot of surveys, people said 'no, I've got a top of the range cell phone'. When I asked them why they were not transacting with us digitally, the response was simple. 'Nceba, we are worried about security, we are worried about being scammed'. So it is not a matter of people not having the right device, it was them saying 'listen, I've worked so hard for my money, I don't want to just lose it overnight'.
"So, we've done a lot of campaigns in the bank to say, look, our services are secure. And also because the more they engage with Audacious Rewards, they find that actually, it's quite safe to do so. And also, therefore it becomes word of mouth to say, listen, this is actually quite a safe space. And that has been our biggest challenge. But once you start getting going, then you find that there's actually great value in this."
(26:46) To wrap up, what are the key pointers or pieces of advice for other bank loyalty program leads, and indeed anybody running or thinking of setting up a loyalty program, regardless of sector? To take from your journey with Audacious Rewards?
Nceba: "For me, there are many, but I'll keep to three. The most important one for me is a seamless joining process. I can say with Audacious Rewards, that you can join in less than a minute. So we've put a premium on that.
"Equally important, as a behavioral scientist, is finding that balance between instant and delayed gratification, because those are equally important. How do you cater for the immediate needs of someone? And yet, how do you make sure that you reinforce long term positive financial lifestyle modifications? That is the second one.
"The last one, and I think more needs to be done in this area, the benefit partners must be aligned with the purchasing behaviors of your customers, and not based on which partner is available, or which partner, I as a leader have got a relationship with. Or, is not based on favorable commercial terms. Therefore, the decisions on the partners you make must be purely focused on what the customer needs. And that is at the heart of customer centricity."
Gabi: "I can only echo the points that Nceba made here. I think on that last point on these brands that matter for, it's interesting. One of the main 2024 objectives that we have as a company is to really forge such direct brand partnerships around the world with brands that want to get in front of the right communities, so that they can feature their stories, their content, their products, their services, to add value to that particular audience. Internally, we like to call it 'Reward shops Reimagined', because reward shops have been around for a long time. But if you really push yourself and think about, okay, how would you really reimagine these kind of reward shops to make them truly memorable and unique? So that's kind of where we think that the overall loyalty industry is going and we want to play a leading role, of course, in that space.
"Now, if you think about that, that element of reward shops reimagined it's probably fair to say that Audacious Rewards and African Bank are actually at the forefront of this journey. So we're super excited to support the bank's vision and their strategic plans. Because we think and we deeply believe that they can be a source of inspiration for not just the banks across the African continent, but truly across many other regions and also across many other industries.
“So I think what Nceba and the team are working on in the space of what is so fondly called 'rewarding the unrewarded' has got many potential applications and enormous opportunities to develop businesses, but also really people's personal life. I think it's a privilege to be part of it and we're very excited about the journey."