In the competitive business landscape, customer loyalty is worth more than its weight in gold.  Equally important to attracting new customers, the ability to retain existing customers is essential for any company's growth and profitability. One critical– but all too often overlooked– aspect that significantly impacts customer retention rates, is the digital authentication and verification process.

When existing customers forget their passwords or usernames, the inconvenience of resetting their credentials puts customer loyalty to the test, often driving away even the most loyal customer into the hands of a competitor.  Resetting a password via OTP (one-time password) is often just as time-consuming and frustrating as creating a new account elsewhere.

Customer churn caused by passwords and other legacy digital identity methods decreases the average customer lifetime value and increases churn rates, sometimes referred to as attrition rates, hurting a business’s top line.

In this blog, we will explore the impact of passwords on customer retention, discuss customer retention strategies, and explain how passwordless authentication can improve customer experience and expand your customer base. 

The Negative Impact of Password-related Issues on Customer Retention

In today's digital age, customers are juggling an ever-growing number of online accounts, ranging from e-commerce sites, social media platforms, and healthcare sites. No wonder why it’s so difficult for existing customers and new customers alike to remember all their passwords and usernames, especially considering how often they must reset them for security purposes.

When existing customers encounter difficulties in recovering their accounts, frustration follows, and their loyalty to the service provider may be put at risk. As the customer retention rate declines, the company faces the challenge of replacing lost customers with new ones through costly customer acquisition efforts. Without repeat customers, a business struggles to survive. Long story, short: poor digital identity can drive away even happy customers and put a business in jeopardy. 

So what steps must you take to boost your customer retention rate?

Understanding Customer Retention Metrics

Before improving the customer retention rate, you must first establish a baseline. The customer retention rate is a vital metric that measures the percentage of existing customers who continue using a company's services over a specific period versus the customers who drop off.  The higher the customer retention rate, the better. By monitoring this metric, businesses can flag issues in the customer experience and take proactive measures to retain a greater number of customers.

Passwordless Authentication: A Powerful Customer Retention Strategy

After you track the customer retention rate for a set period to establish a baseline, it’s time to implement new customer retention strategies. One innovative solution to improve your customer retention rate and enhance customer loyalty is by leveraging passwordless authentication. Here's how it can revolutionize the customer experience:

1. Seamless Access: Passwordless authentication eliminates the need for customers to remember and manage passwords, streamlining the login process. By reducing friction during authentication, existing customers can access their accounts quickly and without effort. In today’s fast-paced world where distractions are everywhere, easy log-ins are a great way to meet your customers’ needs. By eliminating the password, banks and fintech companies can now offer the seamless experience customers already enjoy on e-commerce sites. 

2. Strengthening Security: Passwords aren’t just a pain to remember. They’re also extremely vulnerable to fraudsters. Even hard-to-guess passwords can be stolen during data breaches and sold on the dark web.  Passwordless authentication utilizes advanced security measures including tokens, making it more difficult for fraudsters to break into accounts. The improved security instills confidence in customers, increasing their trust in the service provider and can boost customer satisfaction.

3. Enhancing Customer Retention: With passwordless authentication in place, the chances of customers switching to competitors due to forgotten passwords decrease significantly. By removing this common frustration, businesses can boost customer retention rates and nurture long-term loyalty. The easier a customer can access their account, the more likely they will become a loyal customer. 

Why We Need to Move Past Passwords and OTPs 

If you're still relying on legacy technologies like one-time passwords, you are adding a dangerous amount of friction to the customer journey, putting unnecessary strain on your customer support team, and depressing your customer retention metrics. 

Today, the best customer support is often invisible. Allowing customers to access your services without dealing with passwords and OTPs delights customers and fosters customer loyalty. 

Passwords and OTPs present a sub-optimal experience for customers and at the same time, are vulnerable to social engineering and other fraud vectors. If you’ve ever felt like pulling your hair out because you couldn’t remember your password or because you were waiting for a one-time passcode that never arrived, you are in good company.

‍A recent survey Prove conducted with OnePoll found that 62% of consumers said they’d abandon trying to log into an account after just three failed password attempts and 34% would switch providers completely if they’re unable to log into their account easily. Passwords are putting brand loyalty to the test, causing even happy customers to switch to competitors.

From a security perspective, a staggering 81% of hacking-related breaches used stolen passwords and/or weak passwords, demonstrating that passwords are far from effective when it comes to preventing unauthorized users from accessing accounts.

Password resets & OTPs also cost firms millions annually. Given that a single password reset done via a support team can cost around $7, many firms are looking for a more cost-effective and user-friendly approach to authenticating identities.‍

How Can Companies Transition Away from Passwords and OTPs to increase customer satisfaction?

Based on customer feedback, many leading companies are choosing to go passwordless by adopting more advanced and accurate identity authentication solutions such as deterministic authentication through a mobile device. Deterministic authentication through a cryptographic key such as a SIM card on a mobile device has many benefits:

• Works through something nearly every adult in India already owns - a mobile phone
• Reduces reliance on OTPs and passwords with passive, deterministic authentication in any channel (mobile, desktop, call center, etc.)
• Enhances customer experience and satisfaction by making logging in easy and seamless
• Authenticates any device anywhere via app push notification or biometrics
• Reduces authentication costs by cutting out OTP and password reset charges

Simply put, identity authentication that leverages mobile signals is more secure because it requires a user to be in possession of their mobile device. Unlike passwords and OTPs, which hackers can easily access, this “possession check” makes fraud unscalable and costly for fraudsters. Deterministic authentication through mobile signals is also inherently more user-friendly because it uses mobile phones, which most people always have close to them.

What is Prove Auth™? 

Prove Auth™ is a next-generation solution for passwordless login and omnichannel authentication. Prove Auth™ enables companies to reduce reliance on passwords and one-time passcodes (OTPs) and empowers consumers to frictionlessly authenticate from any channel with a 1-tap solution that is simple, cost-effective, and secure.

How Prove Auth™ Works & What Makes It Different

Prove Auth™ leverages the cryptographic key that is in a mobile device to authenticate consumers more accurately because it performs a “possession check” that requires a user to be in possession of their mobile device. This means that fraudsters will not be able to pass this check unless they are physically in possession of a consumer’s device (which is possible but is unscalable and typically not worth a fraudster’s time or effort). 

Prove Auth™ also elegantly uses something that most adults already have in their possession at nearly all times - their mobile phones. Because most consumers are already accustomed to using their mobile phones, there is no learning curve for your customers to overcome. However, unlike OTPs (which also use mobile phones and customer input), Prove’s services allow companies and consumers to develop a high level of trust in the use of the phone number or any other user id as an authenticator for a particular transaction. Prove Auth™ allows the device itself to inherit that trust by establishing a bind or key between the device and a given identity. After the initial bind,  the key can then be used in place of traditional, phone number-based authenticators for the user to prove possession. 

Prove Auth Success Stories

Many companies have found that the most successful customer retention program is improving their digital identity practices to reduce friction. What better way to keep customers happy than making common events like digital onboarding and log-ins a breeze?  Here are a few customer real-life stories of companies that made the jump to passwordless:

• In the financial services sector, a leading Neobank sought to add a “silent” authenticator in their web and SDK user interactions (e.g. account registration). Prove Auth™ helped fill the gap in their onboarding requirements and daily consumer transaction authentication services resulting in 115 million successful authentications so far.
• In the public sector, a leading government services firm turned to Prove as a way to improve consumer authentication for their state and federal government entities. Prove Auth™ advanced their standard SMS OTP process, streamlining authentication while providing added insights for each transaction. This company has already completed over 200 million successful authentications with Prove.
• A leading credit bureau implemented Prove Auth™ as a way to optimize their consumer registration and credit check process for credit offers before lending decisions. Prove Auth™ has been used for 1.4 million successful authentications and ensures secure, timely decisioning.
• In the retail sector, a national furniture retailer needed to perform registration and initial credit checks for consumers before generating contract terms for their furniture rental service. Prove Auth™ was implemented for initial account generation, securely binding consumers to improve the onboarding experience, reduce cart abandonment, and improve transaction security. 90,000 authentications have been completed thus far resulting in a significant reduction in cart abandonment.

Interested in learning more about Prove Auth?™ Request more information or a free consultation here.

Other Powerful Customer Retention Strategies

After developing an onboarding process that does not rely on the creation of easy-to-forget passwords and usernames, you can take additional steps to ensure satisfied customers return for repeat business. This will give you ample opportunity to both upsell and cross-sell, increasing revenue.

1. Personalized Customer Experience: Tailoring the customer experience to individual preferences and needs can significantly impact customer loyalty. Utilize data-driven insights to understand customer behavior, preferences, and pain points, delivering personalized experiences that build strong emotional connections with the brand.

The days when a personalized experience simply meant sending a generic email with an individual customer’s name in it are over. Today, companies are leveraging the latest in AI technology to enhance customers’ experiences. Here are some tips to delight existing customers through personalization:

• Embrace Data Collection and Analysis: Start by collecting data from various touchpoints, such as your website, social media, and customer interactions. Utilize analytics and AI-powered tools to analyze this data effectively. Understanding your customers' preferences and behaviors will enable you to tailor your content and offerings to meet their specific needs.
• Segment Your Customer Base: No two customers are the same! Divide your customer base into distinct segments based on demographics, interests, purchase history, and behavior. This segmentation will help you create targeted marketing campaigns and content that resonate with each group, making your messaging more relevant and effective.
• Craft Personalized Content: Use the data you've collected to customize your content, whether it's product recommendations, email campaigns, or website experiences. Address your customers by name, provide relevant suggestions based on their past interactions, and ensure that your content speaks directly to their pain points and desires.
• Leverage AI for Recommendations: Implement AI-driven recommendation engines to offer personalized product or service suggestions. These systems continuously learn from customer interactions, refining their recommendations and increasing the chances of conversions.
• Optimize User Interfaces: Consider personalizing your website or app's user interface to match individual preferences. Allowing customers to customize their experiences, such as layout, color themes, or content preferences, can significantly enhance user satisfaction.
• Provide Location-Based Personalization: If your business has a physical presence or serves specific regions, leverage geolocation data to offer location-based promotions and content. Tailored offers based on their surroundings can increase engagement and foot traffic.
• Integrate Personalization in Customer Support: Equip your customer support team with the necessary tools and data to provide personalized assistance. When customers feel understood and valued, they are more likely to remain loyal to your brand.

2. Proactive Customer Support: Implement proactive customer support by using AI-powered chatbots to answer simple but common questions while leveraging your real-life support team to solve the more complex questions. By going passwordless, you can also free up your real-life customer support team from dealing with password reset questions which can take up a lot of time. Pro tip: Because customers are frequently reaching out to companies for support on social media, be sure to stay active on Facebook, Twitter, and Threads.

3. Customer Loyalty Programs: Introduce loyalty programs that reward current customers for their continued engagement. Offering exclusive discounts, rewards for repeat purchases and referrals, or early access to new products can incentivize existing customers to remain loyal and discourage them from switching to competitors. Unfortunately, many companies based in India outsource the running of loyalty programs to third-party companies that rely on passwords. Be sure to avoid this mistake. Creating customer loyalty programs is a smart marketing strategy leveraged by all of the top brands. Pro tip: a great loyalty program with generous offers can spread fast via word-of-mouth and referrals. 

4. Frequent Engagement: Maintain regular communication with existing customers through personalized emails from brand ambassadors, social media, or relevant content designed to cross-sell. Staying engaged with customers keeps the brand at the forefront of their minds, increasing the likelihood of continued usage. 

Conclusion

Maintaining positive customer relationships is vital for sustainable business growth and success. In today’s digital world, customer engagement relies on easy and secure access to online accounts. If a company leverages legacy technology like passwords and OTPs, it will fail to meet the customer’s expectations, resulting in greater churn and a smaller total number of customers. 

It’s important to note that password-related issues on existing customers can significantly influence their loyalty and ultimately affect the bottom line. By implementing customer retention strategies that prioritize smart digital identity practices, personalized experiences, proactive support, loyalty programs, and constant engagement, businesses can delight existing customers and earn rave reviews in testimonials. 

Passwordless authentication emerges as a game-changing solution, offering seamless access, strengthened security, positive customer perception, and enhanced customer retention. Embracing passwordless authentication not only improves the overall customer experience but also contributes to building a loyal customer base. As businesses prioritize the needs and preferences of their existing customers, they position themselves for long-term success in the ever-evolving digital landscape. So what are you waiting for? It’s time to lose the password and win new business.

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