Payments Leader
The Rise of Digital Cards for Instant Rewards and Incentives by Jerry Uffner
October 11, 2018
Jerry Uffner | General Manager, Line of Business Executive Prepaid
The on-going digitization of payments isn’t just about eliminating checks and cash, or even about the rise of digital cards and wallets. If you’re a retailer or corporation, payment digitization presents new marketing and loyalty opportunities, enables instant incentive and reward mechanisms, and provides a much more efficient way to reimburse clients. And the best news may be that you can do all of it in real- or near real-time.
Inelastic Plastic
We’ve all become accustomed to the immediacy of the digital world. But physical cards can’t keep up. If a customer applies for a card, a retailer issues a gift card or a company gives payment cards as employee awards, the wait can take days – sometimes even a week. In the meantime, recipients find other ways to pay and momentum is lost. Delays or other complexity in the process also dramatically reduce chances of recurring usage, and may even negate the loyalty and benefit the card was meant to generate.
Meanwhile, the cost of a plastic card is relatively high – approximately $1.50 by the time it is printed and posted through the mail, not counting that some cards are lost along the way which can result in other complications.
Acquisition costs are another important consideration in the management of cards. A customer may sign up for a card (often for free), but by the time it arrives they have changed their mind, thus costing the issuer several dollars with no chance of return. This is particularly true of general purpose reloadable cards.
Load Now, Spend Now
With a digital card, recipients can receive their “card” on a smartphone or via email almost immediately, the card comes ready for use and access to funds is nearly instant. And the cost to an issuer is a few cents.
Digital rewards are taking off because they present all the same functions as a physical card (except for general ATM acceptance) and offer immediate ability to purchase online, or they can be added to electronic wallets, like Apple Pay and Google Pay, and used in stores.
Another benefit of digital cards is customization. Cards can be authorized for a single purchase or a specific subscription, even giving issuers the ability to cancel transactions if they are not used in a manner, which can reduce fraud.
A Card for All Seasons
Digital cards are great for marketing campaigns. They make it easy for companies to offer value-added promotions to customers with little effort and cost. A retailer giving a $50 rebate can simply issue a digital card through email with their logo visible whenever it is used. The process works so well that many insurers are now looking toward digital cards as a more cost-effective and customer-friendly way to reimburse than printing and posting checks every month.
Digital cards also make it easier for employers to pay short-term employees or those who are part-time or in project-specific roles. Since the employee wouldn’t be in the regular payroll cycle, a virtual prepaid card makes paying them convenient and cost-effective for the employer. In a more corporate environment, a new employee with a digital card can be given instant access to company funds to purchase items without the normal delay in getting a personalized card issued on the company’s account.
