Fintech Insights

It’s time for credit unions to rethink loyalty programs offerings

Bill Hampton I Credit Union Division Executive, FIS

November 30, 2020

From the introductions of Green Shield stamps in the late 19th century to Betty Crocker’s box tops in the 1920s and frequent flier programs in the 1980s, rewards to foster consumer loyalty have evolved to reflect changing consumer behaviors and preferences.

The redemption habits of today’s cardholders underscore a growing preference for cash rewards or an equivalent such as gift cards – “points as currency.” Recently released statistics from demonstrate that currency rewards have displaced yesterday’s toaster or blender and even free airfare.

Particularly troubling is the statistic showing 22 percent non-redemption during 2019. This means that fully one-fifth of cardholders are not engaging with companies’ loyalty programs. Another sign of eroding engagement is declining cardholder satisfaction, slipping from 47 percent to 44 percent between 2018 and 2019, according to the recent Bond Loyalty report.

Members want personalization, immediacy and ease of redemption

Credit union cardholders expect three things from loyalty programs:

  • Personalization
    “You should know me by now.” According to the Bond Loyalty report, a typical consumer holds an average of 14.8 memberships but are only active with 6.7 of them – indicative of a mismatch between what’s offered and what consumers want. Furthermore, only two in 10 are very satisfied with the level of personalization provided by their current programs.
  • Immediacy
    “Don’t make me wait.” It’s time to say goodbye to the months or years-long waits to garner enough points for meaningful redemption, especially when companies raise the number of points required over time. According to Blackhawk, most consumers want to redeem their rewards well before they reach the $100 mark.
  • Ease of redemption
    “Don’t make me jump through hoops to redeem.” Consumers want frictionless redemption experiences – less effort for more timely rewards.

Traditional loyalty programs could be turning your members away

Isn’t it time to replace the outdated catalog with relevant offers that fit today’s lifestyles and provide a superior redemption experience – one that’s simple, provides immediate gratification and takes the burden of redemption off the backs of cardholders? Isn’t it also time to reward loyalty members regularly instead of making them wait months, or even years, to be thanked for their business?

Connecting with consumers on their terms requires a new loyalty program model – one that integrates the company’s program into consumers’ regular routines and meets their expectations for quick and easy redemption. FIS Premium Payback represents an example of this new model. Premium Payback will frequently engage credit union members by presenting them with the ability to enable loyalty point redemption at point of sale (POS). Cardholders with enough points to qualify for redemption can opt to use their rollback offer when they present their payment card or digital device at POS.

How are cardholders enrolled in Premium Payback responding?

The redemption rate for Premium Payback is four times greater than coupon redemption and 50 percent of those enrolled redeemed their points two or more times in 12 months. Ninety percent of users rated the experience as “good” or “very good” and spending increased by 36 percent after program implementation.

Premium Payback cardholders are even using their points online. In fact, since launching its Premium Payback partnership program with FIS, eCommerce giant PayPal has seen incredible results. Compared to the same time period in the year prior, overall card spend increased by 16 percent once the program rolled out with debit card spending increased by 20.2 percent, while credit card spends increased 10.8 percent. Following the larger late July release, overall spend increased to 16.9 percent during the first week of launch. It later settled into a trend of consistent increases, averaging about 14 percent overall.

By intelligently integrating loyalty points into the regular transaction process, credit unions can provide cardholders with the solutions they want and also differentiate themselves by keeping their loyalty program front and center in their members’ minds.