Cheat code for loyalty cards – Integrated personalization and point-of-sale rewards

Keeping a card top-of-wallet starts with delivering a great experience.

Did you know that Americans belong to an average of 19 loyalty programs per person? And of those 19, nearly 10 are active.¹Loyalty programs are intended to drive repeat business but can struggle because of their inability to adapt to changing customer expectations.

The loyalty game has become much more competitive, and cardholders may have trouble finding the right rewards and easily redeeming them. Redemption options in traditional credit card loyalty catalogs can be limited and expensive. They have long focused on higher-price reward items such as travel and experiences, and they come with a delayed timeframe to enjoy them (e.g., taking a trip in June that you book in March).

Cardholders are losing interest, and that has become apparent, with travel loyalty program usage having stagnated the past few years. Hotel loyalty programs are having a more difficult time drawing repeat guests than other travel loyalty programs, according to a Morning Consult report.²

Rewards points also don’t go as far anymore, especially for travel, which means cards are becoming less valuable to cardholders. That’s not to say consumers don’t want credit cards for their rewards, quite the opposite.

Plus, 55% rank loyalty and rewards as the top reason in influencing which credit card to use to pay.

Cardholders want loyalty programs with more attractive, affordable and flexible options they can redeem at the point of sale – everyday items such as groceries and gas. In fact, nearly 80% of consumers would engage more in their loyalty program if the pay with points was offered at checkout, according to a survey from The Wise Marketer.⁴

Innovation is needed to enhance customer loyalty, streamline reward redemption and provide an engaging experience.

How can pay-with-points drive incremental spending and loyalty engagement?

When it comes to loyalty programs, cardholders want more reward choices in one place and easy-to-redeem points for those items anytime. Some loyalty programs are expanding their redemption options to offer more immediate rewards such as cash back or the ability to pay with points.

Many cardholders are already reaping the benefits, with 61% using rewards for cash back or gift cards, as opposed to 17% for a free flight and/or hotel stay. When it comes to choosing the best feature of a rewards credit card, the numbers show a similar disparity: Cardholders prefer cash back (50%) over travel (9%).⁵

Another option is shopping with points that cardholders accumulate through transactions. A cardholder can shop at a retailer or e-tailer using card loyalty points to cover the partial or total cost of their items at checkout. This capability is preferred by 64% of consumers.⁴

This approach also benefits card issuers, with incremental translation and spend activity generating additional value for a loyalty program.

How can issuers use transaction data to create personalized rewards?

Successful loyalty programs have moved beyond tracking points and applying rewards. They integrate with a point-of-sale system and e-commerce platforms to streamline transactions. Those point-of-sale systems can also match financial transaction data (purchase history) with loyalty data to reveal customer insights. That information can be used to understand customer preferences and behaviors so issuers can create tailored, customized communication and rewards.

This approach can also help avoid sending unattractive rewards, which 71% of consumers ⁷ are turned off by as they perceive them as low-value.

Unfortunately, many reward programs don’t make it easy to engage beyond making a purchase. Less than 25% of programs are personalizing member experiences based on previous interactions, purchase history and stated or inferred preferences.⁸

“Reward points and experiences should always be connected to and personalized for cardholders’ daily interactions and transactions,” Sabrina said. “This helps to better understand their changing expectations and ultimately continue to retain them as loyal customers.”

How can issuers reduce friction in the rewards redemption experience?

Connecting all parts of a loyalty program to drive improved outcomes means having the right technology. Issuers need a solution that integrates a point-of-sale system with a redemption program and includes hundreds of retailers, from e-tailers to fuel merchants.

Cardholders can redeem rewards for virtually any product, and the technology prevents friction during the redemption checkout process.

In fact, nearly 1 in 3 say that friction occurs when trying to redeem their rewards. Factors include confusing technology (23%), lengthy redemption process (22%) and redemption details that were unclear (almost 22%).⁹

This friction exposes potential problems with gaps in technology as well as a lack of sophisticated decisioning and engagement tools. If loyalty programs and merchants are not integrated smoothly or there are problems with integrated vendors into a card program, then cardholders may experience issues redeeming their rewards.

How does expanding loyalty offers help issuers stay competitive?

The ability to enhance customer engagement using loyalty programs has immense potential. Yet many continue to be limited to basic points-for-purchase systems containing high-end rewards, which don’t give cardholders the flexibility they want. Issuers need to embrace a loyalty program that expands offers and brands while enhancing customer engagement and driving success.

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