Rewards in Interesting Times

 The economic turmoil of the last five years has left imprints on the financial industry that their products, programs and customers will feel for years. This document looks at impacts to loyalty programs, customer reactions, and what the future holds.

Key Takeaways

  • The economy and legislation in the last five years have impacted marketing programs from financial institutions. As a result, established loyalty programs supported a renewed marketing focus on responsible banking behaviors.
  • Bank loyalty programs have seen dramatic shifts in reward redemptions from the traditional cash back, gift certificates, airlines and merchandise to banking products and services. Many factors influenced this shift including more availability and better value for customers.
  • With the introduction of banking products to the mix of redemption options, banks saw the opportunity to retain the redemption dollars internally while both growing assets at the bank, and deepening customer relationships.
  • Future redemption options will continue to capitalize on the growing trend of customer control. Customers wanting greater immediacy and flexibility will look to use their points anywhere for anything.
  • Increasingly, smartphones are becoming the first point of interaction with a brand. Loyalty program benefits will integrate more immediately with mobile devices to provide location and time-based services that are both unique and relevant.
  • Debit card rewards programs have been greatly impacted by the Durbin amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Many affected banks closed their programs while others shifted the focus to relationship rewards or merchant-funded offers.
  • Spending averages on debit cards where the programs were closed dropped-off relative to debit card spending where rewards were still available. Even for relationship reward programs, where the point earning benefit is broader than just card transactions (e.g. product openings, balances, etc.), spending for rewards members outpaced non-reward members.

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