What’s the best debit rewards program for your financial institution?
A successful rewards program can drive greater card usage and spend
Merchant offers have become an increasingly attractive option for financial institutions seeking to reconfigure their debit rewards programs, but not all merchant offers programs are equal. Designing a program that’s right for your institution can make the difference between a successful rewards program that drives greater card usage and spend, and one that fails to engage cardholders.
What are the elements of a successful rewards program and how should issuers evaluate different merchant offers platforms? These issues are explored in “Merchant Offers: The Future of Debit Rewards” – a whitepaper prepared by Oliver Wyman exclusively for PULSE participants that examines the emerging debit rewards environment and competing merchant offers programs.
New Debit Rewards Landscape
According to PULSE’s 2014 Debit Issuer Study, nearly a third of “regulated issuers” now participate in merchant offers programs. While new regulations and reduced interchange revenue made traditional issuer-funded rewards programs unsustainable, the rationale for debit rewards – promote card spend and differentiate the underlying checking account – is as compelling as ever.
Providing incentives to cardholders without the associated cost has proved appealing even to “exempt issuers” – 22 percent now provide cardholders with merchant offers. Done right, a merchant offers program can create a win-win-win:
- Merchants generate incremental sales by targeting offers to the right perspective customers
- Financial institutions provide a value-added benefit to cardholders at little cost to the issuer, while supporting top-of-wallet card positioning
- Cardholders receive valuable discounts on the goods they like to buy
Because it is difficult for any single issuer to sign up enough merchants directly for a rewards program, most have turned to third-party providers that connect merchants and issuers and provide the algorithms to identify and target the right offers to the right cardholders.
Selecting the right partner is crucial, and these are a few factors to consider in evaluating different merchant offers platforms and program design options:
- How large is the network of merchants? Smaller issuers will have a regional or local footprint that makes localized offers more appealing to cardholders.
- How do consumers receive the rewards? Mobile banking applications are becoming a common channel for rewards offers and allow for location-based targeting of offers.
- How will your financial institution market the program? Simply creating a program isn’t enough – an effective marketing effort is essential to drive cardholder participation.
Program With Proven Results
In short, selecting a partner with the right technical skills and merchant relationships, as well as the ability to guide the issuer through the various program decisions, is the key to a successful rewards program.
On vital metrics such as cardholder engagement, merchant participation and driving incremental per-card revenue, the PULSE® Buzz Points™ platform has demonstrated market-leading results for both large and small issuers.
PULSE has worked with Buzz Points since 2012 to offer a turn-key merchant offers solution to network participants and in 2014, after successful marketplace outcomes, PULSE became a strategic investor in Buzz Points through DFS Services LLC, a wholly owned subsidiary of Discover Financial Services.
Buzz Points’ success rests on delivering superior cardholder experience and the program enjoys a much higher cardholder engagement rate than competitors. With an average of 4.8 payment cards in their wallets, consumers need a compelling reason to change their payment habits, and Buzz Points has proven bottom-line results:
- $8 in additional monthly revenue for each participating account
- $350 in additional monthly spend per cardholder compared to non-Buzz Points users
- 10 more transactions per month for participating cardholders
“That additional spend isn’t everyone getting raise, that’s people not using the other 3.8 payment products in their wallet,” said Jay Valanju, Buzz Points founder and senior vice president, during a recent webinar presentation to PULSE participants. “Our program actually encourages redemption of coupons and offers to drive cardholder satisfaction. We want the end-user to be happy with the experience.”
Buzz Points handles set-up, implementation and management of the program behind the scenes. The turn-key platform includes web and mobile delivery channels for offers, marketing support and a merchant sign-up campaign focusing on local businesses in an issuer’s geographic footprint.
Thanks to success in driving incremental sales for Buzz Points merchants – participating cardholders typically double their spending at local businesses – Buzz Points has been able to build strong merchant networks for each financial institution.
PULSE participants can learn more about Buzz Points and listen to Valanju’s presentation by logging in to the “Webinars & Webcasts” page in the Knowledge area of our website. Participants can also download the whitepaper “Merchant Offers: The Future of Debit Rewards” on the Insights & Research page.