9 unorthodox reward programs

Published
  • January 13 2017, 9:12am EST
Bigger isn't always better; as card issuers compete to bring in more spending, many are rethinking the way they offer rewards. Some of their approaches focus on streamlining redemption, while others dabble with cutting-edge technology such as virtual reality.

Bigger isn't always better; as card issuers compete to bring in more spending, many are rethinking the way they offer rewards. Some of their approaches focus on streamlining redemption, while others dabble with cutting-edge technology such as virtual reality.

Amazon Prime's credit card connection

Amazon is revamping its cobranded rewards card, adding a higher tier of rewards for people who pay a $99 annual fee — as 65 million people already do — for Amazon Prime membership. The strategy is at odds with that of most credit card issuers, which market the perks of using their credit cards and use the lavishness to justify an annual fee. In Amazon's example, the company has sold its customers on paying the fee for a growing range of services including expedited shipping, video streaming and early access to deals; the credit card would just be one more benefit for a cost consumers already pay.

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Samsung Pay rewards

Samsung Pay launched a reward program for U.S. consumers in November that is designed to amplify use of the mobile wallet. The program multiplies points earned based on how frequently the customer uses Samsung Pay, giving more frequent users higher multipliers. Since the program's launch, the number of daily Samsung Pay transactions has nearly doubled and the number of “power users” — those who are making mobile purchases almost once a day — more than doubles every week.

Virtual reality

To encourage more active use of its reward program, Royal Bank of Canada is providing a virtual reality experience that lets consumers virtually try a product or experience before purchasing it with their loyalty points. The aim is to show customers the benefits of certain offers in a tangible way to help their decision making.

Citi Thank You

Citigroup's ThankYou program launched in 2004 as a coalition program meant to partner with airlines, supermarkets and other retailers. When that model hit a wall, the bank pivoted, transforming ThankYou into a bankwide program that rewards customers for the extent of their relationships with Citi. The program hasn't forgotten its roots, however; Citi is working to bring retailers back in the loop by enabling them to accept ThankYou points for purchases and rewards.

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Bigger rewards for bitcoin

During the height of bitcoin's popularity, the mobile gift card provider Gyft (now a unit of First Data) wanted to encourage people to use bitcoin to purchase its gift cards, thereby lowering its own payment processing costs. Gyft did this by offering 3% of purchase value in rewards for bitcoin users, compared to just 1% for those who purchase its product using a credit card. It later added a middle ground — PayPal — for which it offered 2% in rewards.

Rewards for lacking credit

Generally, card companies offer rewards as a way to attract more affluent or financially stable customers. Discover is going the opposite route, offering a secured rewards card for the 19 million people whose lacking credit history makes them "unscorable." The cash-back card requires a security deposit of $200 to $2,500 to establish a credit line of the same amount. The goal is to enable consumers to build their credit history and expand their relationship with Discover.

Instant redemption

The latest craze in loyalty and rewards is to redeem points while making a purchase in-store. Verifone, FIS and Modo recently teamed up to offer such a product; BBVA has offered its own version in the U.S. since late 2015 and Mastercard has had a Pay with Rewards offering since late 2014. These systems typically rely on the use of a mobile app to allow consumers to select when and where to use rewards instead of spending from the card's regular balance.

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Coffee Klatch

Starbucks Rewards had a problem: Only a sixth of its 75 million monthly patrons were using its rewards program, and a small subset of those were trying to game the system in a way that extended transaction times in the process. The old model provided "stars" for each purchase made, leading some customers to split their transactions at the register to earn more points for each visit. The new model, revealed in early 2016, provides stars based on dollars spent, with the goal of reducing wait time in stores while also increasing participation in Starbucks Rewards.

The check ain't in the mail

Cutting back on a rewards program typically means offering fewer points for each dollar spent, but JPMorgan Chase found a different way to streamline its offering: It eliminated two redemption options in mid-2014. The issuer stopped allowing Chase Sapphire, Chase Freedom and Ink from Chase customers to redeem rewards as a mailed check, and it eliminated an option called Pay Yourself Back which let consumers pay down their balances with points. As an alternative to both options, the bank allows consumers to receive rewards as a statement credit or to use them to shop through the bank's website. At the time, experts viewed Chase's moves as aggressive but savvy. "Our research shows that some issuers manage loyalty programs better than others, but Chase is definitely at the top of the heap," said analyst Brian Riley.