Consumers are using retailer discounts linked to their payment cards, but banks and merchants have to simplify the deals and make sure their customers are aware of them.

In addition, card-linked offers or merchant-funded rewards can be more successful when a consumer opts into the program, rather than being automatically enrolled, an Auriemma Consulting Group report says in a new report.

"There is a lot of opportunity with merchant-funded rewards, but those who opt-in represent your most interested consumers," says Scott Strumello of New York- and London-based Auriemma.

The choice to opt in to such offers will grow because consumers feel they get better offers that way, and merchants obtain better spending pattern reports from those customers, Strumello says.

"The card brands benefit as well, because it means their card will be used more," Strumello adds.

Auriemma surveyed 417 credit card users during the month of August to compile the report, which it released in October.

Of those surveyed, 43% said they had enrolled in a merchant-funded rewards program, while 62% indicated they had been automatically enrolled in a program. Just less than one-third, at 31%, acknowledged they had participated in a merchant-funded rewards program.

A majority of those surveyed, at 56%, understood that the program made limited-time offers, though 37% said they believed the offer was long-term or even permanent. And that is a troubling notion for banks and merchants, Strumello says.

"Customers don't want to invest a lot of time and effort into a card-linked offer," Strumello says. "It has to be simple."

Newspaper inserts have worked for merchants for years because they are clear about when an offer starts and ends (usually for a week), Strumello says. "The customer doesn't want to think about whether or not he is eligible for a deal, he just wants to know how long it will be linked to his card," he adds.

Consumers overwhelmingly favor long-term offers because they are easy to remember, the report states. As such, banks should consider making all card-linked offers with memorable expiration dates, such as the end of the month. Consumers do not care for card-linked offers that last for three days or less, the report says.

While consumers understand short-term deals may deliver more value, they find them too complex, the report says.

Eighty-four percent of consumers say they would use a card more frequently if it offers merchant-funded rewards. However, such offer programs do not always lead to cross-sales for the bank, the report says.

Respondents indicated they might consider using the bank offering card-linked services for a checking or savings account, rating that likelihood at 3.22 on a scale of 1 to 5, with 5 representing the highest likelihood. All other services ranked lower.

"The numbers are underwhelming in terms of buying other products from the bank," Strumello says. "It shows there is a lot more to it for a bank to succeed, other than offering rewards, when it comes to communicating and packaging it with other services."

It remains too early in the mobile commerce game to determine if card-linked services will operate for banks as a transition to payments and redemption through mobile devices, Strumello says.

"We don't have data to suggest which way things are going with mobile in that regard, but I don't think cards are going to disappear," Strumello says.

Merchants may want to see rewards redeemed through mobile phones, but consumers surveyed for past Auriemma reports have indicated they are not sure they like the idea of a merchant using a phone's location data to send offers when they have entered a store, Strumello says.

"I think, over time, consumers will see that maybe they can get a better offer because they are in the store and the merchant wants to capture that sale," Strumello says. "We are not there quite yet, but when one retailer figures it out, the others will follow."

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