Life at Fiserv Inc., it seems, is good. And others increasingly are reaping the rewards.
The number of debit and credit cards registered for Fiserv’s UChoose Rewards program increased 69% in 2011, and the processor soon plans to launch a mobile application for rewards cardholders.
Last year, UChoose Rewards cardholders contributed 62% more revenue to participating financial institutions than in 2010, according to Fiserv, a provider of financial-technology services. Also, the program’s cardholders used their cards 50% more than did cardholders not registered for UChoose, generating $52 more incremental revenue per year per cardholder, the company said in a press release.
UChoose Rewards cardholders now number 2 million, up 67% from 1.2 million at the start of 2011, Holly Krest, Fiserv senior vice president of loyalty solutions, tells PaymentSource. Moreover, the number of UChoose Rewards clients exceeds 420, up from 350, she says.
Krest attributes the increase in UChoose cardholders to clients that have seen the 4-year-old program’s benefits and have pushed to add cardholders, and to new clients with large portfolios. Moreover, financial institutions with less than $10 billion in assets not affected by the Federal Reserve Board’s cap on debit card interchange are jumping in to fill the void left by larger issuers that have discontinued or cut back their debit rewards because of reduced interchange income, she says (see story).
Some UChoose Rewards clients not affected by the interchange cap kept offering rewards because the cap is not as low as the 12-cent cap the Fed originally proposed, Krest says (see story).
“They’ve kept their programs but have really been adjusting how points are earned,” Krest says. “They may have been doing one point for every dollar spent. Many have gone to one for every 3 (dollars spent), or every 5. That’s been the biggest impact. They haven’t wanted to disenfranchise their cardholders by dropping the program or getting rid of it; they just had to make it more financially viable for them with the interchange coming down to the level that it did.”
UChoose Rewards offer financial institutions the freedom not only to choose from funding options, including self-funding, merchant funding or a blend, but also to set their own standards for point accumulation, says Krest. Fiserv’s sales partners try to recruit local and regional businesses as rewards merchants, and while financial institutions can nominate local businesses, they do not have to recruit, she says.
Fiserv also monitors where cardholders spend money and tries to recruit popular merchants. More than 14,000 local merchants are partnering with UChoose Rewards and are part of Fiserv’s revenue model, Krest says.
Fiserv gets a fee for every active cardholder and a cut from transactions involving UChoose Rewards partner merchants, she says. The financial institutions make money from transaction fees from cardholders new to the program and legacy cardholders who use their cards more often.
When cardholders want to redeem points, they go to the UChoose website, which is cobranded with their card issuer. An online catalog of redeemable merchandise and gift cards is available, as are cash options and travel and event tickets.
A new feature called In Store Pickup, only available with Best Buy items, lets cardholders save a few points if they choose to pick up merchandise at the nearest Best Buy location within 45 minutes instead of having it shipped. Cardholders are choosing this option 40% of the time they redeem points with Best Buy, Krest says.
Coming soon is a mobile application for UChoose cardholders that will allow them to browse the redemption catalog and scan bar codes in stores to see if the item is available in the catalog. If it is, the app allows the user to order it and start the shipping process.
Aite Group senior analyst Madeline Aufsesser expects to see more creativity from rewards programs as competition increases.
“Rewards programs on cards are becoming more competitive–they’re more pervasive, and I think there’s a lot of good opportunities there for issuers to engender quality loyalty for their consumer base,” she tells PaymentsSource. “Institutions will deploy several different models depending upon the consumer’s profile and the product type that’s being offered.”
Rewards are not going away for credit products anytime soon. On the debit front, they tend to be more merchant-funded incentives than there would be for traditional rewards, Aufsesser back.
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