In the new rewards game, ‘cool’ can’t become ‘creepy’

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A word of warning. Consumer permission is a very fine line. As the payments industry transforms rewards into rewarding, it will be critical to balance relevancy and timeliness with privacy and security to deliver rewards that are always cool, but never creepy.

As points and cash back give way to experiences and exclusivity, it will be fascinating to see what tops consumers’ holiday rewards wish list next year.
A pivot from rewards to rewarding consumers is uncharted territory for most card issuers. Yet it is the only escape from the endless loop of rewards one-upmanship that squeezes profitability and stifles brand differentiation. As financial services institutions start planning for next year’s holiday season, they will need to focus on the following fundamentals to create the next generation of rewards.

Targeted offers. Develop the capabilities to target card-linked offers to a true “segment of one.” This means going beyond traditional demographic segmentation to understand consumers at a psychographic level. Put simply, it is about knowing not just what purchases they make, but why they make them. So the Lady Gaga super fan who has just purchased a ticket to her new movie can earn rewards toward music downloads, concert tickets and even a backstage pass.

Curated exclusivity. Recognize loyal customers with rewards options that are individual, not indiscriminate. These are highly specialized, outside-the-box offers that the competition cannot easily replicate. Think tennis lessons from John McEnroe. Dinner at the chef’s table at a Michelin three-star restaurant. Or deep discounts at a Caribbean resort. Developing these exclusive rewards opportunities will mean forging creative ecosystem relationships with partners across sectors.

Real-time redemption. Ensure that consumers can redeem their personalized rewards immediately at the point of sale. Do not test their patience—or their loyalty—with offers that force consumers to pick categories for the future … and wait. According to Accenture’s 2017 North America Consumer Payments Pulse Survey, 76 percent of consumers say that they want to redeem deals that are tied to their card when swiping at the point of sale.

Easy access. Streamline rewards redemption so consumers are rewarded without having to work for it. The less friction, the better. Airlines are doing this now, allowing consumers to pay with points at many terminals. There’s also a trend toward card-linked offers that do not require consumers to collect receipts or coupons. One app offers immediate rewards as well as the opportunity to move collected cash-back savings to a bank account or make a charitable donation.

Success hinges on understanding consumers’ intent to purchase in the moment and their purchase patterns over time. Fortunately, with data being a foundational “currency” in digital payments, consumers do not have to be a mystery. In fact, our pulse survey suggests that about half of North American consumers can be incented to share their personal information to get more relevant rewards.

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