The Foundations of a Successful Rewards Program

The payments market is crowded, and a compelling rewards program is a key differentiator

If you issue a payment card, every swipe of that card represents an opportunity to convince the cardholder to use it again the next time. That’s what success in card issuance boils down to: What makes your card stay at the top of the wallet, all the time?

JD Power ran a credit card shopping study and found that the most common reason consumers are looking for new cards is to earn new and better rewards. In fact, the importance of the entire rewards experience is represented in surprisingly high resolution: General rewards, sign-up offers, rewards redemption options, and merchant-specific rewards together account for more than half of all the top reasons consumers cited for choosing a card.

Customers Focus on Rewards; Rewards Should Focus on Customers

Bain’s recent study on Customer Behavior and Loyalty in Banking found that the trend of unbundling of banking services — that is, consumers using more than one provider for basic banking needs — “pervades all countries [and] spans all age groups.” The study further uncovered that “where banks have the most room for improvement is in loyalty programs and personalized interactions.” 

That puts customer-facing fintechs and traditional banks in a crowded market, with a clear path ahead for capturing and keeping the attention of new cardholders. When it comes to rewards programs, there are some basic guidelines that can establish a baseline of customer engagement and interest. The core principle of these ideas is that the cardholder remains the center of the program. At every turn, it should be easy and valuable for them to use their cards and to earn and redeem rewards.

Make Offer Discovery Simple and Powerful

There’s certainly a lot of value to the surprise-and-delight rewards cycle, where the cardholder pays for something and then receives a notification that they earned cashback. But the bread-and-butter engagement comes from your everyday offer discovery process. 

The problems you need to solve for are that a long list of rewards without context can be overwhelming, and cardholders generally don’t want to spend their time browsing logos until they find something they like. The process needs to be useful and fast; Bain’s loyalty study notes as one headline that “foolproof and convenient are the watchwords for digital channels.” 

Displaying offers in your app and on your website is only a start. We’ve seen partners have success with an “offers near me” section of the app, as well as in-app highlights of featured offers or offers expiring soon. Your marketing cadence is another important tool: Outside of the actual app environment, how are your users learning about offers? A monthly email newsletter can be a great way to put eyes on your rewards program, and your corporate social media pages can drive interest and engagement as well.

Serve as Many Offers as Possible

Despite the user experience problems with dropping a huge list of offers in front of your cardholders, less is not more when it comes to places to earn cashback. Cardholders want to see rewards from merchants they already shop at, but they also want to see new brands, as well as merchants that they might have considered to be out of their price range. Keep in mind that rewards can influence all kinds of purchases, from everyday to impulse buys. And consumers have caught on in a big way lately: they're more interested in discounts, coupons, and cashback because of rising prices. The more often your card can offset prices, the more often consumers will use your card.

Offer the Most Rewards the Program can Bear

You’ll need to fund the management of your program somehow, but you should avoid cutting corners when it comes to cashback percentages and offers — something that a merchant-funded rewards program like Kard’s can help with. Not every offer will hit eye-popping numbers like a 10% reward, but cardholders will notice if the rewards are very skimpy. Look to reduce overhead for the program before you cut into cardholder rewards to keep it going.

For “always-on” rewards in certain categories, a lower percentage of cashback is perfectly acceptable. For shorter-term, larger campaigns with larger numbers attract more purchases. New customer acquisition campaigns can get higher very easily, with the caveat that they’re often single-use. 

Your Brand Determines the Rest

A payment card can be a source of revenue for a neobank through interchange fees, but it’s hard to build a rich and compelling experience for the customer from interchange fees alone. Merchant-funded rewards, and a platform that integrates seamlessly with your tech stack, can make it relatively inexpensive and simple to engage cardholders with card rewards.

Once you’ve put together the right basic building blocks — offer discovery, marketing cadence, etc. — the soul of your rewards program is up to you. Align your customers’ rewards experience with the reasons they came on board in the first place. Tech-forward demographics might want a cryptocurrency rewards redemption option; penny pinchers might prefer extra rewards on regular purchases like bills, groceries, and fuel. Just because rewards are table stakes to your customers doesn’t mean they can’t align with everything else your solution offers!

Curious what the steps are for building a rewards program? Check out our UX recommendations in the Kard product documentation, or drop us a line to get started with the Kard rewards network!