Rejuvenating Reward Programs for Financial Services
April 28, 2021
Rewards programs in the financial services market debuted in the mid-1980s when credit card rewards programs were introduced. Rewards quickly became so pervasive that cardholders saw them as an expected feature of credit cards and shopped for cards based on the rewards offered. Credit card issuers and financial institutions responded by upping the ante with more creative rewards and by extending rewards programs to debit cards. Today, financial institutions and card issuers face the challenge of creating more and more attractive rewards programs. A recent study from Phoenix MI’s Financial Services, entitled Rejuvenating Reward Programs for Financial Services indicates that financial institutions and card issuers should seriously evaluate offering programs that allow consumers to customize rewards and select options with the greatest personal appeal. The concept of customizing rewards is found to be universally appealing in all age and income segments.
The research revealed that almost all (92%) consumers find at least one of five types of customizable rewards to be valuable. In addition, the appeal is widespread among all age and income segments.
Further analysis found that both credit card and debit card holders value rewards customization. In addition, limited differences are found among the primary users of the four major credit card brands, reinforcing the value of being able to select various types of card rewards features.
Looking at the specific types of rewards customization, each type is valuable to a similar number of consumers. At the top of the list is the ability to choose the type of rewards consumers can earn (e.g., points, miles, or rebates). This is followed by the ability to select the merchants where consumers can earn a higher level of rewards and the ability to select merchants where they can earn discounts. The ability to choose purchase categories where they earn higher rewards and the ability to choose where cash rebates are deposited (e.g., in a savings account, applied to a loan balance, etc.) round out the list, with both being indicated as valuable by more than three-quarters of respondents.
Customization is particularly attractive to Gen Z consumers. When all respondents were asked to rank the importance of various types of rewards, the largest number overall ranked a signup bonus as the most-important type, and the second-largest number chose customizable rewards as most important. However, in the Gen Z segment, the largest number ranked customization as most important, suggesting that the ability to customize rewards will be increasingly important in the future.
Bill McCracken, Vice President of Phoenix Marketing International’s Financial Services, stated, “The concept of customizing rewards holds wide appeal to cardholders. All age and household income segments indicate that the ability to pick and choose rewards features is valuable. Furthermore, it is attractive to both credit card and debit card holders and to cardholders of each of the major card brands. Its appeal is universal. Rewards customization allows card issuers to offer cardholders a feature that makes them feel special. Customization is a form of personalization that is becoming increasingly essential as part of the customer experience in today’s financial services industry.”
These are among the findings from a recent PMI study, Rejuvenating Reward Programs for Financial Services, which features 2,000 online interviews with consumer financial decision makers ages 18 and older.