3 days Ago
Jordan Glazier, Founder and CEO of Wildfire Systems . getty Credit card issuers and companies in the payments ecosystem have long struggled with addressing the issue of customers’ accrued rewards points. Much like unredeemed gift cards or airline miles, reward points represent a liability on the balance sheet until used.
Until then, the payment provider cannot recognize the revenue these points represent. In addition, many loyalty programs and credit cards come with ancillary benefits that many customers simply forget about. Overall, this means most customers don’t realize the value of what they’ve already earned or maximize their existing loyalty program benefits.
Some companies in the payments ecosystem are innovating with technologies that aim to help customers not only take full advantage of their existing loyalty benefits but also increase the ease by which consumer-held rewards are redeemed. In other words, these technologies help address the “burn” side of the “earn and burn” equation in loyalty programs by helping customers more easily recognize the value of their rewards. Let’s take a look at how we can learn from their strategies.
Some card issuers have already integrated a “pay with points” feature at online merchants’ checkout pages, while others are seriously looking into integration. Unlike a customer simply accessing a special store or catalog where a limited assortment of items and gift cards can be purchased with points, pay with points aims to create increased flexibility in the number of places and types of goods where points can be redeemed. Some credit cards, such as American Express , already have functionality in place where the shopper can simply pay with their points balance directly during the checkout process.
And Mastercard’s Pay with Rewards program—which enables cardholders to spend points like cash at certain retailers—is currently available to card issuers and their cardholders. Due to the complicated nature of integrating a member’s points as a payment tender to a given merchant’s shopping cart, a “pay with points” experience is only available with certain cards at certain online merchants. So, the current implementation of such programs likely has a limited effect on the overall “burn rate” of accrued points and, in turn, the benefits cardholders can realize from this functionality.
The aim of this solution is to enable customers to identify a payment tender, such as their credit card’s account number or a digital wallet with a points balance attached, as their preferred method of payment when they shop online. When a shopper is ready to check out at an online retailer’s site, the customer will have the option to select that preferred payment tender. So their checkout is highly streamlined, and even better—if using a digital wallet with points, they get to redeem points too.
Shopify’s Shop Pay , with over 150 million reported users, is an excellent example of this technology’s rapid adoption. After customers opt-in to Shop Pay and complete verification of their shipping info and preferred payment tender, they can use that saved information on any Shopify Checkout that has the feature activated. Unfortunately, Shop Pay is currently not able to store rewards program points to be used as payment tender, whereas another large-scale provider of streamlined checkout, Google Wallet , allows users to not only add default payment methods for faster checkout but also to store loyalty program points for future redemption, further helping to speed the usage of that stored value.
Imagine a shopper reserving a rental car online. Most premium credit cards offer free loss damage waiver (LDW) insurance on car rentals. But how does a shopper keep track of which card to pay with to receive this benefit? Technology is available via browser extensions that can identify and remind the customer of a relevant existing benefit as they shop online—at the moment they need it.
In this scenario, that rental car shopper will be reminded to use their specific card for their booking to get that valuable LDW coverage. This technology connects existing loyalty program benefits directly to the shopping journey, making benefits easier to use and ultimately making the program itself more valuable to customers. Technologies that remind customers of program and card benefits at the moment they need them to encourage ongoing loyalty program benefit utilization and card usage.
It’s simply a matter of time until technologies that help customers and companies alike recognize more value from their loyalty program benefits and accrued points are widely adopted. The more innovative these companies can be with creating opportunities for benefit utilization and point burn, the more positive impact the industry as a whole will have. Ultimately, and maybe most importantly, it all adds up to more convenience, utility and value for the consumer—which is itself a “rewarding” proposition.
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