6 Ways to Apply Loyalty Programs to Payments

by Meriç Özgen, Ayşen Nergiz

Each year, $1.6 trillion is lost by organizations that are not able to achieve customer retention. Therefore, customer loyalty programs are core strategies for any organization to achieve customer retention, grow revenue, and increase referrals. Additionally, utilizing loyalty programs is a great way to collect actionable customer data.

Especially for a financial institution, retailer, or merchant, utilizing loyalty programs is a must to increase the number of loyal customers, purchase frequency, and overall revenue.

Throughout this blog, we’ll break down the hows and whys of adapting customer loyalty programs to payments and explain how these organizations can create value-driving programs for their customers.

Especially for a financial institution, retailer, or merchant, utilizing loyalty programs is a must to increase the number of loyal customers, purchase frequency, and overall revenue.

Throughout this blog, we’ll break down the hows and whys of adapting customer loyalty programs to payments and explain how these organizations can create value-driving programs for their customers.

How to Approach Loyalty Programs

Before moving on to adapting customer loyalty programs in payment services, let’s clear up how organizations use these tools to succeed with their campaigns.

Loyalty programs are rewards programs offered by banks, retailers, or merchants to repeat customers. Typically, these programs reward customers with discounts, prizes, cashback, mileage points or other incentives to attract and retain loyal customers.

In fact, about 84% of customers express that they are more likely to remain loyal to organizations with effective loyalty programs, and 66% say that their purchase behavior is influenced by loyalty programs

It is easier said than done because today’s customers are much more selective about the offers they receive. Beyond competitive interest rates, better merchant services, a variety of payment gateways, and online payment options, they expect to be provided with unique programs and rewarded by all repeat purchases.

In addition, customers’ interests and habits differ in numerous ways which define their perspectives towards loyalty programs offered within payments.

For example, according to the Generation Pay report conducted by Fis, 75% of the participants prefer having loyalty programs for their grocery spending and 57% of them consider points that don’t expire as the best feature for loyalty programs.

Similar to customers’ interests and habits, their value for organizations differs. Therefore, to have a cost-effective customer retention strategy and get the best out of customer loyalty programs, organizations should obtain a holistic approach in which the customer base is segmented and provided with customer-centric solutions.

Obtaining this approach requires smart campaign management solutions to complement all the white spaces in loyalty programs. Let’s take a closer look at how campaign management can boost the performance of your loyalty programs.

Campaign Management

Campaign management solutions offered by Fintech companies are CRM-based management systems or solutions optimizing campaign assets according to actionable insights like recency, frequency or monetary value of the customer.

These systems rely on scenario-based applications that enable banks, retailers, or merchants to provide their customers with unique programs according to their segments and specific needs. This in turn creates valuable loyalty programs for both customers and organizations.

Therefore, at PayCore, we consider campaign management and loyalty programs as a whole practice to deploy. Our comprehensive campaign management and loyalty module within the holistic card management system, Ocean 2.0, offers an end-to-end solution for creating flexible loyalty programs.

This module supports all card types, and all channels and enables campaign results to be monitored and reported.

Ocean2.0 provides a parametric structure supporting on-line campaign parameters like; product profile, customer group, selected card group, selected merchant, selected merchant group, brand, MCC, sector, transaction type, transaction source, selected bank, and special days.

With our 21+ years of experience, we offer flexible and scenario-based solutions to create a win-win relationship between financial institutions, banks, merchants, and customers. Visit our website to learn how you can utilize PayCore solutions.

Citibank’s Citi ThankYou points-based loyalty program is a great example to discover the capabilities of loyalty programs in financial services.

The campaign offers one point for every $1 spent using a Citi credit card, allowing customers to buy 1,000 points for $25 and use them for gift cards, cash rewards, loan payments, charity donations, and even more.

Ocean2.0 platform supports a variety of point-based campaign types like; welcome point campaigns, additional point campaigns, commitment point campaigns, advance point campaigns, and donation point campaigns.

How to Approach Loyalty Programs

Before moving on to adapting customer loyalty programs in payment services, let’s clear up how organizations use these tools to succeed with their campaigns.

Loyalty programs are rewards programs offered by banks, retailers, or merchants to draw in repeat customers. Typically, these programs reward customers with discounts, prizes, cashback, mileage points, or other incentives to attract and retain loyal customers.

In fact, about 84% of customers express that they are more likely to remain loyal to organizations with effective loyalty programs, and 66% say that their purchase behavior is influenced by loyalty programs. However, it is easier said than done because today’s customers are much more selective about the offers they receive. Beyond competitive interest rates, better merchant services, a variety of payment gateways, and online payment options, they expect to be provided with unique programs and rewarded by all repeat purchases.

In addition, customers’ interests and habits differ in numerous ways, which define their perspectives towards loyalty programs offered within payments.

For example, according to the Generation Pay report conducted by FIS, 75% of the participants prefer having loyalty programs for their grocery spending and 57% consider points that don’t expire as the best feature of loyalty programs.

Similar to customers’ interests and habits, their values for organizations differ. Therefore, to have a cost-effective customer retention strategy and get the best out of customer loyalty programs, organizations should obtain a holistic approach in which their customer base is segmented and provided with customer-centric solutions.

Obtaining this approach requires smart campaign management solutions to complement all the white spaces in loyalty programs. Let’s take a closer look at how campaign management can boost the performance of your loyalty programs.

Campaign Management

Campaign management solutions offered by fintech companies are CRM-based management systems or solutions optimizing campaign assets according to actionable insights like recency, frequency, or monetary value of the customer.

These systems rely on scenario-based applications that enable banks, retailers, and merchants to provide their customers with unique programs according to their segments and specific needs. This in turn creates valuable loyalty programs for both customers and organizations.

Therefore, at PayCore, we consider campaign management and loyalty programs as a whole practice to deploy. Our comprehensive campaign management and loyalty module within the holistic card management system, Ocean 2.0, offers an end-to-end solution for creating flexible loyalty programs.

This module supports all card types and all channels and enables campaign results to be monitored and reported.

Ocean 2.0 provides a parametric structure supporting online campaign parameters, like product profile, customer group, selected card group, selected merchant, selected merchant group, brand, MCC, sector, transaction type, transaction source, selected bank, and special days.

With our 21+ years of experience, we offer flexible and scenario-based solutions to create a win-win relationship between financial institutions, banks, merchants, and customers. Visit our website to learn how you can utilize PayCore solutions.

PayCore Campaign Management & Loyalty

Types of Customer Loyalty Campaigns in Payments

So far, we have explored the significance of loyalty programs and how organizations should evaluate them with a holistic approach. Now, we can dive into the different customer loyalty applications that banks, merchants, retailers, and financial institutions can utilize.

1.    Points-Based Campaigns

Simply put, points-based campaigns are loyalty programs that allow customers to accumulate points and redeem them for purchases, gifts, or other incentives. Financial institutions can provide a variety of points for set conditions, like enrollment, point of sale, and online payment usage – especially for increasing e-money loyalty or credit and debit card holding.

Citibank’s Citi ThankYou points-based loyalty program is a great example of the capabilities of loyalty programs in financial services.

The campaign offers one point for every $1 spent using a Citi credit card, allowing customers to buy 1,000 points for $25 and use them for gift cards, cash rewards, loan payments, charity donations, and even more.

The Ocean 2.0 platform supports a variety of point-based campaign types including but not limited to: welcome point campaigns, additional point campaigns, commitment point campaigns, advance point campaigns, and donation point campaigns.

2.    Discount Campaigns

Discounting has long been used to incentivize customers and prospects to make a purchase. Discounts are intended to be used within campaigns and awarded to specific customers under certain conditions, such as membership in a customer segment or specific customer behavior.

Revolut, a challenger bank, achieved a customer base of 18 million+ personal and 500k business users around the globe, setting a valuable example for discount-based loyalty campaigns. To provide additional benefits for its users, the bank tailors its products with various offerings:

  • Discounts on restaurants, retailers, events, and many more
  • Cashback on purchases at a wide range of retailers and restaurants, refunded into the account right away
  • 10% cash back on gift cards sent through the app

As a complete platform, Ocean 2.0 enables banks to deploy loyalty programs with multiple features and offers different discount types, such as merchant discount percentages, discounts for selected products, discounts for selected MCC, and discounts for selected transaction types.

3.     Installment Campaigns

Even if you can afford to buy it in full, paying in installments may be the wiser decision, especially in countries with high inflation, because you won’t have to touch your savings or emergency fund. You can pay in tranches over time, usually over several months or years, until you pay off the item in full.

Ocean 2.0 platform supports installment facility with differentiating offers like installment according to cardholder request, according to merchant defined period, flexible installment selection, additional installment, for not-on-us transactions, for selected transactions, for a cash advance, installment deferral, and installment surcharge.

4.    Catalog-Based Campaigns

These types of campaigns offer reward catalogs and allow customers to use their accumulated points to get gifts or incentives included in the catalog. Additionally, in some cases, catalogs can include a variety of offerings, like discount vouchers and coupons.

Silicon Valley Bank’s SVB Global Rewards program is a great example of a catalog-based loyalty program. It charges cardholders a fee and requires using the card. Yet, it offers various choices regarding the redemption of customer points.

With the given catalog, customers can see all the available options including gift cards that can be used at restaurants, retailers, petrol stations, as well as charities. Also, the catalog includes prepaid cards that account holders can send to someone as a “bonus.”

5.    Co-Branded Credit Cards

Co-branded credit cards are the products of a mutual partnership between merchants and credit card issuing companies. The co-branded credit cards are generally designed with merchants’ logos and provide merchant-specific benefits to customers.

These cards offer brand-associated, exclusive benefits to cardholders from merchants like airlines, grocery retailers, gas stations, and many more. Additionally, these co-branded cards can be accepted globally if they are tied to global payment processors, like Visa and Mastercard.

The Turkish Airlines Miles&Smiles card is one of the best examples of co-branded cards. The card products under the umbrella of Miles&Smiles are designed with the partnership of THY and QNB bank. The card provides customers with a variety of options, like accumulating miles, shopping with them, purchasing tickets, and extra baggage.

Another good example is Citibank’s Costco Anywhere Visa Card. The card requires no annual fee and provides cashback for purchases in contractual sale points and all other purchases from Costco shops and costco.com. So it is a great example of building retail loyalty with card products.

6.    Affinity Programs

Affinity programs deploy credit cards issued by a bank and typically have a charitable organization’s logo. Each time the cardholder uses these affinity cards for purchases, a specified percentage of the transaction amount is donated to the designated organization. These card products can be designed for supporting sports teams, professional associations, universities, or charitable organizations.

As an example of affinity cards, the Bank of Montreal offers a variety of credit cards for cardholders to support animal welfare, arts and culture, education, medical research, and a variety of nonprofit organizations.

To Sum Up…

There are a lot of ways to deploy customer loyalty programs to boost loyalty, increase revenue, and provide sustainable growth. Still, focusing only on loyalty programs might not be enough for financial institutions to create a competitive advantage with payment services.

The Ocean 2.0 end-to-end card management system is here to upgrade your payment system and help you keep up with the transforming world of payments. Let’s partner up to reinforce all your issuing and acquiring systems with our easily adaptable platform.

Let’s Partner Up

This site is registered on wpml.org as a development site.