Continuing the Conversation: What You Need to Know about Today’s Credit Card Rewards Programs

Recently, ICBA Bancard, in partnership with TCM Bank, released the white paper, Cultivating the Strategic Value of Credit Card Rewards Programs,” and I had a conversation with rewards expert Damon Moorer, president and CEO of TCM Bank, to gain some insights into the latest developments with rewards programs. What follows is a second excerpt from that conversation.

Tina: How has COVID-19 impacted credit card rewards redemption?

Damon: With our portfolio we have found that rewards that are easier to redeem are becoming more popular. A traditional points user that may have historically saved up points to earn an airline ticket over the course of several years, for example, today might opt for a10 cent-off-gas redemption model, if offered.

The pandemic has shifted the view of value in the near-term. Issuers who have been in it for the long game are transitioning to new “surprise and delight” moments—like discounts on gas—that strengthen the customer’s bond with their card. Those customers who were not as engaged in the longer-term rewards are paying attention to the value proposition and are looking for more immediate gratification.

Plus, you have to consider that we’ve all been staying home more than ever. Because I am sitting at home looking at the house, I have done a lot of home improvements.  On these larger-ticket payments—appliances, home renovations or upgrades—if I can get 2 percent cash back, I’m going to use it. Savvy issuers recognize that and are purposely providing additional value for larger transactions and creating plan it/pay it programs to increase card use for larger expenditures.  

Tina: COVID’s also created a rise in subscription service payments, like recurring prescriptions at pharmacies and monthly streaming services. How does that factor into rewards considerations?

Damon: Many banks are using their rewards program to drive that type of “account on file” behavior. Rewards programs offer a way to incent customers to put their recurring payments on a card. It’s a different value proposition in the recurring transaction space, and loyalty and rewards programs are worth leveraging to incent that behavior.

Tina: Any advice for a community bank looking to transition to a new type of rewards program?

Damon: I would recommend tailoring the transition plan to your base. You may have customers who are happy with what you currently offer, and that’s great, you can leave them be. But for the customers who are not engaged, how do you transition them to a better offering and do it in a way that they don’t have to take any significant action? Present and test new offerings with a mobile-first, frictionless user experience.  Highlight ease of use, convenience, and digital features to create excitement for the program. I also recommend allowing customers to reinstate the old program for a limited time upon request.

Tina: We’ve covered a lot of ground in our conversation, what is your top advice for community banks as they look at their card rewards programs?

Damon: It goes back to the earlier point: loyalty is no longer set-and-forget; it has to be actively managed. If you are using a legacy program, ask yourself, “Is it simple and easy to use? Does the value proposition align with my customer base? Is it fiscally responsible?” From there, you identify where your program is not aligned, and then work with ICBA Bancard or a provider to rethink your program.

Tina: So, how do I find the right partner?

Damon: I’d say go to ICBA Bancard. 

In all seriousness, this is an important factor in the process. There are a lot of providers out there, and they all offer something banks could use. The lens community banks need to have is one focused on their own business. Most loyalty providers are beholden to their own P&Ls, and how they make money is what they will want to promote to community banks. Some don’t have overall portfolio management expertise and are only looking at things from a loyalty program perspective. There is a big difference between your customer being active in the loyalty program and portfolio active. A community bank needs both.

So, community banks need to know their customer demographic, research competitive offerings, and come into any loyalty program relationship with clarity on what they want to drive from a performance standpoint. There will be burdens on the P&L, and banks have to know what they want to net from the portfolio as a driver—versus taking the advice of a general loyalty program provider, because they have a different agenda.

Tina: Any final words of wisdom?

Damon: If you don’t have a card rewards program, I would see how ICBA Bancard can help to ensure you’re able to respond in a timely fashion to your customers’ evolving payment needs.

If you have a program but know it needs a transition, we can analyze where you are and help right-size your program. Loyalty is complicated, and even more complicated in today’s digital environment, but we have the expertise to help structure your program to meet your overall strategic objectives.

For more on rewards programs, download Cultivating the Strategic Value of Credit Card Rewards Programs” and contact ICBA Bancard at [email protected].