By Mike Davidsen, Senior Associate Customer and Operations Advisory, KPMG in the US.
Credit card rewards points and cashback serve as a rare source of excitement for retail banking customers in contrast to the more mundane banking activities such as depositing checks and paying off loans.
While banks have promoted credit cards well, many are missing an opportunity to better engage with customers once a card is opened through improved visibility on rewards and redemption. In many cases, customers do not have good visibility of the rewards or cashback they are accumulating, meaning that theydo not have a full appreciation of the benefits of choosing that particular product. When the time comes for redemption, customers are often faced with a complex or confusing process.
To provide customers with better rewards transparency in the mobile channel, apps ought to put rewards at the center of their design. A useful lesson can be learnt from the travel sector, who tend to display loyalty points on the homepage of their mobile apps.
Another way of improving rewards transparency is by applying digital marketing techniques. Calling attention to rewards can reinforce a customer’s loyalty to the brand. They might consider using real-time notifications to inform the customer how much a purchase earned them in rewards points or show how much closer they are to unlocking a reward directly on the app’s homepage.
Better transparency into rewards is only valuable to the customer if the rewards are seen as readily redeemable. A bank may choose to show targeted offers in the form of rewards points, accept points as tender for paying the monthly credit card bill or allow points to be exchanged for cash. Lags in reward recognition represent lost opportunities for achieving greater customer engagement so real-time information is valuable.
Indeed, this customer engagement driven by rewards tangibility is largely dependent on a robust IT and data infrastructure. The fundamental complexities of rewards programs – from merchant categorization to co-branded products – have the potential to create a difficult environment for querying data repositories in real-time and subsequently passing information to the customer. Investments in this technical infrastructure are necessary but can be offset against revenue from a higher number of card swipes.
Banks may try to bolster engagement even further by building incentives into rewards programs, such as creating spending tiers that grant loyal card holders higher levels of status. With quick access to spending and rewards milestones,customers may be inclined to check point balances more frequently, increasing the exposure of the bank’s brand and generating potential cross-sale opportunities for other bank products.
The combination of the mobile channel and credit card rewards is a vital opportunity for banks to enrich the customer experience of cardholders. However, thus far in the mobile age, some card issuers have slept on this chance to better engage their mobile-oriented customer base. Sharing rewards detail at key mobile touch points and making it easy for customers to redeem rewards can improve retention and loyalty at a time when mobile banking capabilities play a significant role in some consumers’ choice of banks.
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