The landscape of consumer loyalty is evolving, prompting Visa to encourage banks to rethink their approach to rewards programs. According to Avery Walter Miller, Vice President of Loyalty Solutions at Visa, traditional loyalty mechanisms tied predominantly to credit card usage are no longer sufficient. Consumers expect rewards that are meaningful, relevant, and delivered precisely when they are ready to engage.
Changing Consumer Expectations
For decades, bank loyalty programs have been largely centered around credit cards. Miller noted in a recent interview with PYMNTS that these loyalty systems historically depended on the profitability of credit card operations. Larger financial institutions have invested heavily in these programs, resulting in a homogenous market where loyalty strategies appear quite similar across issuers.
However, as margin pressures on interchange and fees intensify, banks can no longer rely solely on credit card economics. “It becomes essential to find new funding sources,” Miller explained. The loyalty landscape is now more competitive than ever, with consumers enthusiastic about rewards yet overwhelmed by their options. On average, individuals are enrolled in more than 18 loyalty programs, but actively engage with only about half of them.
To address this disconnect, banks must move away from a one-size-fits-all model focused primarily on credit card spending. A more dynamic and personalized approach to loyalty is essential.
Personalizing Rewards and Enhancing Engagement
Miller emphasized that consumers generally appreciate being rewarded for their loyalty. Most do not shy away from the idea of receiving benefits for remaining loyal to their preferred brands. Yet, the experience often falls short when rewards do not align with a consumer’s daily life or priorities.
He provided an illustration: “You don’t want to promote my favorite coffee shop as I’m rushing past it late for a meeting.” The key is to ensure that offers are relevant and timely, allowing consumers the opportunity to plan their engagement.
The driving force behind this shift is data. Banks possess high-quality behavioral data that can reveal consumer preferences, transaction patterns, and timing. Through partnerships with merchants, banks can create value-driven rewards without straining their economics. These merchant-funded offers not only enhance the loyalty experience but also introduce a new funding stream for rewards.
As banks face tightening revenue centers, Visa is advocating for a broader definition of loyalty that goes beyond just credit card transactions. By rewarding behaviors such as bill payments and deposits, banks can foster long-term customer relationships that yield lifetime value.
Leveraging Technology for Seamless Experiences
Navigating the complex loyalty ecosystem requires innovative technology solutions. Miller stated that there is no “silver bullet” for loyalty technology, but Visa aims to simplify this landscape. By integrating various technologies into a cohesive package of APIs, SDKs, and white-label offerings, Visa enables banks of all sizes to provide seamless experiences across multiple platforms, including mobile, desktop, and ATMs.
Visa also applies its global marketing insights to help banks identify the best offers for their customers. This includes running targeted campaigns to ensure that the right merchants are highlighted, keeping consumers engaged with relevant offers.
A modern loyalty program needs to be omnichannel, allowing consumers to enjoy a consistent rewards experience whether shopping online, using a browser extension, or interacting with an ATM. Visa’s extensive global merchant network further enhances this capability, providing relevant offers to customers regardless of their location.
Artificial intelligence (AI) is playing a crucial role in this transformation. Miller noted that AI could streamline the process of finding the best deals for consumers while also enhancing banks’ abilities to optimize targeting and relevance. However, it also intensifies competition among issuers, as they strive for top-of-mind awareness with consumers.
In conclusion, Visa’s push for banks to rethink loyalty programs highlights the necessity for innovation in a rapidly changing consumer landscape. By focusing on personalization, leveraging data, and utilizing advanced technologies, banks can create loyalty programs that resonate more deeply with consumers, ultimately leading to improved engagement and satisfaction.
