February 17, 2020

Loyalty in the payments world

David Addison
Head of Financial Services

The payments market is more dynamic than ever with the latest World Payments Report revealing that global non-cash payment volumes grew 12% during 2016–17.  The report’s authors, Capgemini also estimated that, based on its data, the number of non-cash transactions would exceed 1,046 billion globally by 2022, equating to a compounded annual growth rate of 14%.

The main drivers for growth were adoption of mobile payments, uptake of contactless technology and digital innovation from a growing provider base across traditional banks, card networks, digital banks, and a range of other fintechs.

But with more providers looking to ‘win over’ the customer, with seamless payment solutions as just one example, banks have had to adapt – fast.

Many have risen to the challenge, especially given legacy technology issues and requirements around PSD2 and open banking – constraints that don’t burden a number of their unregulated, new entrant peers.

Yet amid widespread innovation are some interesting patterns that should be informing how banks in particular continue to innovate and prioritise in an evolving digital payments market.

Retail banking research firm RBR recently found that in Europe spend on payment cards has grown by a third since 2014 to reach €3.9 trillion. It noted that debit card usage in particular was on the rise for high frequency, but typically lower value ‘everyday’ purchases. Generally this is due to contactless technology and mobile payments as well as economic uncertainty in Europe which has driven more prudent customer spending.

Compare this with the USA however and the growth is a lot more pronounced in credit-cards, where all the four major credit card networks (Visa, Mastercard, American Express and Discover) saw growth in card volumes and expenditure through 2017 and 2018. While a brighter economic outlook in the USA (depending what you read) is one likely benchmark of this difference, it’s also not a market immune from disruption; from the rising presence of new entrant fintechs looking to emulate their European growth Stateside, to the ‘Big Techs’ of Apple, Amazon and Uber launching specific credit card offerings. So while you may argue that the influx of new payment technologies and ways to bank becoming available will see a dramatic shift in consumer payment preferences, it’s also clear that digital first provders do still see relevancy, and commercial value, in the credit card market alongside arguably more disruptive ‘paytech’ solutions.

As such banks must continually invest in making their established card products – particularly those that generate revenue and loyalty attached to rewards-based spend - and take steps to ensure these, usually premium offerings, remain relevant and aligned to the evolving demands and lifestyles of their very best customers. After all, in the new payments era it should not just be about making customers lives easier, but also about making them better.

Yes, customers are looking for more innovation across the banking value chain, but they also want personalisation and an unrelenting perception of high value in exchange for their continued loyalty. This is even more pronounced among affluent account and card customers who are used to being wooed by numerous elite brands. As such they expect their bank to bring premium features that show tangible value and relevance to their lives, as well as being digitally seamless.  

The experience economy is something that is enabling providers across the banking spectrum to deliver differentiation where customers care more about accessing superior and high value experiences over ‘simply buying things’. Finding ways to do this whilst being digitally agile in the delivery of such features will be key to retaining the stickiness of your offering with these demanding customers.

Offering reward benefits that cardholders use and value will improve and transform on-card spend – a key consideration for any provider wanting to protect incremental revenue through spend on paid-for cards while justifying the costs of having that card for the customer.  

By working with banks to bring a next generation reward for premium clients and cardholders we’re looking to deliver just that, with a unique combination of travel, technology and tangible financial savings to create a sticky and highly valued loyalty perk.

Increased perceived value, increased spend, and increased loyalty.

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