In merchant-funded programs, merchants team up with banks and other card issuers to offer rewards and incentives to their customers. Consumers earn rewards points by shopping across different merchants, which can be redeemed across various outlets in the form or discounts or cash back. Primarily marketed through digital channels such as online and mobile banking and email, such programs can be targeted at consumers based on their transaction history.

The report from Timetric shows that such programs benefit all parties involved. Setup costs for retailers are relatively low, and discounts and rewards are only given when a product or service is purchased. Banks benefit from increased spending on cards, with associated opportunities for customer acquisition and retention, as well as cross-selling. Customers benefit from finely targeted discounts and rewards.

Rewards and loyalty schemes have long been a well-used means of marketing cards and encouraging their use. In recent years however it has become increasingly obvious that traditional bank-funded versions are losing their appeal to consumers and the banks themselves. Rewards often all look the same to consumers, and are increasingly expensive for banks and card issuers.

The report also points out a number of drawbacks. The programs can encourage unwanted customer behaviour and if poorly managed can actually be counter-productive to a brand’s image. Poor customer service and failure to keep reward programs relevant are also key areas where programs can fall down.

The Timetric report; ” Merchant-Funded Reward Programs" was published on the 20th April 2013.

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Please contact James Byrne at the Timetric Press Office
Phone: +44 (0) 2032 200 815

About Timetric

Timetric is a leading provider of online data, analysis and advisory services on key financial and industry sectors. It provides integrated information services covering risk assessments, forecasts, industry analysis, market intelligence, news and comment.