The Rise of Alternative Payment Types Series Part 2: Rewards Currency

Payments Leader

Posted on August 7, 2014


Offering consumers rewards for their loyalty to a business has been a successful strategy for decades. Historically and still more the norm, most loyalty program earnings (points, miles, credits, etc.) are limited to the same or similar products and services purchased that created the initial reward opportunity, which makes complete sense. The whole concept of loyalty is to use incentives of high-perceived value to lure the customer to act faster and to drive more repeat and incremental purchases. As programs continue to change and further differentiate their features in this competitive market, the “standard” loyalty model is evolving. Not only are customers being given more opportunity to be rewarded for activities that fall outside of the “core” program, they have more options to redeem such rewards in an expanded loyalty ecosystem.

More Robust Loyalty Programs

There are quite a few in-market examples where consumers can leverage their rewards points even further, but for illustration purposes, I’ll highlight just a few:

  • American Express and Amazon – Membership Rewards cardholders have the option to shop with points for goods on Amazon.
  • Citi and – Consumers can purchase concert tickets with Thank You Rewards.
  • MasterCard and Fuel Rewards Network – Cardholders can redeem for real-time gas discounts at participating stations.
  • Almost all Airline Programs – Members can redeem for merchandise, digital awards, donate to charity, gift points/miles and much more. (Note: Some airlines actually prefer for their loyalty participants to redeem for non-air awards – Check out my prior post on this topic.)
  • Chase and Select Travel Programs – Ultimate Rewards cardholders can transfer points at full value to participating partner programs.

The real relevance the shifting loyalty ecosystem brings as new partnerships form and others expand is the fact that reward earnings is in fact another form of currency – one that continues to grow at an accelerated pace. With new technology making it even easier and quicker to monetize rewards currencies, there are numerous implications, which are best posed in the form of questions:

  • Can this new shift finally enable a coalition model to take full force within the US?
  • Will there be increased regulation and scrutiny on rewards?
  • How will mobile (wallet) providers respond? What about Point-of-Sale suppliers?
  • Will financial institutions and retailers partner together further to maximize the dual benefits?
  • Are consumers ready to fully embrace rewards as a currency?
  • How will other emerging payment technologies adapt for the monetization of rewards?

A lot remains to be seen, but the reality is this: Loyalty programs are here to stay and as our payments market continues to evolve, only those leading and forward-thinking program managers and providers will fully capitalize upon the exciting transformation well underway.


See part 1 of this series on Private Label ACH Cards.

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Payments Leader

Payments Leader from FIS provides insights on credit, loyalty, fraud and emerging payments strategies through blog posts from our industry experienced authors.