-
Mobile banking can alleviate friction and save time for underserved, low-income consumers, but face-to-face interaction is critical to serving their financial needs.
October 29 -
Want consumers to engage with your financial firm? Dont try to turn their finances into a flashy smartphone game; find new ways to do their banking for them.
September 12 -
Straightening out bad actors is fine, but it wont resolve the inconsistencies and consumer confusion about overdraft protection cited by the Consumer Financial Protection Bureau.
June 14
Capital One (COF) is on to something with its
In a recent interview, Capital One executives
Credit card rewards programs have never been particularly accessible, but they became increasingly complicated during the cash-back craze
Costs are often mitigated by applying a big, flashy earnings percentage (typically 5%) to a particular spending category. But retail reporter Matt Brownell does a good job of highlighting why this tactic lacks broad consumer appeal in
I recently got an email from Bank of America encouraging me to sign up for its BankAmericard Cash Rewards Card. It looked like a good offer. I could get a $100 bonus just for spending $500 in the first 90 days, and any rewards I redeemed into my Bank of America checking account would be boosted by an additional 10 percent. It also provides 2 percent cash-back on grocery purchases year-round, which would fit in nicely with my existing spending habits (and would encourage me to cook rather than dine out).There's just one problem: The card's marquee cash-back category, with a 3 percent reward rate year-round, is gas. I live in New York City. And like many New Yorkers, I don't drive.
To avoid alienating prospective cardholders, Brownell suggests letting them customize bonus categories a la the
One tactic some issuers have used, in terms of broadening appeal and, I suspect, managing costs, is to offer 5% cash back on rotating categories. But these programs, too, can ultimately prove underwhelming.
For one, cardholders are typically required to enroll each quarter to be eligible for the big bonus, which creates a completely unnecessary point of friction for consumers. (The official word from Discover and Chase, which both offer popular cash-back cards with rotating 5% categories, is that enrollment is required as a means of engagement, something readers familiar with my past columns will know I think
Secondly, categories change not just from quarter to quarter, but also from year to year. So, for example, Chase cardholders who signed up for the
These fluctuations and requirements can frustrate consumers. They get the sense that their issuer is trying to take advantage of them, and they don't like having to spend hours to maximize rewards. To paraphrase a popular Internet meme,
Bottom line, 5% as a selling point is highly overrated. It's also increasingly unsustainable.
In a blog post for Bank Innovation, Brett King of Moven predicts smartphones will drive
Furthermore, a big source of funding for banks' credit card reward programs the interest paid on purchases could shrink as consumers become more financially responsible and pay their balances in full.
"In the era of the quantified self the self-aware customer won't make spending decisions based on cash-back, miles or trinkets offered they'll make spending decisions based on whether they can afford to make a purchase," King writes.
I'm not so sure Americans will ever wean themselves off of credit enough to make rewards programs a thing of the past. As this other Daily Finance article explains,
I do agree, however, that big cash-back categories will become increasingly difficult to execute, making straightforward rewards programs a clearer value proposition for financial firms and consumers.
Jeanine Skowronski is the deputy editor of BankThink. You can contact her at
