As a small community institution, Commercial National Bank of Texarkana likes the idea of encouraging people to shop locally. That's partly why it offers Buzz Points, a third-party debit rewards program with a social media twist.

"The Buzz Points program is all about bringing the community and the bank together," says Belinda Mobley, business development manager for the $198 million-asset Commercial National. The Texas-based bank launched the program in the summer of 2011.

About 800 of its customers and 50 local merchants participate in Buzz Points. Customers earn points every time they do a signature transaction with their debit card. They can redeem the points for gift cards from select local and national merchants, either online or through a mobile app.

"Customers love it," Mobley says. "They love the fact that they can do their shopping and get something for it without having to do something extra." And financial institutions benefit from an increase in signature transactions, which are more lucrative than PIN transactions.

Buzz Points also runs a Facebook page for each participating financial institution and encourages customers to sign up for additional services, such as online statements, by giving them extra points.

Customers can earn extra points by allowing Buzz Points to post to their Twitter and Facebook profiles about the rewards they have earned, with their financial institutions typically named in the posts.

To be part of the program, a merchant has to pay a monthly fee, in addition to fees based on the number of points its customers earn. The benefit is that customers have more incentive to shop there and receive emails and text messages through the Buzz Points program that encourage them to stop in.

Businesses that join typically see a 20 percent to 30 percent jump in revenue from customers who participate in the program, according to Jay Valanju, the CEO of fisoc, which created Buzz Points (and broke with corporate style by christening it with capital letters).

Merchants who work with Buzz Points get a discount if they are a customer of the participating bank or credit union, which has prompted some merchants to move their business over, Valanju says.

Mobley confirms this, but says merchants who bank elsewhere don't often switch their business to Commercial National. "You might get a customer here and there to switch, but more times than not, they don't."

Buzz Points, launched by fisoc in 2011 with the name BuzzBanking, targets community banks and credit unions because they often lack the resources both to offer their own debit rewards programs and to be heavily involved in social media.

More than a dozen of them offer Buzz Points now, and Valanju expects to more than double that number through the first quarter of 2013. Financial institutions in about 10 states, from Alabama to Wisconsin, expect to launch the program in coming months, he says.

The banks and credit unions that have signed up range from small ones with between 5,000 and 10,000 customers to regionals with more than half a million customers.

When fisoc launched the program, it was the banks, including Commercial National, that were tasked with signing up merchants for Buzz Points. "But our employees had full-time jobs and it had been a challenge to sign up merchants," Mobley says.

After receiving feedback, fisoc has taken on that role and now deploys teams to get merchants on board. The company handles everything from integration to deployment, so the program is "not labor intensive at all" for banks, Valanju says.

Nicole Sturgill, a research director at consulting and research firm CEB Tower-Group, says programs like Buzz Points can help foster customer stickiness.

In the case of Buzz Points, she says, "they have expanded by not just offering merchant rewards, but also bringing in the rewards for signing up for things like electronic statements and mobile banking." And as customers sign up for more services, they are less likely to switch financial institutions, as long as customer service remains strong, Sturgill says.

What Buzz Points is doing isn't entirely unique. Other companies, such as Cardlytics, offer debit rewards programs.

The rewards business is just starting to take shape as banks experiment with different approaches and partnerships, similar to what's happening in the mobile payments business, Sturgill says.

"There are so many tests going on," she says. "The standard hasn't really shaken out yet. There eventually will be a standard. We just don't what it is yet."

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