Providing comprehensive, bankwide rewards programs may do more to maintain customer loyalty than do debit card rewards, which some banks are looking to trim or eliminate because of reductions in interchange revenue, a new survey report suggests.
In fact, only 47% of survey respondents who participated in a debit rewards program had ever redeemed their points, according to research from Mintel Comperemedia, which in May surveyed 1,000 U.S. adults online.
The company’s goal was to determine how and why consumers choose their banks make decisions about their bank. It also wanted to determine how frequently they used their debit cards, whether they were enrolled in a rewards program and what that meant to them, and whether they were willing to pay for debit rewards, Susan Wolfe, vice president of financial services at Mintel Comperemedia, tells PaymentsSource.
Mintel segmented the respondents into three groups: Heavy users that redeemed points once a month, medium users that regularly redeemed within every six months, and light users who redeemed once a year. Of those groups, 36% of heavy users and 30% of medium users said they would not change how use their debit cards if their bank eliminated debit rewards compared with 55% of light users who would.
Asked if they would pay to participate in a debit rewards program, 36% of heavy users said they would pay as much as $4 per month, while 61% said they would pay $1 per month.
Such results suggest debit rewards may not drive customer loyalty, Wolfe says. “We think the results speak to a larger issue [of bank loyalty], and banks are not doing a great job instilling loyalty among customers,” she says. “Banking has become a commodity.”
Banks should go beyond supporting just debit rewards and develop loyalty initiatives in which customers may earn and use points, such as by giving rewards points for using debit cards, credit cards and other bank products, much like the Citicorp Thank You rewards network, says Wolfe. Debit-rewards programs do not enable customers to build up points quickly, and many do not see the benefit of such programs, she says.
Financial institutions should follow the lead of many airline rewards programs, which instill such strong loyalty that customers may pay more for a ticket on an airline because they earn points toward substantial perks, such a free drink tickets, free baggage
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