Report: Innovations in Payment Card Loyalty TOC

INTRODUCTION
- Who is the target reader?
- Scope of the report
- How to use this report
AN INTRODUCTION TO PAYMENT CARD LOYALTY
- What is a loyalty scheme?
  - Issuers must compete on price or service provision
    - Price leaders offer price incentives
    - Reward based loyalty schemes are used by premium service providers
- There are four key objectives of a loyalty scheme
  - The primary objective is to attract new cardholders
  - The second aim is to retain these cardholders
    - Multi-retailer schemes offer even greater acquisition potential
  - Loyalty schemes aim to make their product the "card of choice"
    - Points-based schemes also reward the most active
  - The final objective is to increase customer spending data
INNOVATIONS IN LOYALTY
- Introduction
- Rewards are being adapted to cardholders' preferences
  - Many issuers are offering increasingly exciting and innovative awards
  - Profile: The American Express Blue Sky card gives cardholders an unlimited choice of travel rewards
    - The program offers a favourable redemption rate
    - However, the value proposition is not as strong as some airline co-branded cards
    - The Blue Sky program is aimed towards the mass market
  - Some payment card loyalty schemes will exchange points to a different loyalty currency
  - Profile: The Royal Bank of Canada has an extensive loyalty program, with the option to transfer point to other loyalty programs
    - Redemption is online
    - The points are transferable to other loyalty programs
  - Rewards for charitable and environmentally conscious cardholders are becoming more common
  - Profile: Greencard offsets the cardholder' s carbon emissions
  - Well designed programs allow card holders to earn extra points in a range of situations
  - Profile: CitiBank' s "Thank You" loyalty program has a range of merchant partners and offers cardholders a range of innovative rewards
    - The program gives cardholders the opportunity to earn points by using different Citibank services
    - Additional points can be earned at a range of other merchants, greatly adding to cardholders' ability to earn points
    - Account management is from a dedicated website
    - Cardholders benefit from a large choice of rewards
    - Prepaid gift cards are a reward option
    - Citibank will create a reward for cardholders
    - The program promotes the Citibank brand in general
- New methods in point redemption are being more introduced
  - The next step forward from quicker redemption via the internet is instant redemption
- Some issuers are leveraging chip technology to allow instant redemption in their loyalty programs
  - Chips offer several advantages for loyalty over magnetic stripe
  - Chip technology facilitates instantaneous redemption at the point of interaction
    - Redemption at the POS is attractive to merchants too
  - Chip based programs allow issuers to develop a deeper relationship with cardholders
  - Profile: Garanti Bank offers cardholders a range of options on its chip-based Bonus Program
    - The chip allows for instant redemption
    - Garanti also have several non chip-based innovations
  - Profile: Mashreqbank' s WOW! Card rewards repeat purchases as opposed to transactional loyalty
    - The chip allows Mashreqbank and its partners to reward transaction freqency as well as value.
    - Other data stored on the chip can help further the relationship between the program and the partner
    - The value offered to the retailer is considerable
  - While this functionality is compelling, chip based systems are not ideal for all issuers
    - Despite the benefits, chip based programs are very much in the minority
CONCLUSIONS AND KEY LEARNINGS
- The secrets of a successful loyalty program
  - It should be remembered that reward programs are not the only way to create loyalty
    - Cardholders have different requirements
    - There is a trade off between price and reward program
    - Final thoughts on payment card loyalty
APPENDIX
- Definitions
  - Affinity card
  - Balances outstanding
  - Co-branded card
  - Credit card
  - Charge card
  - Debit card
  - PoS terminal
- Research methodology
  - Cards and Payments database
- Future readings
- Datamonitor' s custom research capabilities
- Cards & Payments Team contact details
- List of Tables
  - Table 1: American Express' Blue Cash card offers a cash back rate dependent on the level of annual expenditure, 2007
  - Table 2: A selection of "Experience" type rewards on the Webmiles program, 2006
  - Table 3: Rates of tree replacement per type of expenditure on Greencard, 2006
  - Table 4: A representative sample of credit APRs and annual fees, UK, 2007
  - Table 5: Current relevant Datamonitor publications, 2007
  - Table 6: Future relevant Datamonitor publications, 2007
- List of Figures
  - Figure 1: Three categories of reward based card loyalty schemes exist
  - Figure 2: The American Express Blue Sky Card
  - Figure 3: The Royal Bank of Canada has an extensive loyalty program
  - Figure 4: RBC and Esso points are exchangeable in both directions
  - Figure 5: The Greencard is attractive to those who care about the planet
  - Figure 6: Citibank' s "Thank You" program has a wide range of partners
  - Figure 7: Chips can store data specific to individual merchants as well
  - Figure 8: Chips can store personal information which can be used by merchants
  - Figure 9: The Garanti Bonus Card - Turkey
  - Figure 10: Garanti gives its partners access to detailed customer information via a website
  - Figure 11: The Mashreqbank WOW! Card UAE/Qatar
  - Figure 12: Chips allow merchants to encourage repeat business
  - Figure 13: Chips can bring together a range of offers to make a compelling customer loyalty offering
  - Figure 14: Datamonitor' s core consulting capabilities

Innovations in Payment Card Loyalty

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