Expectations for credit card rewards have become ubiquitous across generations and the credit score spectrum for both consumer and business cardmembers.
Financial institutions face a tough balancing act. They must offer a rewards program appealing enough to attract new cardmembers while ensuring it is profitable. Considering the costs and complex deals involved with reward vendors, compliance efforts, and potential cash reserve, community banks and credit unions may find this challenging.
There are strong consumer trends in today’s competitive market. When considering how to create or optimize a credit card rewards program, consider these three statistics:
- 43% of consumers identify rewards as a top motive for seeking a new credit card.
- 35% of consumers apply for a new credit card at least once a year to take advantage of sign-up bonuses.
- 55% of consumers said the flexibility to redeem whatever they choose is important.
While trust in their financial institution is a contributing factor, according to this report from PYMNTS Intelligence and Elan, what’s clear is consumers are willing to find a credit card at whatever financial institution offers the best rewards to meet their needs.
Consumers expect today’s rewards programs to be easy to use, accessible, and available on all devices. Cardholders want an immediate line-of-sight between their spend and the reward earned, like the option to see mobile alerts on points accumulated from transactions. Elan Credit Card recently launched a new mobile app that fulfills that need by offering the ability to see points year-to-date, by statement, and by transaction.
To optimize engagement, rewards should be fully transparent, and the process of spending and receiving rewards should be both interactive and seamless. Redemption needs to be just as easy, with the option to pay with points or auto-transfer earned cash to an account of the cardholder’s choice.
It takes a skillful balance to run a successful credit card rewards program appealing enough to draw loyal cardmembers while maintaining profitability and compliance.
“The cost of running a credit card program continues to rise across all aspects of the products balance sheet,” says Mitch Pangretic, senior vice president and director of strategic partnerships at Elan Credit Card. “Offering competitive products and rewards while earning a profit has become more difficult, especially during uncertain economic conditions, pending legislation, and further capital requirements for loan assets like credit card.”
The direct operational cost of a rewards product is higher on a per-balance basis than any other loan product. Most of these costs are attributed to cardholder acquisition and administrative expenses.
By providing top-of-wallet products, Elan makes it easier for community banks and credit unions to fortify existing relationships and build loyalty. Explore more insights on rewards programs in this new whitepaper and learn more about the benefits of the agent credit card issuing model and why more than 1,200 financial institutions trust Elan as their partner.