ST. PETERSBURG, Fla.—Is “reverse loyalty” the way more issuers are going to drive greater card usage?
One payments expert says a new strategy for rewarding credit card users may be on the way—where issuers provide incentives up front, such as a cash bonus, for using their card.
Brian Scott, SVP of sales and solutions consulting at PSCU, explained that this loyalty approach runs counter to current rewards programs, where users are rewarded when they use their plastic.
“Here, issuers are providing the incentive first and then expecting card usage to follow as a result,” explained Scott.
Scott shared the example of Uber Cash.
“Uber Cash is much like a digital wallet,” explained Scott, noting Uber Cash is a stored value account—where users load money for future use. “Uber is in some ways trying to create the Starbucks experience and encourage consumers to use Uber Cash for all of the different businesses Uber is branching out to.”
The move incentivizes users to use Uber Cash and not other cards the person’s digital wallet.
“This is very interesting—the approach,” said Scott. “Uber is doing a really good job from what I have seen of getting people to preload value into their Uber account—which is way different from what they have done in the past, where I have my credit card attached to my Uber account and each time I use Uber it pulls up my card.”
The incentive Uber has been offering so far has been cash.
“If I preload $95 onto Uber Cash they give me a total of $100. It’s pretty cool, almost like reverse loyalty,” said Scott.
The concept of reverse loyalty, where cardholders are paid their incentive in advance of actually doing anything with their payment tool, may be bubbling to the surface now, said Scott.
“Uber is giving users money knowing their intent is to use their service. They are saying there is value in that intent, that preloading cash onto the account shows you intend to use their services in the future,” said Scott. “You have not even used their service and they are giving you additional value.”
Consumers Get Smarter
With issuers seeking ways to differentiate rewards programs and keep costs down, especially as reports indicate consumers are becoming much better users of their rewards, Scott said the use of reverse loyalty among issuers could increase, possibly turning into bonus rewards points and not just extra cash.
Scott said the use of reverse loyalty could also be effective in the battle for the use of consumer payment data. Scott suggested that if incentives are given up front for a consumer to grant an issuer use of their data, that makes the payment data much more valuable and useable.
“We know what happened to Facebook, having to go in front of Congress for sharing consumers’ data…But if you use loyalty rewards to incent people to share their data, you are in some way compensating them for their data. So you can actually use it,” Scott explained. “Unlike how Facebook used people’s data without their consent, that consent people give you to use their data makes that data so much more powerful.”
A Gray Line
Today there is a gray line on how companies can utilize people’s payments data, according to Scott.
“And you can incent people to share more about themselves, which can complete the picture you have of them,” said Scott. “An issuer can see a person’s payment info, but they can only see the payment information that happens on their card. If I could get consent to see payments happening on other cards and bill pay, that rounds out the picture. I get a 360-degreee view of the person that allows me to make better decisions to engage that person as opposed to just spewing out marketing based on the limited information I have. You can become more predictive with your decisions.”
Could reverse loyalty programs be less costly for issuers than traditional rewards offerings?
Scott said it’s hard to say, but noted that research has indicated that the cost to acquire a new cardholder is $100, and that rewards programs should be considered a marketing expense.
“So if Uber is paying $5 to get a new customer, that’s a pretty good deal for Uber,” he said.