View all newsletters
Receive our newsletter – data, insights and analysis delivered to you
  1. Uncategorized
May 28, 2010

Loyalty schemes setting the credit agenda worldwide

Loyalty is a theme which runs through this edition of Cards International, and it is hard to think of a time when the subject has been more of an industry focus. Two in five consumers surveyed by Groupe Aeroplan, the group which owns the UKs Nectar loyalty programme, feel the schemes are more relevant to them this year than last

By Verdict Staff

Loyalty is a theme which runs through this edition of Cards International, and it is hard to think of a time when the subject has been more of an industry focus.

Two in five consumers surveyed by Groupe Aeroplan, the group which owns the UK’s Nectar loyalty programme, feel the schemes are more relevant to them this year than last. There has also been a notable uptick in cards businesses implementing the programmes.

In this edition alone there are several examples. Alpha Bank, Greece’s third-largest bank by assets, is upping its rewards initiative following a 26% increase in card usage after introducing a programme in 2009.

Many card issuers are looking at starting to expand their credit businesses again and find offering rewards programmes to customers a conservative way of doing this.

They can encourage card spending through reactivation of existing customers and also selectively add customers to their portfolio, without engaging in aggressive competition for market share which led many to elevated levels of credit losses during the financial crisis.

HSBC’s cards business in Mexico is a case in point. It doubled its market share from around 5% to 10% between 2008 and 2009, partly through a packaged account it offered with a current account, debit card and credit card.

The product, called Tu Cuenta, helped the bank expand rapidly but contributed significantly to increased defaults in the last 18 months.

HSBC has now refined the strategy for expanding its portfolio with the use of more sophisticated credit loss management tools, a greater focus on more affluent customers and the offer of rewards packages to customers.

MasterCard has cottoned on to this trend too, announcing a tie-up with loyalty scheme Next Jump – an initiative which highlights another important benefit of loyalty programmes, namely the value of the data gathered through them.

Clearly, there is a huge profit potential here is if the card associations start to unlock this data. This opportunity is over and above the obvious benefits well-executed rewards schemes can deliver to banks – increased card spending and reduced portfolio churn.

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. A weekly roundup of the latest news and analysis, sent every Wednesday.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Electronic Payments International