The financial impacts of the ongoing pandemic are continuing for many consumers, even as the United States government moves to push up consumer confidence in spending with its stimulus checks and other programs. Consumers remain budget-conscious, however, with one study finding that 75 percent of individuals seek out coupons, promotions or other ways to reduce prices when making purchases.
Merchants must adjust their product offerings and customer engagement strategies accordingly, especially as the crisis’ effects are also impacting how consumers pay for their purchases as well. Forty-one percent of consumers now prefer to make payments with debit cards, for example, eschewing the fees or interest charges attached to other methods such as credit cards. Connecting these two distinct trends — the desire for promotions or other financial rewards as well as the move to debit — could enable merchants to better engage and retain consumers in this new environment. Programs such as debit rewards could therefore prove more attractive to both consumers and merchants.
In the latest Next-Gen Debit Tracker®, PYMNTS examines the role debit rewards programs play in the payments space and how merchants can keep pace with these shifts.
Around The Next-Gen Debit World
Neobanks appear more than willing to fill the debit rewards void left by legacy banks. Digital-only bank N26 recently announced a partnership with cashback and rewards provider Dosh to help support its Perks system as it expands to the U.S., for example. Dosh’s network will underpin Perks in the country, allowing U.S. debit cardholders to receive cash rewards when making purchases with these cards. The bank will also connect this feature to its mobile app, enabling debit cardholders to keep transparent track of their spending and associated Perks points within the banking app. N26 officially launched the Perks program in December 2019. Its expansion to the U.S. comes as consumers within the country are still attempting to weather the financial impacts brought on by the pandemic.
The newfound interest in debit or other rewards programs by such banks is also coming as many consumers begin to switch more of their spending from their credit to their debit cards. One study found 64 percent of European consumers claimed they preferred to make eCommerce purchases with debit, for example. Increased control over their level of spending was one of the top reasons cited for the preference, the report also noted. Keeping a careful eye on this shift may prove critical to merchants as they seek to grow engagement and trust with consumers. The study also found 70 percent of those surveyed would wait to receive refunds from retailers before they made another purchase from that specific merchant, for example — indicating many customers are watching their own spending closely.
Consumers that do participate in loyalty programs are much more likely to spend more with the merchants participating in or offering those programs, another study found. Eighty-one percent of millennial customers indicated that belonging to merchants’ loyalty programs drove them to spend more with these retailers, for example. This shows a significant appetite for loyalty and rewards, especially among younger consumers, something that could be key not only to entice consumers to spend initially with one’s brand but to retain their business. Merchants must approach the rewards space strategically to capitalize on this trend, matching potential cash back or other perks to the payment methods consumers increasingly prefer to use when making transactions both online and in stores.
For more on these and other stories, visit the Tracker’s News & Trends.
How Digital-First Payment Trends Are Shining A Spotlight On Debit Rewards
Speed and convenience have always been important factors for consumers when making payments, and their importance has only increased during the global health crisis. More individuals are tapping online banking tools or shopping via websites or mobile channels when making purchases, seeking swift and easy transactions that do not break the bank. Supporting the speedy payments consumers want in a variety of channels alongside programs that offer points or rewards when these transactions are made is becoming more important for merchants to keep customers’ attention, especially when it comes to younger consumers.
To learn more about how the increase in online banking ad spending is leading more consumers to expect rewards everywhere they shop, visit the Tracker’s Feature Story.
The ongoing pandemic has only increased the attractiveness of loyalty and rewards programs for many consumers as they look to balance their budgets amongst the crisis’s lingering financial impacts. More individuals are also shifting from spending with their credit cards in favor of debit as they seek to better manage their finances — something that may be prompting a higher amount of interest in debit rewards programs that could offer them cash back or other perks when making such transactions. Participating in such programs could thus provide merchants with key benefits as they look to further engage with consumers.
To learn more about how the pandemic is affecting consumers’ perceptions regarding debit rewards and how this could prove key for merchants, visit the Tracker’s Deep Dive.
About The Tracker
The Next-Gen Debit Tracker®, a collaboration between PYMNTS and PULSE, a Discover company, examines consumers’ changing payment behaviors, the innovations that are reshaping how they use debit and how advanced solutions like machine learning technologies can help financial institutions secure debit payments.
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