Are Loyalty Cards Dead?

The loyalty card is not dead…yet. Rather, it’s heading towards a slow death. To avoid this painful reality, we need to change how we think about loyalty cards. The loyalty programmes of the future will be combined with payment cards, thus creating a unified and consolidated approach. Even better, I would also add gift cards to the equation. Not only do gift cards have an important role to play as a payment vehicle, they can also be used as a dynamic loyalty tool. The path is clear – payment cards, such as gift cards, represent the future of loyalty and customer engagement.

So, what has brought us to this point? The key drivers are technology, customer expectation, marketing ‘Big Data’, and the advent of open banking (PSD2).  

Technology is revolutionising the way loyalty schemes work; we are now able to track and report on customer behaviour in ways that our counterparts in the early 2000s could never have imagined. Specifically, I’m referring to the proximity between marketing and the customer reward technology that activates when customers: approach a store (geolocation) and sign up for WiFi access at a shopping centre, just to name a few examples. 

Alongside this jump in tech capability, customers expect more from a loyalty programme today than in years past. Their pain threshold for complex sign-ups and point-based reward schemes have completely changed. Any loyalty program, whether through a card or online account, has to be easy to understand and easier to use. It must also provide a compelling reason for allowing a third-party to follow their shopping behaviour; this is an obvious implication of GDPR but also provides a sense of value to the customer. 

From the perspective of Big Data, marketeers have become more savvy in how they use data. They can now analyse customer behaviour, make data-driven decisions, and propose promotional activities that are in alignment with the desires of their target audience while also promising stakeholders a reasonable ROI. 

Lastly, there’s tracking. The push towards open banking we’ve witnessed in the PSD2 initiative means that payment transaction information is more readily available, and can be built into a loyalty program’s algorithm. This optimises how customers are rewarded, in almost real-time, while taking a variety of behaviours into account. This includes but is not limited to spend amount, frequency of visit, downloading and viewing of content, breaking a geofence, referring others, etc.

I’m confident that the future of loyalty is intrinsically linked to gift card programming. Our customers are more educated, and more demanding, than ever before. They understand that technology now allows companies to provide compelling, tailored offers in real time, and that this can come at the cost of privacy. Obviously, there will be barriers to overcome around GDPR compliance, POS technology, merchant reluctance, and customer confidence. The anonymity and flexibility of private label gift cards, whether closed- or open-loop, resolves many of the privacy and confidence issues.

Companies that consolidate loyalty and marketing into payment cards will survive the loyalty reckoning. Those who do not adapt will drift into obsolescence.  

Article written by Eduardo Miccolis, Head of Gift Card Business and Customer Success
Originally published in The Gift Club's newsletter: July 2021

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