Consumer credit card usage is changing rapidly, and loyalty programs are significant drivers in shaping consumer behavior and fueling growth. The Consumer Financial Protection Bureau (CFBP)1 recently released a report highlighting cardholders’ emerging patterns that can help financial institutions gain actionable insights to optimize their loyalty strategy.
By strategically integrating loyalty programs, institutions can offer targeted and personalized promotions that genuinely resonate with consumers and maximize these trends. Check out our summary of the CFPB’s most significant findings to stay ahead of the competition in the loyalty sphere.
The Surge in Rewards
Between 2019 and 2022, there was a significant 58% increase in rewards earnings for mass market general purpose cardholders, rising from $26.1 billion to an estimated $41.1 billion. This surge was mainly driven by the growth in points, indicating that consumers are increasingly drawn to them as a form of reward.
This shift holds critical implications for financial institutions, suggesting that incorporating and emphasizing points-based rewards in loyalty programs can be a strategic approach to meet and exceed consumer expectations. Adapting your offerings to align with evolving consumer preferences can ensure your loyalty program resonates with the changing financial sector rewards landscape.
Elevating Earn Rates
The dynamics of rewards continued to evolve, with general-purpose cardholders earning 1.4 cents for each dollar spent in 2019 and 2020. Fast forward to 2021 and 2022, and earn rates escalated to 1.6 cents per dollar, highlighting a significant uptick in engagement across base and bonus spending categories.
Maximizing Redemption Values
Consumers are not just earning more; they are redeeming more. The average rewards-earning account saw a 44 percent increase in redemptions, reaching $167 in 2022. This signals a growing appetite for extracting tangible value from loyalty programs, presenting a prime opportunity for financial institutions to tailor promotions that align with consumer preferences.
The Resurgence of Sign-Up Bonuses
Sign-up bonuses have become a popular feature of credit card rewards. In 2022, they accounted for 9.1% of total reward earnings, up from 7%. The average value of these bonuses for eligible cardholders increased to $326, highlighting the attractiveness of these welcome offers. Developing targeted promotions centered on sign-up bonuses can be a game-changer, helping traditional financial institutions to attract and retain valuable consumers.
Exclusive Access to Offerings
As the desire for deeper consumer loyalty grows, many organizations are taking a fresh approach by offering exclusive benefits tied to specific products and services. Financial institutions can maximize this trend by creating targeted promotions catering to the unique preferences of different segments of their customer base.
The recent cardholder demand for merchant-funded and product-level offers aligns with this movement, with 50% of millennials stating they would switch to companies that offer product-specific and merchant-funded offers and 65% declaring a deeper loyalty to their card provider2.
In a world where consumers seek unique experiences that are often in short supply, loyalty programs can be a major differentiator. Financial institutions can take advantage of this trend by encouraging credit card usage and creating personalized promotions that boost engagement and build long-term brand loyalty. As the gatekeepers of premium benefits, financial institutions can redefine the credit card experience and shape the future of consumer loyalty.
At ampliFI, we’re excited to take your loyalty solutions to new heights. Connect with our team at firstname.lastname@example.org or click the link below to get started.