When it comes to the use of credit cards, the pandemic has kicked the rate of behavioral and technological change into high gear. We may be entering a new era of cashless transactions. Credit card reward programs are changing at a rapid pace, too. The future of such programs includes an enhanced user experience, improved accessibility, and expanded options – and the future is already here.
Credit unions need to adapt and evolve along with developing technology to provide members with an effective and exciting rewards program. In the past, credit card reward programs provided many use incentives such as exclusive merchandise, event tickets, travel, and cash savings on everyday purchases. But, as technology and the world continue to change at an accelerated speed, how will credit unions keep up?
Some new trends
Here are some credit card reward program trends that are expected to take off in 2021:
- Symbiotic partnerships — Redemption options will increase. This means that your choices in terms of what you can redeem points for will expand to other industries and products. For example, Amazon recently teamed up with Capital One to allow its cardholders to use rewards points for payment on Amazon purchases. Additionally, alternative redemption options will be essential for travel-focused credit cards since travel is so limited during the pandemic.
- Cash back may prevail — COVID-19 has caused many credit card companies to make major changes to their rewards programs to retain existing customers and attract new ones. Generally, there are two categories of reward points: cash back or travel. While cash back is straightforward and bound to be used, travel rewards offer better payback. Given the current pandemic, however, cash back cards may be the way to go. Since travel rewards are often difficult to redeem, many consumers are uninterested in using them. Cash, however, remains unaffected by a pandemic. Also, with travel likely disrupted for years to come, many consumers may switch to cash back cards once they use up their current miles.
- Higher return points — Right now, many cards offer 2x to 3x points back on gas and dining. However, industry experts believe those rates are about to go up. Further, they expect a shift towards grocery reward points over dining out points since fewer people are eating out during the COVID-19 crisis.
- Fees may be reduced — Without the luxury of using and transferring points, consumers may be reluctant to pay hefty card fees. Due to the pandemic, many card companies are already delaying or even waiving fees.
A booming market
According to the U.S. Consumer Financial Protection Bureau’s 2018 Consumer Credit Card Market report, reward card spending has continued to increase in the last few years. The bottom line is that credit union remote banking is booming – and it’s no wonder with online banking and shopping records being broken left and right. Future credit card rewards programs will seek to leverage technology to provide a better user experience with more accessibility and redemption options.
While nobody expects COVID-19 to last forever, it is doubtful that the shift towards remote banking and digital wallets will decrease. Instead, it is likely to increase and expand further. Build incentives that entice members toward those services that are most essential to your credit union’s success. Since not all members need the same services, FLEX allows credit unions to allocate points to individual services, and offer fee discounts and rate incentives as members accumulate more points. Learn more about the credit card reward options FLEX offers in our Relationship Pricing eGuide.