NEW YORK, Nov. 12, 2013 (GLOBE NEWSWIRE) -- Merchant-Funded Rewards, which are funded by and usually delivered to consumers by participating merchants, have grown in popularity in recent years, especially on debit cards. The reason is attributed to the impact of the Durbin Amendment on debit interchange, which has traditionally been used to fund a majority of consumer card rewards.
Merchant-Funded Rewards programs are evolving, and a major way that they're evolving involves the use of both data and technology. Specifically, opt-in programs, whereby the consumer voluntarily enrolls in a Merchant-Funded Rewards program (typically online) which enables them to select both the offer frequency as well as the types of offers they find most appealing. Opt-in enables better targeting of reward offers, with greater cardholder participation as well as the possibility of enhanced tracking for participating merchants. Offers can be delivered via mobile applications, e-mail or text messages.
According to new research from The Payments Report, a syndicated research report published by the Auriemma Consulting Group, Inc. (ACG), more than three in seven (43%) of consumers indicate they have voluntarily opted-in to a Merchant-Funded Rewards program with their debit card, compared to approximately six in ten (62%) consumers who were automatically enrolled in a Merchant-Funded Rewards program with their debit cards.
Matt Simester, Managing Director of the Consumer Payments Insights practice at ACG, observed, "Consumers seem to be acknowledging that opting-in to a Merchant-Funded Rewards program is more likely to benefit them with more relevant offers with merchants they really like." He adds that the amount of rewards (cited by 70% of respondents) consumers can receive, as well as the number of participating retailers (cited by 63% of respondents) were the factors most-frequently cited as influential in deciding whether to voluntarily "opt-in" to a Merchant-Funded Rewards program of the sort just described.
"At this point, the main limitation seems to be a dichotomy between consumer favoritism towards long-term vs. short-term Merchant-Funded Reward offers, as consumers overwhelmingly favored longer-term merchant-funded rewards offers." Mr. Simester says that consumers find long-term offers much more appealing because knowing specific eligibility dates, eligible retailers and transaction amounts is a hassle to remember, and they want rewards programs to work simply, without having to remember all of the specific details. But Mr. Simester notes that relatively simple fixes, such as having eligibility dates at the end of a given month (rather than a random date in the middle of a month) may help to bridge this gap, as well as potential technological fixes, like confirming an eligible transaction via text messages, could go a long way towards addressing those issues.
About Auriemma Consulting Group
Since 1984, ACG has offered comprehensive management consulting, research, industry roundtable and benchmarking services to the financial services industry. ACG clients include credit card issuers and networks, commercial banks, mortgage lenders, merchants, and industry vendors. With offices in New York and London, ACG offers actionable solutions to help clients make important business decisions to maximize their efficiencies and revenues. For more information, please contact Matt Simester at 212-323-7000 or matt.simester@acg.net.