This document discusses trends in loyalty programs in the payments industry. It notes that consumer preferences and spending habits have shifted in recent years due to factors like the growth of e-commerce and mobile devices. Loyalty programs now need to offer more practical and relevant rewards to engage consumers. The document also outlines challenges like redemption friction points and the rise of digital competitors. It proposes solutions like expanding the use of merchant offers, improving the rewards experience, and leveraging new technologies like beacons to develop innovative loyalty strategies and programs.

1. GROUP EXECUTIVE & EXECUTIVE VICE
PRESIDENT, MASTERCARD
AINSWORTH
JOHN

2. TECHNOLOGY, LOYALTY AND
THE MEMBER EXPERIENCE
Loyalty Trends in the Payments Industry

3. Market Conditions
The retail industry has seen
dramatic changes over the last
5-10 years:
• Discretionary income and
consumer confidence causing
spending shifts
• Power has shifted from retail
stores
to shoppers
• Consumers preferences have
shifted from aspiration rewards
to practical rewards
Web enabled mobile devices
have transformed e-commerce
(Omnichannel):
• Innovative ways to engage the
consumer
• A wealth of product information
and alternative shopping
channels at
their fingertips
• The local marketplace has been
replaced by the global
marketplace

4. The Conflicted U.S. Consumer
Post recession customer attitudes are evolving…
Fear fatigue
Recessionary
hangover
Key trends that were
born of the recession
or even pre-recession
era will continue to
impact consumers
Recessionary
backlash
Key trends that have
developed as a
rejection of the
consumption patterns
forced on consumers
as a result of the
recession.
Enduring value
perceptions
(education,
retirement)
Streamlining
lifestyles
Redefining the
“new community”
Relaxation,
re-connectivity
and self
indulgence
Uncertainty
avoidance
Conspicuous
consumption
Age shifts
Experiential
shopping
Changing
perceptions
of luxury
Consumers
Save
Spend

5. Consumers are smart and will shop
for the best deal for their money
58%
Stick to brands &
stores I can afford
$150K+
36%
68%
Regularly use coupons
to reduce costs
$150K+
56%
75%
It’s important to get
the lowest price on
most things
$150K+
53%
55%
Go a little further
to shop stores where
I can save
$150K+
42%
50%
Choose lower priced
brands than their usual
to save money
$150K+
24%
43%
Look online for
discounts before
shopping
$150K+
36%
42%
Used to go to stores
just to browse, don’t
as much anymore
$150K+
30%
ALL THE WAYS I’M SMART

6. Rise of Digital Competitors Potential Threat
to Financial Institutions Loyalty Programs

7. Cardholder Demand for Relevance
Increasing
1. Barry Levine “ClickFox Survey Asks Whom Consumers Trust with Data”,
August 15, 2012, Ernst and Young “The Customer
2. Takes Control, Global Banking Survey 2012
3. CGI “Understanding Financial Consumers in the Digital Era”, 2014
4. Swirl “iBeacon’s First Retail Holiday: Consumer Insights” December 2013
80%of consumers expect
companies to use their
purchase history and retail
experience1
68%of consumers are willing to
provide information if it
means greater
personalization of better
service2
of financial consumers want
omni-channel digital services
regardless of age or income3
77%of consumers would share
their smartphone location
data in return for valuable,
relevant offers4
58%

8. Cardholders Experience Redemption Pain
Points
Source: Lightspeed data, 2014 & Mastercard Advisors Panel Study
2014
48%Like to save up until they
have a large amount of
points
29%Don’t have enough points to
redeem
Are unhappy with rewards
options in their program
48%Have experienced frustration
while redeeming rewards
54%
Must drive deeper engagement at point of interaction
Key reasons rewards cardholders have not
redeemed rewards include:

9. Benefits from expanding use
of merchant-funded offers:
• Low cost benefit and reward option
• Cardholder-relevant value and
savings
• Brand loyalty and advocacy
• Competitive differentiation
• Improved marketing metrics and
returns
ISSUERS CAN PROVIDE MORE
OPPORTUNITIES OF ENGAGEMENT
Source: Daily Deals:
The Opportunity for Banks
and Credit Unions Aite Group LLC.
45%
subscribe to at lease
one daily deal service
47%
are interested in receiving
daily deal offers from
their primary FI.
U.S. CONSUMERS

10. COMMISSIONED STUDY: DEBIT CARD
FEATURES CUSTOMERS VALUE MOST
Security Security
Travel
Travel
Shopping
Travel
Security
Travel
Money Mgt
Shopping
Shopping
Security
Shopping
Shopping
Money Mgt
Shopping
Shopping
Indexed Demand Utilities*
Young Adults Mass Families Affluent
Number of Respondents (Weighted) 606 601 601
Rewards 200 199 199
Zero Liability 143 156 158
Price Assure 140 132 145
Price Protection 136 141 139
Receipt and Warranty Vault 127 135 132
ID Theft Resolution 127 137 141
Extended Warranty 126 132 134
Shipping Discounts 125 126 129
Best Price Mobile App 124 126 124
Satisfaction Guarantee 124 130 130
Wallet Protection 124 130 133
High Security Travel Vault 123 126 132
Payments Calendar 120 121 117
Purchase Assurance 119 123 124
Know Your Balance 118 121 118
Debit Card Spend Dashboard 116 117 115
Luggage Tracker 116 113 120

11. COMMISSIONED STUDY:
DEBIT CARD FEATURES CUSTOMERS VALUE MOST

12. Advances in technology are
enabling innovative approaches:
• Beacons
• Prepaid cards
• Card linked redemption
• Push notifications
• Gamification
• Wearables
CONSUMERS EXPECTATIONS FOR
LOYALTY ARE INCREASING

14. HIGH LEVEL LOYALTY SOLUTIONS
PRODUCT ROADMAP FOR REWARDS
2014 2015 2016 & Beyond
Rewards&Offers
• Experiential Earn
Options
• Integration of Offers &
Rewards Platforms
• Website Redesign to
be Mobile Responsive
• Email & IM support
• Integration with
Priceless cities
• Real-time POS
Discounts
• SKU level offers
• Digital Marketing
Platform
• Launch Redemption at
POS (Pay With
Rewards)
ADVANCING LOYALTY ADVANCING COMERCE

15. DISCUSSION QUESTIONS
• How do you measure the voice of your member?
• How does loyalty fit into your payment strategy?
• What are you doing to drive loyalty beyond free checking?
• Are you top of wallet for your members?
• How do you make the economics work?
• How do you choose the right partner?