Integrating Payments and Loyalty Programs
What do today’s customers really want from merchants? Convenience, personalization, and a seamless experience—and these expectations are changing the payments landscape. The 2024 Voice of the Merchant Study offers some compelling insights into why loyalty and payments integration is the next big step for enterprise merchants. Let’s explore what the report reveals and why this trend is a game-changer for businesses preparing for 2025.
Loyalty Programs and Payments
Merchants have long understood the power of loyalty programs to attract and retain customers. But according to the 2024 Voice of the Merchant Study, the way merchants approach loyalty is shifting. Loyalty programs are no longer just about earning points or redeeming rewards; they’re becoming tightly integrated with payments to create a seamless customer experience.
Here’s a key takeaway: only 10% of merchants expect to keep their payments and loyalty programs separate in the future. That is a significant drop from the 27% who keep them separate today. Why the change? Because integrating these systems allows merchants to:
- Offer faster, frictionless checkouts.
- Use data more effectively for personalized offers.
- Strengthen customer relationships with dynamic and targeted rewards.
This integration also supports the broader goal of creating a unified customer journey, which is essential when it comes to the competitive market.
One great example is the shift towards integrating payments and loyalty programs. By doing this, merchants can eliminate friction at checkout, which is often a pain point for customers. Seamless integration ensures that earning rewards and redeeming them feels effortless, while also keeping customers engaged and incentivized.
General-Purpose Payment Methods in Loyalty Programs
Another big trend highlighted in the report is the move away from proprietary payment methods (like co-branded credit cards) to general-purpose payment methods, such as debit cards and ACH. Currently, 27% of merchants include general-purpose payment methods in their loyalty programs. But 44% of merchants expect to include them in the future.
Why does this matter? General-purpose payment methods make loyalty programs more accessible to a wider audience. Customers don’t want to be tied to a specific card or payment method to earn rewards. Offering flexibility makes loyalty programs more appealing and easier to use.
This transition is also beneficial for merchants. Broader participation means more customer data, which can be used to refine strategies and offer personalized incentives. Data-driven strategies can also enhance targeting, allowing merchants to create loyalty programs that feel unique to individual customers.
Moreover, integrating general-purpose methods can streamline operational efforts. Merchants no longer need to rely on specific payment platforms for loyalty tracking, reducing backend complexities and costs. The shift enables businesses to scale their programs much more effectively.
Personalized Loyalty Programs
The report highlights a growing trend: nearly 70% of merchants are expected to adopt personalized loyalty programs in the near future. Why is personalization so critical? Because today’s customers expect brands to know what they like, need, and want; often before they do.
Personalized loyalty programs offer several advantages:
- Unique Deals: Offers that are tailored to individual customers based on their preferences and purchase history.
- Dynamic Checkout Displays: Presenting the customer’s preferred payment method at the top (or highlighted) in the checkout flow.
- Improved Retention: Customers are more likely to stay loyal to brands that make them feel valued and understood.
Personalization is a powerful differentiator in a crowded market. With the right technology and integration, merchants can use payments data to drive loyalty in a lot of meaningful ways. Advanced analytics can also identify patterns in consumer behavior, enabling merchants to anticipate needs and deliver rewards that resonate.
Additionally, personalization isn’t just about offers; it’s also about communication. For example, sending reminders about expiring rewards or suggesting products based on past purchases can make customers feel like the loyalty program is designed specifically for them.
Fighting Fraud in Loyalty Programs
While integrating payments and loyalty brings immense benefits, it’s not without challenges. One of the biggest concerns is fraud. Loyalty programs are becoming targets for fraudsters every day because they can hold valuable rewards and customer data.
The risks include:
- Account Takeover: Fraudsters gain access to loyalty accounts and steal points or rewards.
- Fake Accounts: Creating fraudulent accounts to exploit promotional offers or bonuses.
- Data Breaches: Loyalty programs often store sensitive customer data, which makes them attractive to hackers.
To address these challenges, merchants need to adopt effective security measures. Tokenization and two-factor authentication are becoming essential tools popularly for safeguarding loyalty accounts. Additionally, real-time fraud detection systems can also monitor unusual activity and flag potential threats before they escalate into fraud or chargebacks.
For more details on tackling these challenges, explore how businesses are protecting their loyalty systems from fraud.
The Future is Seamless
So, what does the future of loyalty and payments integration look like? According to the 2024 Voice of the Merchant Study, it’s all about creating a seamless experience. Customers want:
- Speed: Fast and easy transactions that reward them instantly.
- Choice: Flexibility in how they pay and earn rewards.
- Relevance: Personalized offers that feel tailored to their needs.
Bringing loyalty and payments together makes it simple for merchants to meet customer expectations and keep up with what’s in demand.
Key Takeaways for Merchants
If you’re looking to future-proof your loyalty and payments strategies, here are some actionable steps to consider:
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Evaluate Your Loyalty Program: Are there opportunities to integrate it with your payment systems? Integration can create a more seamless and engaging experience for customers.
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Adopt General-Purpose Payment Methods: Make your programs more accessible to a broader audience by allowing flexible payment options for earning and redeeming rewards.
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Invest in Personalization: Use data to create tailored rewards and experiences for your customers. The more relevant your offers, the stronger your customer relationships will be.
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Address Fraud Risks: Strengthen security measures to protect your loyalty programs from fraud. That includes using tools like tokenization and fraud monitoring.
The integration of loyalty and payments isn’t just a trend but the future of customer engagement. As merchants continue to innovate, those who embrace these changes will be best positioned to thrive in 2025 and beyond. By taking these steps, your business can build stronger customer relationships and unlock new opportunities for growth.
To learn more insights from the 2024 Voice of the Merchant Study, check out our webinar analyzing the results with experts from Oliver Wyman and MAG.