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volume 9 • fall 2016
GPR card on the market to o er cash back on all purchases.
In March 2016, Serve got company, when Walmart announced it would add cash rewards to its prepaid MoneyCard program, issued and program managed by Green Dot. Dubbed 3-2-1 Save, the feature o ers 3 percent cash back on purchases made on Walmart.com, 2 percent back on fuel purchases at Walmart or its a liated Murphy USA gas stations and 1 percent back on purchases made at Wal- mart’s brick-and-mortar stores. (MoneyCard had o ered cash
back on gas purchases since 2010.) Program manager Cascade Finan- cial took a crowd-funding approach to cash back on its Cascade Pre- paid Mastercard, o ering cardhold- ers cash back based not only on their own purchases, but the total spending of all other cardholders they referred to the program.
Mobile, Merchants Matter
Despite those initial forays into cashback rewards, the sustainability of cashback programs on a wider scale remains unproven. For prepaid providers looking for an alternative loyalty model, merchant-funded rewards are a promising option.
“There are only so many value pools, given the average load and spend dynamics, especially in the context of post-Durbin interchange and with competition driving fees down in general. That said, prepaid cards which are subsidized by retailers or loyalty partners could be viable,”
notes John Grund, partner, First Annapolis Consulting.
Although cash back typically is funded by interchange and other fees that are restricted by Durbin, rewards funded by a retailer or brand o er bene ts for all three parties: card providers see in- creased spend; merchants enjoy an uptick in retail tra c and customers; and cardholders get
a discount or other reward.
The e ectiveness of merchant- funded rewards has been proven in the credit card sector, driving $4.7 billion in U.S. credit card purchases in 2014, and projected to increase at a 20 percent annual growth rate through 2020, accord- ing to Mercator Advisory Group.
But for such loyalty programs
to succeed in the GPR space, providers must tailor their ap- proach to their cardholder base. “You need really engaged custom- ers, which is why program man- agers are likely exploring the boundaries of what will drive higher levels of cardholder en- gagement,” Grund says. That means not only partnering with retailers and brands that matter most to their customers, but also communicating with those custom- ers in the most relevant ways. Often, that means mobile.
“Prepaid card customers tend
to be younger, mobile- rst con- sumers who are heavy users
of social media,” says Fred Rolle, chief strategy o cer and president,
bank programs for Cardlytics, which runs loyalty programs for nancial institutions. A recent Cardlytics study found that mobile- rst users check for rewards twice as often as computer-based online users, Rolle notes.
And it’s not just demographics
that make mobile an e ective way to reach prepaid users. The smaller balances typically carried by pre- paid cardholders mean that they’re more likely to carefully watch how much money is on their cards, according to Rolle. Although “low balances can pose an issue, they can also be a strength. These cus- tomers are more digitally engaged because they check their balances often, so prepaid providers can use this engagement to create connections with customers.”
Given the primacy of the mobile channel for prepaid users, provid- ers should focus on making the mobile component of their loyalty programs as robust as possible. Rolle recommends investing in mobile capabilities, including geo- location and real-time noti cations, to create ongoing engagement. It’s also smart to promote your mobile application to customers who are only accessing their accounts through online banking, he adds.
Social media—whether accessed through mobile device or desk- top—also is an important channel for promoting prepaid loyalty. When American Express began o ering card-linked rewards on its Serve prepaid program in 2014,
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