Card-linked offers: what are they & why do businesses need them?

Do you know why brands continue to invest in the age-old loyalty strategy? Annex Cloud’s report highlights that 84% of consumers are more likely to stick with a brand which offers a reward program. Moreover, 66% of customers have acknowledged that they change their spending behavior to earn rewards. And, it is a known fact that retained customers drive the profitability for the company.

The strategy of reward programs may be decades old, but its implementation is continuing to evolve to attract newer generations and strive in the cut-throat competitive marketplace. As the mode of purchase shifted from offline to online, we progressed from the earn and burn reward program where customers earn points and redeem them to the affiliate model where each sale is driven by clicks on the promotional ad hosted on the affiliates’ website. There has been an advancement from promo codes and coupons to the cashback model. Many FinTech firms like PayPal and Paytm have implemented a cashback model, where they provide cash back for transactions made through their platform. A recent strategy, card-linked offers, is gaining popularity.

In this article, let’s understand what card-linked offers are and why businesses need them.

Understanding card-linked offers

To reduce the physical load of carrying vouchers to a store and the cognitive load of remembering the coupon code, card-linking provides an effortless mechanism to avail rewards while you check out. Here, once a user has a registered card, their transactions are tracked for associated merchants and then they are notified about cashbacks for qualifying purchases. Simply, card-linked offers are offers that customers receive automatically after linking their cards with merchants or loyalty programs like those of Groupon, American Express etc.

This effortless reward system has four major steps:

  1. Registration: The brands enroll customers to their loyalty program with registration of everyday debit or credit cards via APIs, web services, QR codes or any other technical infrastructure. 
  2. Discovering offers: The customer browses offers in the app they’re using.
  3. Making transactions: With the registered card, the customer will make a purchase with the promoted/associated retailers.
  4. Receiving rewards: With no efforts or redemption process, the customer automatically receives rewards upon their purchase.

A lucrative reward program technique

While card linking simplifies the reward redemption system for the user, it has many advantages for the associated merchants. This strategy promotes member interaction, keeps the reward system transparent and simple without the requirement for complex integrations. It offers flexibility to the merchants to shape their reward programs as well as rich data for analyzing user behavior and tweaking their program for maximizing customer satisfaction and profitability. The rewards can be diversified and personalized based on user location and transaction history. 

Card-linked offers are fast growing as they come with no upfront costs. Merchants’ expenses on advertisements are reduced significantly as they only have to pay a small fee when someone makes a purchase. Therefore, the payment card gets translated into a loyalty card, saving enormous costs of marketing, reward card production and replacement. 

The value of card-linked offers is estimated to be $10 billion. The top merchant categories adopting this strategy is dining (20.7%), followed by clothing (15.9%) and department stores (15.9%). A recent growth has been observed for grocery (11.6%) and travel services (9.1%). A survey by Digital Commerce Alliance showed card-linked offers as the second most preferred marketing channel with a growth in advertising budget allocation from 37.8% in 2019 to 64.3% in 2020. The acceptance of this technology among the users is demonstrated in this survey as 41.2% of the respondents chose card-linked offers over other categories.

Card-linked offers need a strong technical infrastructure for not only integrating merchant funded offers with a seamless redemption system, but also a mechanism for tracking user transactions. We will share more about success stories and pillars of an effective card-linked reward program in our next blog.

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