DES MOINES, Iowa–Spoiler alert: TMG has released a new white paper, “Yes, Credit Card Rewards Really Are Worth It.” Authored by TMG’s Brian Day, director of digital strategy, in partnership with Karan Bhalla, managing director for data analytics firm and TMG strategic partner IQR Consulting, the paper is the second in a series of white papers TMG is publishing on data-driven.
“This paper, written for financial institution leaders confronting long-held notions about the value of card rewards, is a prime example of how data can dispel myths,” TMG CEO Shazia Manus. “I’m confident you will be inspired as you see how a simple review of cardholder behavior has the power to change minds and empower fresh ideas.”
Day and Bhalla say rewards are table stakes yet too many issuers hold back, discouraged by what Day and Bhalla call age-old misperceptions among rewards naysayers.
The notion that rewards are superfluous generally manifest in two positions: 1) rewards offer little return as compared to the expense; and 2) rewards are most beneficial when cardholders don’t redeem points, the paper opines.
Believing the opposite to be true, Day and Bhalla gathered their teams and set out to analyze the data generated by 12 months of activity from 400,000 credit card accounts issued by TMG clients. The paper includes detailed analyses of credit card rewards’ impact on profitability, cardholder loyalty and issuing financial institutions’ exposure to risk. Expert tips to help issuers turn good credit card programs into great ones are sprinkled throughout.
“One preconceived notion popular in the C-suite is true: Rewards programs require a significant investment. And most leaders in the community financial institution space are aware of that,” the paper states. “The return on that investment, however, can be huge. In fact, the TMG-IQR team’s analysis revealed rewards cards are 79 percent more profitable than their no-frills counterparts.”
Addressing the second commonly held misconception, Day and Bhalla write: “It’s easy to understand how finance professionals view rewards, and especially rewards redemption, as an expensive ‘payment’ to cardholders. Rarely are these individuals presented with the results of a rewards campaign at the same time as the bill from one. This can lead to the compromise of offering rewards while discouraging redemption. As it turns out, however, an unused or latent rewards program is the most expensive rewards program possible, simply because the issuer is not reaping the highest return on its investment.”
For more info and to download the white paper, “Yes, Credit Card Rewards Really Are Worth It,” go to www.tmg.global/credit-card-rewards.