Using Card-Linked Rewards for an Edge

By Monica C. Meinert

Everybody loves to be rewarded.

Whether it’s a free cup of joe at a local coffee shop or a special sales discount at a favorite store, getting a little “thank you” from a business can go a long way in boosting customer satisfaction and loyalty.

Bank customers are no different—in a recent survey by CGI, consumers ranked the desire to be rewarded for their business as their “top want” from their financial institution, and 72% said they would consider switching banks if they found another institution offering better rewards. And yet, just over a third of consumers say they are currently satisfied with what their bank is doing in this area.

For banks struggling to attract and retain millennial customers aged 18-35, that statistic should be a particular wake-up call—in a 2015 Accenture study, millennials identified high fees and poor loyalty programs as the top reasons they are dissatisfied with their banks. Combine that with the fact that millennials switch their bank at nearly double the average of other generations, and it makes a compelling case for offering a rewards program.

Cashing in on customer engagement.

In 2013, Macatawa Bank—a $1.7 billion institution with 26 branches in western Michigan—saw an opportunity to use debit rewards to grow customer loyalty, increase card usage and deepen existing customer relationships. As some of the bank’s national and regional competitors backed away from their rewards offerings after the financial crisis, Macatawa started up a program through UChoose Rewards, the card-linked platform offered by Fiserv—ABA’s endorsed core processing service provider.

“It seemed a little counterintuitive to what was happening in the marketplace at the time,” admits Jill Walcott, the bank’s chief retail banking officer, but “we thought this may be a differentiator for us. We put in a program that rewarded customers for their debit card activity, but also gave us the flexibility to reward them with points when they did additional business with us, like a loan or deposit product.”

Unlike most programs which allow customers to redeem points for gift cards or merchandise, Macatawa’s program gives customers the option of redeeming their points for cold, hard cash. “We wanted to make sure we were offering something the customer wanted,” Walcott adds.

The bank saw results quickly—just over a year after the program launched, 21% of eligible cardholders had registered and today, the bank has over 30% enrolled. Using the detailed metrics provided by Fiserv each month, Walcott says the bank was able to track card usage among enrolled consumers compared to non-rewards customers, and noticed consistent increases in both the average transaction value and the average number of transactions. “Usage increased 54% six months after an existing cardholder enrolled. Their spend increased by 59% and our interchange income per month for those cardholders increased by 70%.”

The sustained improvements in card usage helped assure Macatawa’s executive team that the program had been well worth the investment. “What a lot of banks struggle with when considering rewards programs is ‘are we going to just pay more for the same thing?’ Are we just going to reward people for activity that they’re already doing with us,” Walcott explains. “We had to make a little bit of a leap of faith that by rewarding our customers and really putting a good program together, we would actually reap additional business and additional customer satisfaction and retention.”

Creating a buzz about local business.

For Franklin Savings Bank—a $425 million mutual in Franklin, N.H.—debit card rewards helped the bank not only engage customers, but local businesses. The bank partnered with BuzzPoints, an Austin, Texas-based company whose platform allows customers to earn points every time they swipe their card, and double points when they patronize a local business. Once enough points are accrued, the customer can redeem those points for gift certificates to local or national retailers, or have their points donated to charity. Local businesses that sign up as “Preferred Local Merchants” not only serve as redemption centers, they also receive access to a special marketing program that allows customized promotions to be offered to all BuzzPoints members.


“What really turned us onto this program was the ‘local’ feature, supporting local businesses,” says Ron Magoon, Franklin Savings Bank’s president and COO. “Getting local merchants involved, getting them a turnkey, low-cost marketing tool while at the same time driving local business to them—we saw it as a win on both sides, and that’s the way it’s been received in the community.”

Magoon said the bank recognized the strategic value of the program right away, and really took ownership of the implementation and ongoing promotion—and it’s this ownership that he credits with the program’s success. “We saw it as a way to set ourselves apart in our marketplace and we said we’re going to go out, invest our time and the hours of our staff to call on existing businesses.”

Since the program’s launch in July 2015, Franklin Savings Bank has recruited 61 local merchants to join. As an extra incentive to encourage businesses to sign on, the bank offered subsidies to help offset the cost. It’s been money well spent, Magoon adds. “We can see people’s spending habits change as a result of this program, and we’ve seen the spend at local merchants going up. So we know that this program is changing buyer behavior.”

Today, almost 40% of the bank’s checking customers are enrolled in BuzzPoints. And of the redemptions that were made in the program’s first year, 95% have been for gift cards to local business. “That tells you right there that the program is having the intended effect,” Magoon says.

BuzzPoints has been so successful, in fact, that Franklin Savings Bank hired a new full-time employee to coordinate promotions, vendor outreach and marketing. “You have to look at this as a long term differentiator for yourself and your clients,” Magoon advises. “When you start thinking about something like this as a long time prospect, you’re more willing to devote the time and energy and resources it takes to have it be successful.”

Delivering serendipitous delight.

As customers rely increasingly on mobile devices to meet their banking needs, Ann Arbor State Bank—a $270 million institution—turned to a tech solution to help them connect with customers at crucial moments and keep their plastic top-of-wallet.

Using a platform developed by Larky—a Michigan-based startup that had its debut at Finovate in 2014—the bank launched its “Local Loyalty” program, which delivers “serendipitous delight” to customers in the form of discounts to local merchants when they pay with their debit cards. Larky’s mobile app uses a unique geographic targeting feature to push notifications to customers whenever they’re near a discount, incenting them to shop local and pay with their debit cards.

“Geocoding works extremely well,” says the bank’s president and CEO, Peter Schork. “When you’re driving down the street and you pass a car dealership or restaurant, [the app]will buzz you and alert you that you have a discount. It really is effective.” The app can also be programmed to alert customers of things like mortgage and auto rates when they visit a realtor’s office or a local car dealership, keeping the bank top-of-mind at crucial financial moments.

As an institution with a large number of commercial banking clients—particularly restaurants—Schork says Larky was an especially good fit for Ann Arbor State Bank. “It’s a two-edged sword,” he says. “One, we have more debit card usage, interchange fees and people banking with us more, but also, we are a major player in the Ann Arbor downtown restaurant world, so we’re very interested in helping our clients get additional business.”

The bank rolled the program out in early 2016, and Schork says his branch and commercial lending staff were instrumental in spreading the word. “We have used Larky as an opportunity to meet with our business customers and say ‘we have something to offer you that’s in essence a no-cost solution,’” he says. “We have visited a hundred of our clients and many have signed up and give discounts on products.” He adds that in addition to encouraging adoption among current debit card users, the bank has also begun targeting non-checking customers—mortgage customers, in particular—using “Local Loyalty” as an added incentive for them to deepen their relationship with Ann Arbor State Bank.

And the feedback—from customers and businesses alike—has been overwhelmingly positive. “We have definitely seen more debit card usage,” Schork says. “We have people using their debit cards more—not just at these places, but in general.”

The future of banking presents many unknowns. But if there’s one thing that’s a sure bet, it’s that banks will continue to compete more aggressively than ever for market share and depth of wallet. And as these banks—and many others—have learned, enhancing the customer experience through debit card rewards can help give a competitive edge.


Monica C. Meinert is assistant editor of the ABA Banking Journal, where this article originally appeared.