October 2, 2022

Bucks: A New Type of Reward With Your Debit Card

Many banks are canceling or scaling back debit-card rewards programs, due to a pending cap on the swipe fees that bigger banks can charge merchants for processing transactions. USAA Bank, for instance, is canceling its debit rewards program as of Sept. 1.

But there’s a new kind of debit rewards option cropping up at some banks, this time, offering customer discounts that are funded by retailers eager for business, rather than by the banks themselves.

So-called “merchant debit rewards” are programs in which retailers team up with banks, with the help of an outside contractor, to offer discounts to debit card users. But instead of getting rewards points or cash back from their bank, card-holders get discounts funded by the store selling the goods. The merchants pay a small fee to the bank for sending the customer their way, so it actually can make some money for the banks.

That’s why you may soon be hearing about the program from your bank, says Alex Matjanec, co-founder of MyBankTracker.com, a bank comparison site.

There hasn’t been a huge rush yet by banks to offer the programs. They may have been waiting to see what happened regarding the swipe-fee caps, he says. But a few online banks and regional financial institutions already offer the programs, including Ally BankBeneficial Bank and the South Carolina Federal Credit Union.

The systems operate through the banks’ online banking sites via third-party servicers, like Billshrink, for instance, which calls its offering Statement Rewards, and Cardlytics. Bank customers receive the offers via their online bank account.

Here’s an example of how it works: Say I like to shop at Macy’s, using my debit card. So Macy’s offers me a deal of $10 off my next purchase, if I spend $50. I shop at Macy’s and later get the $10 deposited into my account; Macy’s pays my bank a percent of the total sale as a fee, and the bank pays a portion of that fee to the company that manages the service. (In some options, the discount is automatically applied at the point of purchase; it depends on how the bank wants the service to work).

Details of the systems vary, but in general, to get your offers, you log on to your online banking account and click on an “offers” tab, or something similar. If you see a deal you like, you click to activate it, shop at that merchant, and the discount is applied the next time you shop at that store.

In addition to department stores, other merchants testing the service include Subway, Apple’s iTunes, Amazon and Sports Authority, says Mr. Matjanec. If consumers use the deals carefully, he said, they can eke a bit more benefit out of their checking accounts, beyond the paltry interest they may be earning.

In addition to rewarding existing customers, the rewards also can be used as a way to attract new customers. For example, if I frequent Starbucks, a local coffee shop may offer me a discount to try their brew instead.

The question is whether customers want a service that, essentially, brings advertising to their bank statement. And the  programs may make some consumers wary, because it involves making offers based on their purchase patterns. But Schwark Satyavolu, chief executive of BillShrink, says no information is revealed to outside vendors. “Our platform is built so no information is exchanged,” he said. “Merchants cannot see who bought what.”

Billshrink’s research shows a majority of consumers are interested in the service and would even switch banks to gain access to it, he said. He says many more banks will be rolling out the program in coming months.

The marketing consultant Adam Hanft, though, says he thinks the new rewards programs may be a hard sell. Consumers watching their pennies during tight times may not be eager to see pitches to spend more, even if it’s couched as a discount at stores they already frequent, while looking at their checking account balance. “I think it’s a gimmick,” he said.

Would you use a merchant reward service, if your bank offered it?

Article source: http://feeds.nytimes.com/click.phdo?i=7509c6ab8c29fd1b1a76e0c1f2e24ef5

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