What if the banking industry could increase the liquidity, fungibility,
and value of reward points, while also significantly improving operating
efficiency for the bank and reducing barriers to participation for
merchants?
Higher liquidity would involve real-time points accrual and redemption,
allowing customers to spend rewards points at any card-accepting merchant.
Higher fungibility would allow customers to aggregate reward points from
different issuers into a single pool, enabling faster accumulation of points for
higher-value goods and services.
The result would be a higher-value currency that more closely approaches
cash-back rewards, but with important advantages relative to cash:
1. Earned reward points would incentivize incremental spending on future
purchases rather than being applied to past balances.
2. Unrestricted spending using reward points would provide valuable
information as to what customers value most, i.e. what they consider
“rewards” versus everyday transactional spending.
3. Real-time analytics based on patterns of real-time spending and
rewards fulfillment would enable new kinds of rewards, special offers,
and personalized product suggestions.
Benefits for card issuers:
n Lower operating costs by
switching from third-party
systems to a shared ecosystem
n Real-time data eliminates the need
for reconciliation
n Better utilization of Reward point
balances, leading to healthier
balance sheets
n Simpler operational processes for
points redemption
Benefits for card issuers and
payment processors:
n Higher operating efficiency
from real-time settlement
n Audit trail for a complete
history of transactions
n Better information from realtime
view of transactions
and balances