Merchants Gain an Edge by Combining Payment With Rewards

Photograph courtesy of ZipLine

As retailers try to connect with their customers at every touchpoint, the race is on to build brand loyalty and trust that keep them coming back. Consumers gravitate to those that offer convenient payment and personalized rewards. While there are many options available to merchants looking to gain an edge in such a competitive landscape, one solution has often flown under the radar: private-label debit (PLD).

“Private-label debit programs pair a payment device with the merchant’s loyalty program,” said Sarah Grotta, director of debit and alternative products advisory service for Mercator Advisory Group. “The merchant spends less on interchange fees and builds loyalty by putting their brand front and center at every purchase.”

Grotta recently authored a research brief titled “Driving Loyalty Through Private Label Debit,” which provides an overview of how, when combined with rewards, PLD can create a competitive, self-funded loyalty program.

The rise of private-label debit

Mercator Advisory Group estimates that the PLD market had a process volume of $13.9 billion in the U.S. in 2018, totaling an estimated 279 million transactions. And with a compounding annual growth rate (CAGR) of more than 10%, this market will grow to $28 billion by 2025, Mercator forecasts.

A major factor underlying the rise of PLD programs is the adoption of mobile payment. It’s easier than ever for a consumer to use an app on their phone to receive information from a merchant, complete transactions and track rewards. By coupling the payment method with a communication channel, retailers can better reach their customers.

What are the benefits for the merchant?

Private-label debit cards link the payment mechanism to a loyalty program. "Rewards associated with private-label debit programs increase a merchant’s customer base, increase the number of customer visits and increase overall per-customer spend,” Grotta said. Because retailers are always looking for ways to increase sales, PLD programs are a great tool for accomplishing this.

PLD programs also give merchants better control of the data. The amount of data shared with a merchant for a traditional payment transaction is limited by network rules and regulations. As a result, most merchants have to buy data services from a third-party provider to link cardholder data with transaction data. In contrast, most PLD programs are built with data collection and analysis in mind. This allows merchants to better market their products and create a customized experience for consumers.

Setting up a PLD program

Merchants interested in setting up a private-label debit program should reach out to a PLD and rewards provider, such as ZipLine. Grotto pointed out that the most successful programs are the ones in which the private-label debit product is not thought of just as a payment device. Merchants should view PLD programs as “a means of ongoing promotion, customer recognition and communication,” she said.

If the PLD program is implemented correctly, both consumers and merchants benefit. Merchants will see an uptick in sales and increased brand loyalty, while consumers will get better deals on the products they want.

To learn more about private-label debit combined with rewards, download the Mercator research brief here.

This post is sponsored by ZipLine

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