The idea of attracting customers and building loyalty through the use of rewards is documented as far back as 1793. An enterprising business owner identified only as “a merchant in Sudbury, New Hampshire” gave out copper tokens with each purchase, which customers could collect and redeem for merchandise at his store.1The idea apparently caught on, spurring other stores to offer their own tokens.2

Trading stamps officially replaced metal tokens in 1891, and in 1896, S&H Green Stamps became the first independent loyalty business, bringing its programs to multiple merchants.

But our modern concept of the loyalty program began with frequent flyer programs in the early 1980s. The programs aimed at keeping travelers coming back to the same airline were the first to introduce miles and points as a form of loyalty currency.

Today’s bank loyalty programs operate using that same framework. But the programs haven’t turned out to be quite as profitable a venture for banks as they have been for hospitality and retail businesses, for a couple of reasons:

  • Loyalty program fatigue. Consumers have more programs to choose from and, as a result, have become more demanding of the programs. Colloquy reports that, on average, consumers only actively participate in 46% of the programs they sign up for.3
  • Banks have fewer opportunities to build relationships with their customers. It’s in the one-on-one where banks can build relationships and, by extension, their brands. But now that most banking activities are transactional, taking place online or via smartphone, the brand has become removed from the experience. While customers may have a smooth experience, they aren’t necessarily associating it with the bank providing it to them.4
  • Rewards aren’t built into a bank’s business model. Airlines own the seats they give away in exchange for miles, hotels own the rooms and retailers own the merchandise. Banks, on the other hand, don’t already own the rewards they will offer as part of a loyalty program. Free travel and bonus goodies from a favorite store are appealing offers to consumers, and banks have to offer rewards that can compete.5

What gets consumers excited about a loyalty program?

The 2017 Colloquy Loyalty Census asked survey participants what drives them to participate in a loyalty program. Top answers included:

  • “I can get to the reward I want within a reasonable amount of time.”
  • “The program gives me ways to earn rewards faster.”
  • “The program makes me feel like a valued member.”
  • “The rewards are worth the number of miles or points needed to get them.”
  • “The program gives me great discounts.”

And when asked why they stop participating in a program, the top two answers given were:

  • “It took too long to earn points or miles for rewards.” (57%)
  • “The loyalty program did not provide rewards/offers I was interested in.” (53%)

The message from consumers is clear: I want rewards that are appealing, and I don’t want to have to jump through hoops to get them.

Consumers today know the score—they understand that loyalty programs are about gathering data as much as they are about generating repeat business. They’re okay with sharing their data with you, as long as they get something out of it. 6

In a survey by consulting firm CGI, consumers were asked, “What are the top five ways your bank could improve your lifestyle?” The number-one response, given by 81% of respondents, was, “Reward me for my business.”7

Give your customers rewards they want.

The easiest way to guarantee that all your program members have access to rewards they find appealing is to offer a greater selection of rewards. Take a look at your current offering, and make sure you’ve got every type of reward represented. A few options you should have include:

Open-loop prepaid card

This is the most flexible type of reward card available, as its bearer can use it anywhere the issuing card network is accepted. Including an open-loop card in your rewards catalog enables you to give your members exactly what they want.

Digital open-loop prepaid card

Like the above, but with the added benefit of speed, as it can be issued, received and redeemed faster than a physical card. One specific type of digital open-loop card, the Mastercard® Prepaid Card, can be provisioned to mobile wallets. It’s a first-of-its-kind option that’s a Hawk Incentives exclusive.

Prepaid card with Five BackTM option

This card offers users a bonus of five percent of the total purchase back in the form of credit applied to the card when it’s used for goods or services at a participating merchant location (signature-based purchases only; for more details on this patented option from Hawk Incentives, see Terms and Conditions.

By providing a rewards catalog loaded with different reward and delivery options, you better your odds of having something that every member will want and view as worth their loyalty.

Include gift and prepaid cards in lower denominations.

To address consumers’ number-one complaint about loyalty programs—that it takes too long to earn a reward—include a wide selection of rewards at lower denominations. When it’s possible to earn a $20 gift card in a month, your member can see the value of their participation. Your program stays top of mind for this participant, and helps to counter some of the “strictly transactional” nature of their relationship with your brand.

Embrace digital technology for your rewards and loyalty programs.

While the Colloquy survey shows that financial institutions are warming up to the idea of investing in digital technology, a study by Temenos shows that it’s still a low priority. When asked for their top three IT investment priorities for 2018, only 8% of respondents listed third-party API development (though this number is an improvement over the previous year’s 1%).8 However, data and analytics efforts maintained its position in the top three, as banks focus on efforts to consolidate heavily siloed customer data. This stat suggests that banks may have just put off the API development while they deal with larger back-end system issues.

Adoption of digital technology can help deliver the additional customer loyalty push that banks have been chasing. While it’s tempting—and in some cases, perhaps, necessary—to address legacy system issues, that task shouldn’t come at the expense of API development. Working with outside developers to provide API-driven solutions can give banks the ability to quickly incorporate the convenience features, personalized experience and immediate rewards consumers want,and at a much lower cost than an entire system overhaul.

“Tech-savvy consumers are asking for financial service offerings that are faster, less formal, more personalized, easily accessible and cheap.” –Evry10


Download “The Indispensable Guide to Loyalty Rewards” for insights on how to match the right reward to drive long-term relationships with your audience.


1. Original source: Nagle, James J, “Trading Stamps: A Long History.” The New York Times, December 25, 1971.

2. Lonto, Jeff R. “The Trading Stamp Story (or: When Trading Stamps Stuck}.” Studio Z-7, 2013.

3. ”2017 Colloquy Loyalty Census: An In-depth Analysis of Where Loyalty Is Now . . . and Where It’s Headed.” May 2017.

4 & 5.  Tynan, Kevin, “Carrots or Sticky Services? How to Keep Customers From Jumping Ship.” The Financial Brand, December 15, 2016.

6. “Persuasive Perks: The World of Loyalty Programs.” CBC Radio,  July 26, 2016.

7. “Understanding Financial Consumers in the Digital Era.” CGI/Research Now survey, 2014.

8. “Searching for profitability in a fast-changing world: The 10th annual Temenos survey of challenges, priorities and trends in the financial services sector.” Temenos and Accenture, 2018.

9. McIntyre, Alan, “How Banks Can Win With Rewards Programs by Using APIs.” Forbes, August 3, 2017.

10. Hellström, Viola, “PSD2—the Directive That Will Change Banking As We Know It.” Evry, 2017.