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Loyalty points set to transform fintech in 2022

Tony Zerucha — Tue, 21 Dec 2021 20:14:12 GMT

The new year will see significant progress in the loyalty sector and the continued emergence of an environment where points become a de facto replacement for fiat currency.

That is among the trends being witnessed by Engage People and Wise Marketer Research Services, who recently published Pay With Points: Reducing the Friction in Loyalty Redemption. It includes a B2B survey of 26 United States-based credit card issuers and a B2C study of 200 American consumers.

Engage People is a provider of white-label technology in loyalty with customers, including five of the seven largest Canadian banks. They focus on providing personalized service to members with a critical interest in redemption.

Michael Capizzi, a partner at the Wise Marketer Group.

Wise Marketer is a global publisher of education and research for the loyalty marketing industry.

Michael Capizzi, a partner at the Wise Marketer Group, said there is significant friction in the loyalty redemption space, with users needing to remember passwords, points piling up, and a cumbersome redemption process.

“It’s one of the reasons why people don’t like these programs as much as they thought they would when they first signed up,” Capizzi said.

He explained that the vast volume of unredeemed points is a massive liability for the program sponsor.

The sponsor must carry those points until they are redeemed. Make the redemption process more fluid, and the liability lessens because more points are being cashed in.

Growing awareness

There is also a growing awareness of the use of points as a way to remain connected to the customer so a company can understand their needs and maintain that relationship into the future, Capizzi explained.

“So we want them to redeem, we want them to enjoy the benefit,” Capizzi said. “We want them to say, ‘I got that benefit because I use this card from this bank.’ So anything we can do to increase the accessibility around that benefit is going to be smart.”

Some pay with points systems are limited to use at a single brand, such as a gas station, Capizzi said. Yes, you get the option to pay with those points, but it is limited to one brand and one product. It has limited utility and growth prospects.

Len Covello.

Engage People’s CTO Len Covello said the ultimate aim is a system where the consumer can shop across brands and product sectors both on and offline and pay with points as a valid substitute for fiat.

“And according to the research report, consumers love this idea, but they’re just not very much aware of it because it doesn’t exist a whole lot,” Covello explained.

“It’s a little bit too isolated today. So that’s what drove us to look at this, and we were encouraged, especially by what the consumer said.”

For the past 25 years, the strong consumer preference has been cash, Capizzi said. They know how much it takes to get a buck back — it’s easy to understand and affordable for the issuer. The lesson for every program lies in this — provide value, convenience, and flexibility.

Education important

One certainty is providers need to do a better job of educating merchants because many think they already have a good pay with a points system in place when they do not, mainly because they have no idea of what a system can bring.

Make those benefits widely available and ensure consumers know about them and they will indeed be used, Covello and Capizzi said. In the survey, 12% of respondents said that ability to use rewards as a currency would increase the burn rate of those points.

COVID-19 accelerated this desire to use points like fiat, Covello said. The sudden shift to lockdown left people open to using other payment methods as they were conscious of their savings and feared job loss and life disruption during the early days of the pandemic.

But the desire to have more utility from rewards programs easily predates COVID-19. It provides a personalized experience. That’s why cash is so popular, as were gift cards because consumers struggled to liquidate their points with brands they wanted to spend at.

Covello also said many reputable loyalty programs are growing more comfortable in their brand identities and are working on partnerships that allow people to redeem at other brands.

That association still comes back to where they earned their points. That openness also builds on the desire not to carry the long-term liability.

Loyalty comes from earning AND redeeming

“There has always been this kind of cloudy, ‘we don’t want people to redeem their points’ out there in the industry, but that’s really not the case,” Covello explained.

“Loyalty comes from earning and redeeming, and that cycle happening again and again. So they want that liability off the books not just from a financial perspective, but a lot of burn equates to a good loyalty program. So I think that’s something that’s really not out in the market.”

“But what the consumer said is if my bank gave me a credit card with a pay with points feature on it, I would stay with that bank,” Capizzi said.

“In fact, some said they would consider switching the bank that they had over to the bank that offered that particular feature because it would give them a lot of value, convenience, and flexibility. That’s powerful. This is an industry where usually switching doesn’t happen very often.”

Covello said he is seeing momentum in brands offering a broader pay with points capability, including a large e-commerce brand and several financial institutions. That increased adoption is needed for the concept to take off with consumers.

The more places they see it, the more curious they’ll get and the more utility they will see it has.

This awareness to provide more utility for pay with points has been around for at least five to seven years, Covello estimates.

He began discussing the issue with brands back then as they were concerned about the 50 percent of 200 billion points awarded every year going unredeemed. They saw the promise of points as currency, but few wanted to be the first, and all were concerned about friction impacts at checkout.

Like many changes, it was spurred out of necessity, as consumers looked for new purchasing methods during the lockdown. The industry saw a 600 percent lift in redemption.

Tech handles complexities

Covello said the back-end technology takes care of most of the complexities around redemption, such as point equivalencies. The next step is providing differential redemption rates so different consumers can earn to varying rates at one brand. Promotions offering different points are also differentiators.

Capizzi said the sector is moving to a period where the technology makes the benefits completely transparent.

He believes blockchain (not cryptocurrency, he was clear to say), with a distributed and shared ledger allowing everyone to see what the points are worth. He likens it to landing at a foreign airport and seeing the different exchange rates at the currency counters.

“What’s an American Airlines Advantage Point worth versus an American Express Membership reward point? Those could be on the blockchain very, very easily,” Capizzi said.

“I think what we’re coming to is a period where the benefit earned by the loyalty program member is going to more and more looking like fiat currency. And that means it can be used anywhere, everywhere, all the time, easily, with no friction. And all you need is a piece of technology like Len’s to make sure that they’re keeping score and the technological aspect of the transaction works nice and smooth.”

Much like the old Wheel of Fortune episodes where people had to spend their money in a furniture showroom, gone are the days when people wanted to redeem their points for merchandise. Less than 10% cite it as their preferred option. They can get popular items like television sets cheap enough at many retailers, and it’s expensive to ship items, too.

Points and miles shift to cash

“You’re going to see a future where people are going to want the instant translation of their points and miles to cash, that can be used at any point of sale online or off any merchant, and I think you’re going to see blockchain enable more and more transferences of currency between programs between countries,” Capizzi said.

“This isn’t just a Canadian or an American phenomenon here. The loyalty landscape is actively pursuing ways to make all of these points and miles become real.”

Capizzi said restaurants were slow to embrace rewards programs, but they are catching up. A few years ago, it wasn’t easy to connect the consumer to the transaction but not anymore.

Every chain needs to know their customer, and the ones who did before the pandemic were best positioned to adapt and give the customer what they wanted and how they wanted it.

“Everybody’s woken up,” Capizzi said. “Yes, it tells the consumer that the brand really likes them and wants to do something for him. But it also is a mechanism by which we can understand individual consumer behavior. And he who knows the most about the customer and can take a relevant intervening action, he wins. Hands down.”

Covello said the airlines did a fantastic job of this when the pandemic hit. They leveraged the value of their loyalty programs to raise capital. Air Canada spun theirs off and repurchased it because of its value.

“If it’s run properly, it’s its own entity,” Covello said. “It’s less about an airline having a loyalty program, and it’s almost like a loyalty program has an airline arm associated to it that that’s the way Air Canada’s starting to look at it.”

Massive adoption

Capizzi expects massive adoption through true personalization to smaller and smaller segments defined by the brand and who get personalized messages.

The data is in place, as are the tools. Companies need to begin applying more advanced learning to their databases. Unlike Facebook gleaning data under the table, these programs are 100% opt-in.

“You’re going to see the fruits of that,” Capizzi said. “Loyalty’s been investing in data for many years.”

The post Loyalty points set to transform fintech in 2022 appeared first on LendIt Fintech News.

BNPL’s ‘Venmo moment’ nears

Tony Zerucha — Tue, 21 Dec 2021 19:49:25 GMT

Mobiquity‘s senior advisor for digital banking, Ruby Walia, believes the fintech industry is in the midst of its Venmo moment when it comes to buy now, pay later (BNPL), but one more intricate.

That evolution will continue to be a story to watch as BNPL capability grows in 2022.

Before Venmo, Walia said that folks couldn’t send money digitally to each other. The concept wasn’t on banks’ radar up until then, either.

Mobiquity‘s senior advisor for digital banking, Ruby Walia.

Then came Venmo and an incumbent awakening. Banks knew they were spending money processing checks, but they were also conscious of the importance of every customer touchpoint.

They worried about disintermediation and the entry of a giant such as Apple or Amazon into the sector. Their collective response was Zelle, which is incorporated into many bank mobile apps.

Walia said, fast forward to the 2020s, where Affirm, Klarna, Afterpay, and others have created a capability that has clear resonance in the marketplace. It’s better than checks, which has immediate consequences as BNPL has evolved into term loans and unsecured personal lending.

“So this Venmo moment is not saving the banks money. It costs the banks money, which means it heightens the urgency with which they have to react,” Walia explained. “So the banks are trying to figure out how they play in the space, how they compete. And I think they’re one player in this ecosystem that will do something in this space over the next 24 months.”

Co-branded options possible

Merchants also have a stake, with larger ones having co-branded cards that see them getting a cut of credit card purchases, Walia noted. They lose that when they enable the Klarnas. More prominent merchants may have some leverage and negotiate with the BNPL brands, but most have to accept the fintechs’ terms, even as they cannibalize business from their own branded cards.

The possibility of co-branded BNPL options with the banks issuing credit cards has been raised. Walia expects merchants and banks to work on solutions, whether joint offerings or stand-alone ones, over the next two years. Network processors are also paying attention, and they are working on enabling banks in their networks to run BNPL.

“A payment gateway, for example, enables the experience on a terminal,” Walia said. “And so, in that experience, why couldn’t they enable a BNPL capability and manifest that inside the post? So that’s another constituency that’s looking at BNPL and saying to themselves, ‘well, why wouldn’t we do something like this?’

“And then the wildcard, of course, is Apple. So Apple is quite widely reported as doing something with Coleman and Marcus.”

Apple is one of the few companies that could come in and move the industry, Walia said. There were no negotiations when it introduced ApplePay — take their terms or watch from the outside. That gives them the power to fill a vacuum Walia sees in the US market. While it won’t sap the merchants’ and banks’ desire to enter the space, such a move will indeed resonate.

Cycle will shift

BNPL has become prominent as a vital part of the cycle. What happens when the cycle shifts? Walia said that the extra payment revenue shields BNPL players from higher defaults on a macro level. Consider who signs up for BNPL, he said. Many are less affluent and often with a thinner credit file. They see the ability to make payments over time as an opportunity to buy items they otherwise could not, as many don’t have cards. That is inclusion.

From a credit perspective, it’s less risk than a credit card, which is essentially a never-ending line of credit, Walia said. This is why installment payment that blocks off a section of a user’s credit card space will not have the same penetration — much of the market in the United States do not have credit cards.

Walia said he has a contrarian view on open banking and its effect as the movement heads west from the European Union. He believes it has essentially existed in the United States for five to seven years. While some of the traits related to PSD2 and the use of payment rails that exist in the European Union are not present here, companies like Plaid have created equivalent capabilities, he reasons.

“They’ve actually created equivalent capabilities and maybe even more capabilities,” Walia suggested.

So if being in the process of opening up a Venmo account, as I’m filling out the screens on my phone, I have to provide my bank credentials so that they can access my bank account. Because Venmo doesn’t actually keep your money, they’re acting as a conduit. So Venmo doesn’t actually store my bank credentials.

Market-led approach

“In the US, it’s sort of a market-led approach, rather than a European government-led approach where companies like Plaid will allow third parties to create services that require access to our bank account.”

Looking ahead to 2022, Walia sees plenty of activity in BNPL, beginning with brands partnering with banks to introduce their BNPL capability like the sporting goods merchant Scheels did with FNBO. Walia said he had advised companies considering similar moves.

Look for companies to pursue better-embedded finance experiences, too, Walia said. They want to emulate that seamless Uber experience.

He suggests that real-time payments capability will also progress, which can work in combination with embedded finance due to the strong communications capabilities that connect payables and receivables from different companies.

Walia said that there is still plenty of room for innovation in making everyday financial interactions seamless. For example, look for more intuitive experiences where orders and payments for everyday items like your morning coffee are made for you.

“I see a lot more of that automation and reducing the messiness of having to engage in and handle all of those chores personally,” Walia said.

“For people for whom those kinds of things are part of everyday life, why can’t we automate that?”

The post BNPL’s ‘Venmo moment’ nears appeared first on LendIt Fintech News.

Latam Embraces eCommerce, Digital Payments

John K. White — Tue, 21 Dec 2021 19:09:57 GMT

Andy Obando of Kushki explains that COVID-19, high smartphone penetration and the emergence of neobanks are driving adoption of online commerce in Latin America.

Read the full article at: www.pymnts.com

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BNPL Firm Addi Pushes Value to $700M

John K. White — Tue, 21 Dec 2021 19:09:40 GMT

Latin American buy now, pay later (BNPL) company Addi has generated $200 million of debt and equity, pushing its valuation to more than $700 million.

Read the full article at: www.pymnts.com

The post BNPL Firm Addi Pushes Value to $700M appeared first on LendIt Fintech News.

Credix raises $2.5 million to build DeFi credit marketplace in LatAm

John K. White — Tue, 21 Dec 2021 19:09:00 GMT

Credix raises $2.5 million to build an enterprise-grade DeFi credit marketplace in Latin America. Read on LABS

Read the full article at: labsnews.com

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Here are the LendIt Fintech 2021 Industry Awards finalists

John K. White — Tue, 21 Dec 2021 15:24:02 GMT

On Tuesday, Dec. 21, LendIt fintech announced finalists for the 5th annual LendIt Fintech Industry Awards to celebrate the top fintech influencers and innovators across 14 categories.

Read the full article at: www.lendacademy.com

The post Here are the LendIt Fintech 2021 Industry Awards finalists appeared first on LendIt Fintech News.

Top 10 quotes from LatAm 2021

John K. White — Tue, 21 Dec 2021 15:23:40 GMT

Here are the top 10 quotes, among the many keynotes, panels, and conversations at LendIt fintech LatAm Miami Last week.

Read the full article at: www.lendacademy.com

The post Top 10 quotes from LatAm 2021 appeared first on LendIt Fintech News.

Community Banks To Form New Payments Network To Take On Zelle

John K. White — Tue, 21 Dec 2021 15:23:17 GMT

A consortium of community banks will announce the launch of CHUCK, an open network for real-time payments to integrate and compete with payment services like services like Venmo, CashApp, and Zelle.

Read the full article at: www.forbes.com

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With Fraud Growing, Robinhood Becomes Latest Fintech To Block Customers From Transferring Money From Certain Banks

John K. White — Tue, 21 Dec 2021 15:22:57 GMT

The fast-growing online broker has resorted to the blunt instrument of a banned list–heavily populated with digital banks–to fight fraud.

Read the full article at: www.forbes.com

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JPMorgan to Power Siemens’ Payments on Blockchain

John K. White — Tue, 21 Dec 2021 15:22:39 GMT

J.P. Morgan Chase is working with Siemens to create a blockchain system for the latter company’s payments.

Read the full article at: www.pymnts.com

The post JPMorgan to Power Siemens’ Payments on Blockchain appeared first on LendIt Fintech News.

Zopa Ends P2P, Buys back P2P Loan Portfolio

wiseclerk — Tue, 07 Dec 2021 08:17:40 GMT

British Zopa announced it will close the p2p lending operation for retail investments. After 16 years the pioneer of p2p lending says they deliberated several options for how to close the P2P side of the business in a way that delivers the best outcome for their customers. After careful consideration, they have decided that the […]

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International P2P Lending Volumes November 2021

wiseclerk — Thu, 02 Dec 2021 09:44:36 GMT

The table lists the loan originations of p2p lending services for last month. Mintos* leads ahead of Peerberry* and Fellow Finance*. The total volume for the reported companies in the table adds up to 484 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the […]

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International P2P Lending Volumes October 2021

wiseclerk — Wed, 03 Nov 2021 11:54:18 GMT

The table lists the loan originations of p2p lending services for last month. Mintos* leads ahead of Peerberry* and Fellow Finance*. The total volume for the reported companies in the table adds up to 477 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the […]

The post International P2P Lending Volumes October 2021 first appeared on P2P-Banking.

International P2P Lending Volumes September 2021

wiseclerk — Mon, 04 Oct 2021 12:21:53 GMT

The table lists the loan originations of p2p lending services for last month. Mintos* leads ahead of Peerberry* and Estateguru*. The total volume for the reported companies in the table adds up to 421 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data […]

The post International P2P Lending Volumes September 2021 first appeared on P2P-Banking.

Landex – Easily Invest in European Farmland and Forestland

wiseclerk — Mon, 20 Sep 2021 08:44:52 GMT

Looking to diversify into an asset class with solid security, interesting yield and less volatility? Lots of people have been investing in property for that purpose – however farm land and forest land has been outside the scope of most private investors bar the ultra-rich so far. The newly launched startup Landex* (please use referral […]

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Estateguru raises 5.8M EUR Series A Funding

wiseclerk — Tue, 07 Sep 2021 08:10:51 GMT

EstateGuru*, the pan-European marketplace for short-term, property-backed loans headquartered in Tallinn, Estonia, today announces the successful closure of its Series A funding round, with investments coming from Switzerland, United Kingdom, Czechia, Austria, Germany and Cyprus. The lead investor for the round is TMT Investments Plc, a UK VC, and a public company that was also […]

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International P2P Lending Volumes August 2021

wiseclerk — Thu, 02 Sep 2021 10:44:36 GMT

The table lists the loan originations of p2p lending services for last month. Mintos* leads ahead of Assetz Capital* and Peerberry*. The total volume for the reported companies in the table adds up to 492million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data […]

The post International P2P Lending Volumes August 2021 first appeared on P2P-Banking.

International P2P Lending Volumes July 2021

wiseclerk — Tue, 03 Aug 2021 11:41:47 GMT

The table lists the loan originations of p2p lending services for last month. Mintos* leads ahead of Peerberry* and Assetz Capital*. The total volume for the reported companies in the table adds up to 386 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the […]

The post International P2P Lending Volumes July 2021 first appeared on P2P-Banking.

International P2P Lending Volumes June 2021

wiseclerk — Fri, 02 Jul 2021 12:46:10 GMT

The table lists the loan originations of p2p lending services for last month. Mintos* leads ahead of Peerberry* and Assetz Capital*. The total volume for the reported companies in the table adds up to 428 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the […]

The post International P2P Lending Volumes June 2021 first appeared on P2P-Banking.

International P2P Lending Volumes May 2021

wiseclerk — Wed, 02 Jun 2021 10:22:30 GMT

The table lists the loan originations of p2p lending marketplaces for last month. Mintos* leads ahead of Peerberry* and Assetz Capital*. The total volume for the reported companies in the table adds up to 368 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the […]

The post International P2P Lending Volumes May 2021 first appeared on P2P-Banking.