Artboard 4
Embedded Finance

Creating Next Generation Rewards Programs With Embedded Finance

How To Beat The Inflationary Storm with Next-Generation Rewards Programs

Loyalty programs are designed to keep customers coming back — and buying more. But with rising costs, consumers are looking for new ways to combat inflation, notably through the redemption of reward program points. While good for consumers, this poses an ongoing challenge for businesses: Higher cost with lower revenue.

Last month, Dunkin Donuts faced a blowback when the company peeled back its rewards program and devalued its points. In addition, Chili’s president Kevin Hochman told analysts in August the company would rein in its free food giveaways and reboot the My Chili’s Rewards program to “make that loyalty program more traffic driving, but less costly.”

Beyond rising costs, seemingly everyone — every retail storefront, online brand, gas station, grocery store, and service provider — has a loyalty and rewards program. Traditional loyalty programs (e.g., points for nominal benefits) are now table stakes, creating a challenge for brands that want a truly differentiated loyalty program that drives sales growth.

As brands look to innovate their loyalty programs and create more profound, specialized rewards for customers, the next generation of loyalty programs has arrived.


How It Works

A next-generation loyalty program begins with a brand offering its customers an open-loop branded debit card program. Branded debit cards enable shoppers to load money into an account provided exclusively by a brand. These cards allow customers to take advantage of unique benefits — like saving for their next big purchase, accessing additional coupons for recurring purchases, or cash back rewards that lower their bill.

Because the card is "open-loop," shoppers can use it at various merchants and locations. New revenue streams are created whenever the cards are used, and allows brands to access unprecedented first-party customer spending data. This gives brands a real-time look at their consumers' preferences and buying habits.


New Revenue and Customer Spend Data

With this powerful combination now accessible to all brands, some brands are creating hobby or category-centric loyalty programs to drive usage and data collection in their category. For example, a hotel chain could launch a travel-centric loyalty program and card, providing extra benefits for their sponsor brands or partners. Customers could automatically contribute money from every paycheck right into the account to save up for their next big trip. Or, if customers begin to use the account as a primary bank account, their everyday spending could earn cash-back toward their next hotel stay or for a splurge on a room upgrade. 

Convenience or grocery stores could launch a loyalty program that provides cash-back on all grocery purchases — perhaps 3% back on any grocery store purchase and 6% on purchases in your store, creating rewards tiers to drive purchases in your store. 

Wondering how you can fund cash back at deeper levels, including on purchases made outside your own brand? 

Next-generation loyalty programs create a new revenue stream from the interchange fees collected every time branded cards are used. This new revenue stream can go right to the bottom line, but many brands apply it directly to their loyalty program to make their program benefits stand out from the competition. 

New revenue generated from branded cards, paired with data about where customers are shopping, is a powerful combination that paves the way for delivering a more rewarding and personalized loyalty program. 

Imagine customers logging into your app to see their cash-back summary across their entire budget and spending. With this type of loyalty program, brands now can see, for example, that 20% of your customer base may shop the competition before coming to you. To combat this, your brand could launch push notifications and coupons directly to that portion of your customer base to encourage them to skip their usual trip to the competition and shop with your brand instead. 

Finally, brands can turn on more personalized and desirable rewards (i.e., more direct monetary value to your customer) than competitors.


Brands are now looking to capitalize on the benefits of offering additional rewards programs, including financial instruments. This no longer the domain of the traditional bank.

By 2023, 73% of global consumer payments will be processed by non-financial institutions.

- International Data Corporation (IDC)

Consumers are eager for new types of loyalty programs and financial services offered by their favorite brands. 

In a survey by Alviere with Qualtrics in 2022, 72% of respondents say they are more likely to be loyal to a brand that offers a more personalized experience with deeper rewards and benefits. 

And 64% of those respondents say they would be likely to use financial services from brands that offered personalized rewards and better customer experiences (Alviere & Qualtrics consumer survey, Spring 2022).


Beyond Customer Loyalty: The Value of Embedded Finance Technology

Deeper, more personalized, and truly differentiated loyalty programs are just part of what embedded financial services offer.

Embedded finance technology creates new channels of revenue, and offers visibility into customer spending patterns that can innovate how you design your customer experiences, product offerings, and more.

Before searching and getting the wrong answers from Google, get our complete handbook on embedded finance.

Whether you're looking for new ways to innovate and drive new revenue, focused on loyalty programs, interested in improving customer experiences, or just learning more about embedded finance technology, this handbook is for you.

You’ll learn:

  • How innovation is driving embedded finance
  • The shift in consumer spending habits
  • What to offer in your financial services program
  • Launching a new financial product to your customers


Download The Embedded Finance Handbook Now

Put the Power of Embedded Finance In The Hands of Your Brand Get The Handbook

Written by Alviere