Consumers rarely think about rewards until they fail to appear at the right moment. That simple reality is forcing banks and card issuers to reconsider whether loyalty programs still fit the way people shop, pay and expect value at checkout.
For years, many rewards programs evolved through modest adjustments to points, miles or cash back formulas. Mladen Vladic, head of product for payment networks at FIS, said the larger opportunity lies elsewhere. The challenge is no longer adding another benefit. It is making rewards feel like a natural part of the payment experience itself.
“We overindexed on making incremental changes without really redefining and reimagining the experience that we are putting out there for consumers and staying relevant,” Vladic told PYMNTS in an interview. “Ease of use and removing the friction are really the guiding principles that every brand, every institution, every issuer should be using.”
The observation reaches beyond loyalty. Checkout has become one of the few places where financial institutions interact directly with consumers every day. If offers arrive too late, redemption requires extra effort or the experience feels disconnected from the purchase itself, the value of the rewards program can fade regardless of how generous it appears on paper.
Vladic said personalization has become central to that equation.
“It is all about the right time, the right message, the right offer to the right audience,” Vladic said, adding that issuers should think about loyalty “as part of the broader overarching payment card strategy.”
Rather than discard existing programs, institutions should modernize them while preserving the features customers already understand, Vladic said. New ideas, whether tied to alternative reward currencies or other digital experiences, should complement proven models rather than replace them overnight.
Partnerships May Matter as Much as Technology
Rewards also depend on what banks can deliver beyond their own balance sheets.
Merchant partnerships have become one way to offer discounts and experiences that traditional rewards catalogs cannot easily match.
“I do believe there is an opportunity, and it is a gap,” Vladic said.
Corporate banking customers, merchant clients and business account holders may provide opportunities to build exclusive offers that competitors cannot duplicate.
That approach reflects a broader shift taking place across payments. Banks no longer compete solely on interchange economics or rewards percentages. They also compete on the quality of the ecosystem surrounding the card, from merchant offers to digital experiences delivered during checkout.
The expansion of those ecosystems creates a governance challenge.
Financial institutions must continue to balance innovation with oversight, particularly as artificial intelligence becomes more deeply woven into payment experiences. Vladic said he expects AI to make these discussions even more important over the next several years, particularly as issuers introduce new customer experiences that rely on automation while remaining subject to regulatory and operational expectations.
Technology, however, is only part of the equation. Vladic cautioned against assuming that every bank should attempt to become a software company.
“There is absolutely necessity to become more technology-enabled to be able to deliver the experiences that customers are expecting of issuers,” Vladic said, but banks “should not lose sight and lose focus on their core business.”
Instead, Vladic said he sees partnerships as the practical path forward. Many financial institutions still operate on complex technology estates. Rather than rebuilding everything internally, banks should identify partners capable of delivering modern customer experiences while allowing the institution to concentrate on lending, deposits and payments.
“I think that now more than ever selecting the right partner that can drive the innovation and layer that innovation on top of many legacy systems … is absolutely the key,” Vladic said.
The philosophy also explains why FinTech firms continue to shape customer expectations. Consumers do not distinguish between experiences created by banks, FinTechs or payment providers. They simply expect checkout to be fast, rewards to be relevant and digital experiences to function without unnecessary steps.
The result is a competition in which scale alone does not guarantee leadership.
Large financial institutions still command substantial budgets and customer bases, but smaller banks have shown a willingness to test new ideas that might once have been considered too speculative. Vladic said he believes that shift has narrowed the traditional innovation gap between community institutions and the industry’s largest players.
“We are seeing many smaller financial institutions that are embracing [a] new way of thinking,” Vladic told PYMNTS.
Watch the full interview with Mladen Vladic to learn more about:
- Why merchant partnerships may become one of the strongest competitive assets for card issuers.
- How community banks are experimenting with new rewards strategies alongside larger institutions.
- Return on investment, not institution size, often determines how quickly payment innovation reaches market.
