By Chanel Smith EMEA Editor (@PYMNTS_EMEA)
Are loyalty card programs a relic of the past, or are they just due for a digital upgrade?
Loyalty cards supposedly provide a win-win service, since they provide customers with special offers and clue in retailers to tons of insight on shopping behavior. However, a new report from WorldPay shows that UK loyalty card usage is dropping and consumers are starting to question the value of such programs. What will it take to convince shoppers that loyalty cards are still useful?
The study reports that a whopping 8 million UK consumers said they use their loyalty cards less than they did a year prior, and explained it was because they were losing patience with such programs. One-in-three shoppers revealed they don't believe the cards have any value, and 30 percent even said they frequently forget their loyalty cards at home before leaving for the store.
Additionally, 75 percent of participants said they would prefer to have loyalty solutions linked to their bankcards to help make sure they are rewarded for purchases. Twenty-one percent said they would like to have loyalty schemes integrated on a smartphone payment app.
Lately, loyalty cards are getting a bad rep. According to The Telegraph, in the last few months various British retailers and grocers have been accused of pushing boundaries with customer privacy. Supermarkets primarily use loyalty programs to obtain valuable consumer data, which helps companies target customers with personalized offers and ultimately increase the likelihood of sales. In exchange for shopping information, retailers provide shoppers with vouchers, promotions, rewards and more. Yet consumers in the UK are beginning to lose sight of the exchanged value.
Ron Kalifa, deputy chairman at WorldPay, said, "our research shows that shoppers are starting to lose patience with loyalty schemes as expectations of the ease and speed of payments increase."
He touched on the future caps on European card payments, and further explained, "with new legislation on interchange fees reducing the income that card issuers have traditionally received, there’s a clear commercial incentive for them to maximize the success of their promotions and engage retailers directly, rather than rely on cashback discounts."
In addition to UK consumers’ disdain for loyalty programs, the research also shows that many are not fond of paper receipts. Consumers are greatly in favor of digital integration during the shopping experience, which means paper receipts are expected to be reduced. Younger consumers vehemently agree, as the report shows that 26 percent of 16-24-year-old consumers want to receive vouchers on their mobile phones, and 21 percent said they want to access such vouchers through a mobile application. Conversely, over half of older consumers aged 25-64 said they still prefer paper-based receipts upon purchase.
Still, merchants must acknowledge that digital integration will be necessary to convince consumers to change their minds.
"Loyalty cards provide vital business intelligence for retailers, and valuable savings for shoppers, so it's critical that they’re incorporated into the way consumers pay today," stated Kalifia.