Loyalty & Rewards

Discover Beefs Up Cash Back Redemption Options

Discover was a pioneer of cashback rewards when it began offering them to customers in 1986. Fast-forward 28 years and Discover still wants to make it easier for cardmembers to get that CashBack Bonus — anytime and anywhere.

Discover announced Wednesday (Nov. 19) that is would offer cardmembers the chance to redeem cashback rewards regardless of the balance in four new ways: applying rewards to their statement balance, depositing rewards directly into their bank accounts, purchasing items directly from several online partners, or for making charitable donations. Instead of having expiration dates on rewards, cardmembers who close their accounts or have inactive accounts will automatically be credited for the available Cashback Bonus amount.

“We know our customers want the most rewards possible, but equally important is their ability to use them when they want,” Heather Roche, vice president of rewards at Discover, said in a news release. “We are excited to give our cardmembers more redemption flexibility.”

Since 1986, Discover said its card members have earned more than $12 billion in Cashback Bonuses. In the company’s Q3 2014  earnings call, CEO David Nelms cited Discover’s customer-centric model in delivering products and loyalty rewards as a basis for growth they experienced that quarter. Specifically, he talked about the ability of Discover’s users to log in to its mobile banking with finger print authorization, the mobile-friendly option to quickly activate or freeze accounts, and the addition of Amazon Instant Rewards linked to a user’s Amazon profile when a Discover card is registered on the site. The focus on customer rewards, and ease of products have lead to stronger card volume and card sales volume, he said.

 Nelms also said during the Oct 21 third-quarter earnings call that Discover set an industry standard for rewards programs and he thinks other financial companies are catching up.

“Well I would say generally we are seeing people copy us. I mean people don’t have the loyalty that we have. Historically people were not as focused on rewards as we’ve been,” he said. “So I think when you look at competitors the big switch is they have moved their marketing from a mix of rewards and non-rewards to now almost all rewards and that would erode their margins whereas we have certainly invested more in cash back bonus, you know a number of years ago we were closer to 80 basis points, we’re now a bit north of 100 basis points of rewards cost.”

Discover’s card volume was at $32.1 million for Q3, almost $2 million more when compared with last year’s identical quarter. year over year. In terms of card sales volume, Discover posted $29.61 million, up roughly $1.6 million from last year’s identical quarter. Card sales for the quarter increased 5.8 percent from the prior year. Other revenue drivers for Discover came from a higher portion of customers revolving balances and having lower interest charge-offs. Transaction process revenue brought in 46 million, unchanged from last year. Discount/Interchange revenue for the quarter were $599 million, up $49 million from last year, but after factoring in rewards costs, the net revenue for discount/interchange came in at $295 million, up $19 million from last year.

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