Debit Rewards Platform Broadens Loyalty Rewards Beyond Credit

Tens of millions of U.S. consumers use debit cards — one of the most popular ways to pay — and in doing so, have been largely shut out of the chance to earn rewards for that spending.

David Feuer, chief product officer at Galileo Financial Technologies, told PYMNTS in a recent interview that SoFi’s technology platform – Galileo’s – new initiative in the debit card space will help brands bring those rewards to a widening circle of consumers.

The conversation followed Galileo’s Feb. 20 announcement that the company launched a co-brand debit card program, allowing brands to offer debit users access to rewards typically reserved for credit card holders. The initiative also taps into a massive, untapped market with U.S. debit card spending.

Feuer noted: “$4.3 trillion is obviously a massive market,” and added that, for Galileo, “this is a particularly opportune time to double down on the debit market.”

About 90% of U.S. adults have a debit card, he said, adding, debit is a preferred payment method for many people, even if they also use credit. For the 45 million adults with little to no credit history, debit is also an essential payment method.

That segment of the population, Feuer said, doesn’t typically have the opportunity to receive rewards for their spending or to participate in loyalty programs. The co-brand debit program will expand financial inclusion as brands offer their debit card users loyalty perks and rewards usually reserved for credit cards.

The move initially focuses on the hospitality and travel sectors, letting airlines, hotels and other brands boost loyalty, spending and customer engagement by offering co-branded rewards debit card, but now is available to brands in any industry.

Addressing the Complexities

For brands, the opportunity is significant. The loyalty market is projected to reach $44.7 billion by 2029, and Galileo is streamlining the time to market for co-branded debit rewards programs. Typically, it can take a year or more to launch a co-branded card. The complexities are especially apparent when launching a debit card versus a credit card, Feuer said.

In the case of the latter, issuers aggregate the monthly charges and send their customers a bill — and the cardholders then have the option to pay interest on the loan instead of the balance, if they so choose. In the case of a debit card program, those debit cards are tied to bank accounts, which have their own set of regulatory and compliance requirements.

“What we’ve done is consolidated the issuing piece, the processing piece and the program management piece so that brands don’t have to juggle all these different vendors,” Feuer said.

Galileo’s financial services hub cuts that timeline to launch program down to months by providing brands access to a robust bench of sponsor bank partners, intelligent transaction routing, and Cyberbank Digital — its platform born from the Technisys acquisition — which enhances digital banking experiences and strengthens risk management.

“We can build the bank apps off of the platform very quickly for our brand partners and customers,” he said, as those clients create loyalty programs. Galileo leverages its expertise and actively collaborates with clients to shape unique offerings, regardless of the sector.

Feuer noted that market demand, particularly from younger generations, has been driving the need for loyalty debit cards in the travel and hospitality sectors. Usage was there, but the industry hadn’t responded to those verticals. He pointed to reports showing that millennials use private-label cards at higher rates than Gen Z, indicating an access gap to those loyalty programs. Galileo saw that opportunity and developed solutions to better capture the demand.

The Durbin interchange caps of 2010 effectively limited the economics of those programs, Feuer said, but Galileo can leverage its scale, not just as a processor, but as a financial services hub that includes its bank partnerships and make these programs viable again.

“We want to capture it,” he said of the travel sector, “and the truth is, this is available for any industry. We see broad-based demand across multiple sectors, and particularly retail. … What we’re going to be able to do is help consumers get set up to start to accrue those points and then give them the power to use those points however they want. That’s the demand that we’re seeing in the market.”