How Experience-Driven Credit Card Rewards Can Win Gen Z, Millennial Loyalty

Brits love rewards and place loyalty programs among the top factors considered when choosing where to shop, PYMNTS research has shown. And it’s no different in the credit card space, said Tim Chong, co-founder and CEO at U.K. credit card startup Yonder, where customers are looking to make the most of their everyday expenses through points, miles or cashback earned on their purchases.

But maximizing credit card rewards or figuring out how best to spend points accumulated over time can be a challenge, Chong told PYMNTS, causing users to leave significant value on the table over time.

“Quite frankly, the average person doesn’t want to sit down with a spreadsheet trying to calculate the most optimum way to use their American Airlines or British Airways Avios points, which is valuable but very difficult to use unless you know how to play the game,” Chong said in an interview.

It’s a problem the Mastercard-powered Yonder credit card is looking to solve for customers, mainly millennials and Gen Zs who have been wary of credit cards over the years, Chong said, moving beyond the mere transactional aspect of rewards to provide an experiential value.

As such, Yonder offers curated experiences designed around their lifestyle, from dining, social and travel, from rewards partners across London, regularly offering new deals to keep young adventure-seekers engaged. “There are 12 to 15 new experiences that change every month and people get excited about it,” he explained. “They use it to discover new things to do and become a tourist in their own city.”

The rewards program also allows customers to access value through an instant and seamless redemption process which gives them full control over their card and where their money is going, Chong added: “[That means] no clunky website portals, it’s just pairing your card, swiping the app, and that dinner is fully on Yonder.”

And so far, he said city adventurers have embraced the product, spending over £30 million (about $37 million) on Yonder cards over the last 12 months, while taking part in over 10,000 Yonder experiences during that time.

These include customers switching from traditional high-end rewards products offered by American Express or one of the larger U.K. high street banks like Barclays or HSBC, and first-time credit card users who, until Yonder, have not been enthused about traditional card reward offerings.

“We have found that traditional programs are discounts that you don’t necessarily want to talk about,” he noted, “and for us, we believe each Yonder experience should still feel distinctly exciting and something that you want to tell your friends about as well.”

Removing Credit Score Limitations

Yonder’s underwriting process is powered by open banking, a technology which offers a fairer, more accurate view of a customer’s true income and expenditure, Chong said, adding that it particularly comes in handy for expats and immigrants like himself, who has lived in five different countries over the years.

“If you don’t have a thick credit file, we can underwrite you based on who you really are, rather than based on what your credit score says about you,” he explained of how users can apply for Yonder without a U.K. credit score and then build that score by making monthly payments on time.

It’s also about leveraging artificial intelligence (AI) in a way that ensures that credit assessments are fair and free from bias, he said, by keeping their AI models blind to certain demographic data like location, gender and ethnicity that could inadvertently be used to discriminate against certain segments of the market.

“In the U.K. and probably in the U.S., certain socio-demographic groups tend to live in a particular post code, and despite having a great job at Deloitte, they are unfairly discriminated against because of where they live,” he explained of their decision to exclude these data points from their credit assessment.

Beyond Rewards

To continue its growth, the British firm has raised £62.5 million (about $77 million) to expand the credit offering beyond London to another city — which it has yet to select — while also boosting its marketing to continue growing its customer base in London, per a recent PYMNTS report.

And moving forward, Chong said the goal is to move beyond the dichotomy between credit and debit with a Yonder cash flow concept that enables customers to frictionlessly move “between credit and debit modality rather than having to use two separate pieces of plastic or metal.”

They will also continue to power the Yonder experience engine with the data they’re regularly gathering to enrich the product and offer high-quality localized experiences tailored to users’ spending habits, he said.

For instance, an optimized Yonder service will include handpicking 15 local places for a user to explore upon arriving in a particular city, and Yonder going a step further to save users time by making a reservation at one location that they can check out that same day.

As Chong said: “It then becomes far richer than just a rewards product, but a companion to making the most of your city experiences.”

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