March 21, 2024 ☼ Payments
Have you ever felt that the reward points offered by your card issuer don’t reflect your consumption habits? Could there be a way to make these rewards more ‘contextual’ and encourage you to shop at local businesses?
Say a card issuer triangulates where you live based on your payment history. It wouldn’t need your mobile GPS data but could analyze ‘physical’ transactions you typically make near your home. By examining purchases like groceries, gas, or medicine, the issuer can leverage merchant zip codes to estimate your living area.
Next, the issuer analyzes your transaction history, predicting the Merchant Category Codes (MCCs) you favor for frequent or high-value purchases.
For each identified zip code, the issuer compiles a list of top merchants by MCCs, chosen based on criteria like transaction volume or low chargeback risk.
Using data about your preferred MCCs and top MCCs in the area, the issuer estimates which merchants you might transact with given an increase in rewards points. The issuer introduces a rewards offer, notifies you through your preferred channel, and specifies a duration for the offer, encouraging transactions with local merchants.
From a cardholder’s perspective, this system offers several benefits. Rather than generic rewards, users receive personalized offers based on their shopping habits and location, potentially boosting satisfaction.
Merchants, especially local businesses, can increase traffic and sales by joining such a contextual rewards program. Personalized incentives help attract and retain customers.
Issuers can use this solution to improve user loyalty and drive transactions toward preferred merchants. This also allows merchants to advertise themselves. Data insights help refine rewards strategies, differentiate programs, and boost interchange revenue.
In conclusion, this solution proposes making reward programs more contextual and personal. It benefits cardholders, merchants, and issuers by enhancing rewards programs and aligning incentives with individual shopping behaviors.