Aite Group reveals that U.S. financial institutions will spend US$18.4 billion on rewards by 2010, up from US$10.3 billion in 2006. Program management expenditures will rise from US$0.6 billion in 2006 to US$1.15 billion by 2010.
In an 80-page report, Loyalty & Rewards: A Market Overview, Aite Group discusses the current and future states of rewards in financial services and profiles 20 vendors of loyalty and reward services for financial institutions and merchants. The report is based on interviews with over 50 decision makers at financial institutions, merchants, and technology vendors during the second semester of 2006.
"In 25 years, rewards have arisen from marketing gimmick status to a paramount competitive force in financial services and other industries," says Gwenn BÃ©zard, a Research Director with Aite Group and the author of the report. "The reward industry is shifting from pushing one-size-fits-all rewards to delivering highly personalized rewards through advanced segmentation. Junk goods manufacturers are out, and PhDs are in," adds BÃ©zard.
The report observes that financial institutions and large retailers are expanding their reward programs well beyond the general-purpose and private-label credit card arenas. In the process, stiffening competition among financial institutions and merchants is spurring demand for loyalty consulting, technology and other services. As financial institutions' and merchants' needs become more sophisticated, the vendor marketplace is also becoming more complex for buyers of services and participants to navigate.
Some of the trends discussed in the report include: relationship rewards, merchant-funded rewards, non-airline controlled reward currency networks, airlines' currency sustainability, product innovation, real-time point-of-sale loyalty, one-to-one loyalty, dual cards, and private-label merchant debit/prepaid payment and reward programs.
The vendors profiled in this report include: American Express Incentive Services, Alliance Data's Epsilon, Aeroplan, Affinion Group, Affinity Solutions, Carlson Marketing, Discover Financial, Fidelity National Information Services, First Data Financial Institution Services, First Data Commercial Services, Incomm, LoyaltyLab, MasterCard Worldwide, Moneris (Ernex), Pay By Touch, Peppercoin, Tempo (formerly Debitman), TSYS (ESC Loyalty), Vesdia, and Visa U.S.A.