Outdated Credit Card Rewards Annoy Gen Z

Credit card providers who don’t renew their rewards programs risk losing customers, warns a study of 3,233 U.S. consumers conducted by PYMNTS and payment processing company i2c.

Reward points are widely popular, but who doesn’t love free rewards? – Consumers want offers that are easy to use and personally relevant. Younger consumers want a fully digital experience that can be accessed via email or paper coupons as well as their phones.

“Physical mail, once the standard method of such communication, is now declining in preference across all age groups,” the study found. Keep it simple and make it fast. Surveys have shown that consumers are frustrated when rewards are not clearly explained or when they claim they are slow to receive rewards. This may explain why simple cashback rewards account for almost half of all claims.

“Rewards programs with long redemption processes or without personalized offers drive consumers away,” the study concluded. About 31% of consumers said the long repayment process was a major issue. The same percentage said they had experienced friction using rewards in the past 90 days, with 23% reporting confusing technology and 23% citing a lengthy redemption process.

Banks that issue credit cards have been experimenting with using card rewards programs to boost individual accounts, but with limited success, said Dan Hanks, senior vice president of global product management at i2c.

“There have been some cards that offer higher rewards repayment rates if you repay them with a bank or investment account, but they have had limited success. Economic conditions can be difficult and banks have been reluctant to treat card businesses as loss leaders for their investment businesses.”

High-spending consumers tend to prefer travel or cashback rewards, he added.

“Travel rewards remain popular as travel rebounds from the decline during Covid. With a few exceptions like the Chase Sapphire Preferred, Capital One Venture, and Amex Platinum, they still tend to focus on co-branded cards related to travel (airlines, hotels, etc.). “Travel rewards are still a niche market, but they are attracting high-spending customers.”

Smart digital apps can be a means of differentiation and competition.

“Gen Z and Millennial consumers are known to be more tech-savvy and efficiency-driven, which directly conflicts with the operational inefficiencies of current programs. Financial institutions must innovate beyond traditional rewards structures to alleviate these concerns; tailoring rewards programs to individual preferences, simplifying the redemption process, and improving the clarity of offers can significantly increase the satisfaction of these users.

Hanks said banks should relook at their compensation structures to attract Gen Z and millennials because younger consumers can provide value over the long term.

He explained, “The lifetime value (LTV) benefits of loyal customers are something that banks must consider.” “Younger card customers tend to be less profitable because they typically have lower credit limits and less spending and revolving capacity. As they age, these customers become the most profitable across a range of banking products. Unfortunately, many banks have a more short-sighted view.”

Some features of the card have changed. It is said that rental car insurance programs such as collision damage waiver have disappeared from some card programs.

“These features have typically been offered by card networks for some of the more expensive cards. For example, Visa replaced its Signature card with benefits like cell phone protection a few years ago. “Because we felt this card was underutilized and many customers did not see its value.”

Research into consumer sentiment presents opportunities for new entrants or existing providers who can tailor rewards programs to changing consumer preferences.

“While existing loyalty programs attract a large number of users and provide rewards,

Friction and frustration present a significant market opportunity for solutions that seamlessly deliver personalized rewards.”

Credit companies aren’t offering the rewards that Gen Z consumers want, and these younger consumers want more than cash-only offers. They are interested in additional cards from companies that are personalized and offer different rewards. Preferences for ticket access and referral programs are noticeably higher than traditional preferences among baby boomers and seniors, the survey found. Younger consumers also tend to act based on their own preferences. Survey data shows that nearly half of Millennials and 43% of Gen Z consumers are very likely to apply for a new credit card that offers their preferred type of rewards.