In this Super Bowl week, it’s difficult to not view the looming date on which Chase will curtail enrollment for its debit-card rewards program (two days after the big game—Feb. 8 ) in terms of total-game strategy. In response to the Federal Reserve’s proposed level of debit interchange fee cuts, and the subsequent drop in revenue (and in rewards funding) that the cuts represent, Chase is taking the first step in phasing out this particular element of value exchange.
Yes, one can argue that even current earn rates in debit-rewards programs aren’t sufficiently robust, let alone how they might be affected by interchange cuts—but that’s actually part of the point. In terms of total-game strategy, Chase’s not-unexpected move is symptomatic of a mostly defensive stance exhibited by financial services institutions in the face of the Durbin Amendment (and its potential eventual extension to credit-card interchange), of the CARD act and of general economic pressures.
Banks are struggling with how to drive top-line, long-term revenue. Generating such revenue rests with increasing and improving customer engagement across the bank’s product spectrum. A more holistic loyalty strategy creates more opportunities for earn (more products/services tied together in the program), which allows greater reward differentiation, including recognition/soft benefits and targeted marketing that drives customer engagement and reinforces value.
To do this well, there must be increased concentration on the customers and their needs. As I noted in “The Cutting Room Floor” concerning the Durbin Amendment specifically, “In particular, the time is right to move faster toward enterprise-wide loyalty strategies. The holistic customer concept of an enterprise relationship—in which customers are rewarded for participating in multiple banking products from deposit demand accounts to retirement investments to mortgages—must be turbocharged.” Playing the same plays as everyone else, results in an ineffective offense. Developing and executing a more customer-focused strategy drives both top line revenue and bottom line growth.
Financial services need to reward more engagements with customers, not fewer. They need to seek innovations, in debit rewards and in the total customer-focused relationship. And as use of debit becomes more popular among consumer and more competitive among issuers, teaming a differentiating value of debit use with the value of other components of a total bank-customer relationship becomes more imperative. In Super-Bowl-week terms, acting only defensively amounts to a head coach saying, “Oops. We’re paying that running back a bit too much. Drop him from the squad and let’s play with just ten players. Better yet, let’s just drop out of the game entirely.”
