Banks and credit unions are seeking loyalty strategies to deepen relationships with customers and members to drive growth. Credit and debit card rewards programs play a key role as these cards are often the initial products a consumer uses with a financial institution (FI).
With the right approach, these programs will lay the foundation for deeper connections with cardholders, giving them more reasons to engage with your FI. Deepening cardholder engagement can be achieved by using loyalty data to improve the cardholder experience and integrate into cardholders’ lives. As banks and credit unions look to achieve long-term success, they must balance cardholder satisfaction with the financial sustainability of their programs. Four key trends—relationship banking, personalization, point ubiquity and flexibility in reward structures—are setting the stage for more effective card loyalty programs in 2025 and beyond.
Relationship banking: Strengthening the rewards ecosystem
More and more FIs are increasing their focus on relationship banking as a core part of their loyalty strategies. Instead of focusing solely on points back or cash back, banks are incentivizing cardholders towards other products that deepen the cardholder/bank relationship.
By encouraging cardholders to use multiple products within the ecosystem and integrating these into a rewards program, FIs can deepen loyalty and recognize their most valuable cardholders. Offering rewards for actions like opening a savings account or using a mortgage product, along with tailored recommendations and exclusive benefits, motivates cardholders to engage more broadly with a bank’s services, making them feel valued.
By focusing on fulfilling cardholder needs, FIs position themselves as the go-to choice for financial services. With the right data, banks can create tailored experiences that encourage more frequent interactions across products and recognize the full relationship of a cardholder.
This relationship-driven strategy can also help FIs offset changes in revenue from interchange fees. By offering integrated loyalty programs across services, banks can maintain cardholder engagement and long-term growth, even when other traditional revenue streams fluctuate.
Co-creation and personalization: Meeting the needs of the modern cardholder
A personalized and flexible rewards experience is becoming the norm within loyalty overall, and banks are capitalizing on this by empowering cardholders to co-create their loyalty programs. By allowing cardholders to tailor their rewards structure based on their spending habits, issuers can foster deeper engagement and long-term loyalty. Some programs let cardholders manually select bonus categories, like dining or travel, while others automatically adjust rewards based on real-time purchase data. This level of co-creation makes the program personalized and therefore more relevant to cardholders.
For issuers, implementing this personalization effectively requires careful thought, especially when balancing the rewards structure with the financial sustainability of the program. A key consideration is how merchant categories are structured in the rewards program. These categories group types of businesses (e.g., restaurants, airlines, gas stations) and dictate how rewards are earned. However, each business type has different interchange costs, and issuers must strategically select which categories to include in their program, or if an earn cap is necessary to maintain its financial viability.
Point ubiquity and reward flexibility: Balancing customer experience and financial sustainability
To remain a preferred option for cardholders, a card must seamlessly integrate into their daily lives and provide maximum value. This is where point ubiquity plays a critical role—removing redemption barriers and giving customers the freedom to use their rewards in ways that suit their needs, whether by redeeming points for cash, gifting them to others, or redeeming for gift cards with their brands of choice.
According to Kobie’s 2024 Loyalty Study, a significant portion of respondents (between 53% and 84%) expect their program to offer these capabilities. The easier and more flexible the redemption process, the more likely cardholders are to perceive the program as valuable, fostering stronger loyalty and reducing churn.
To support these customer expectations, card programs need to adjust their reward structures to balance costs and value. Some rewards will need to be priced higher than others to maintain a sustainable program. Customer data and shopping preferences can inform these decisions, allowing issuers to price rewards based on what’s most valuable to individual cardholders. For example, cardholders may be willing to pay more for popular gift cards with their preferred brands. It’s also critical for banks and credit unions to think about how they communicate and promote certain redemption options. By proactively highlighting certain redemption options to cardholders, banks can help drive the behavior they want to see.
By focusing on both ubiquity and reward structure flexibility, issuers can craft a rewards experience that not only aligns with customer needs but also ensures long-term financial sustainability.
Setting the stage for 2025 and beyond
Cardholders increasingly view their loyalty programs as an extension of their wallets, especially in times of economic uncertainty, when maximizing value becomes essential. This creates a pivotal moment for FIs to deliver rewards experiences that not only meet these heightened demands but also deepen engagement, ensuring their cards remain the preferred choice for everyday spending.
This year and beyond, the landscape of loyalty programs will evolve past traditional points accumulation. Financial organizations will need to take a more flexible approach, weaving rewards naturally into the customer experience while making sure the programs are both engaging for users and financially viable for the bank. This means leveraging data to anticipate needs, offering personalized experiences that feel intuitive and responsive, and creating rewards systems that adapt to both customer preferences and the bank’s financial goals.
By building stronger, more adaptive connections with cardholders, FIs can transform loyalty programs into powerful tools for long-term engagement, driving both customer retention and sustained growth.
Drew Slater is Director, Strategic Consulting at Kobie.
