The Case for Merchant Funded Incentives: New Opportunities for Card Issuers
Report Summary
The Case for Merchant Funded Incentives: New Opportunities for Card Issuers
Merchant funded incentives programs are gaining traction in the market and creating new revenue opportunities for issuers of all card types.
Boston, June 21, 2011 – A new report from Aite Group introduces the emerging merchant funded incentives market for card issuers. It highlights leading U.S. vendors of merchant funded incentives, discusses how the programs work, outlines the business model, and examines the market opportunity for this space.
In the last two years, market conditions—including revenue-reducing regulation in the credit market, the maturation of the debit market, and increased competition in the prepaid market—converged, paving the way for the new merchant funded incentives business model. Aite Group believes that this new model will revolutionize the reward business as we know it today through revenue share and a lack of fulfillment costs for incentives. These components will create for card issuers a longer-term ability to gain traction, shift resources, and complement traditional reward programs. Additionally, the cost of entry to card issuers has been minimized because there is no out-of-pocket fulfillment cost for the incentives, and because the largest portion of the operating expenses is being incurred by the vendors. Given these appeals, Aite Group projects that merchant funded incentives will rise quickly to popularity, providing a meaningful revenue stream for card issuers, program managers, and merchant funded incentives vendors by 2015.
“Merchant funded incentives programs are a good deal for card issuers, and offer a new revenue stream,” says Madeline K. Aufseeser, senior analyst with Aite Group and author of this report. “Because the cost to operate merchant funded incentives is less than that of traditional reward programs and will generate a greater profit per account, card issuers should consider swapping some existing traditional reward programs for merchant funded incentives programs, especially on debit portfolios.”
Merchant funded incentives vendors mentioned in this report include Access Development, Affinity Solutions, Bankons, BillShrink, Cardlytics, Cartera, Clovr Media, Edo Interactive, and Freemonee.
This 32-page Impact Report contains 19 figures and four tables. Clients of Aite Group's Retail Banking service can download the report .