How card-linking technology can supercharge customer loyalty

Customer loyalty programs have long been promoted in e-commerce as an effective way to boost customer retention and build stronger engagement. But is the allure of the loyalty card as strong as it once was?

As inflation continues to bite, brands with well-known loyalty programs are faced with the prospect of pulling back on reward perks to save on expenses. Sephora, Red Robin, and Dunkin' Donuts are just some of the businesses that are removing the low-hanging fruit that loyalty programs are known for, including birthday rewards and redemption thresholds. Yet removing the most tangible benefits from your program risks provoking customers' wrath.

So, how can brands keep their loyalty programs engaging but cost-effective to manage?

Card-linking technology offers brands a new spin on the traditional 'earn and burn' program mentality, bringing together attractive benefits with a more seamless customer experience that prioritizes convenience.

What is card-linking technology?

Card-linking technology refers to a customer loyalty strategy where a customer's chosen payment card is linked to a merchant or loyalty program account and kept on file. Card linked technology enables shoppers to receive bonus points, cashback offers, or other benefits automatically when making purchases using their linked cards, rather than having to input this information manually. This simplifies both the earning and redemption process for loyalty members, while also providing brands with actionable insights into consumer spending habits and behaviors.

Because card linking requires card details to be kept on file by the brand, they must have significant data security measures in place to keep card linking secure and avoid valuable data being lost or stolen. To link payment cards, customers must consent to data collection through the loyalty scheme and purchasing history.

How does card-linking work?

Card-linking technology works by leveraging existing payment infrastructure, which removes the need for physical coupons, loyalty cards, or additional steps that slow down the checkout process. The customer must first add their chosen credit or debit card to their account, which is usually integrated via an API connection with an external loyalty management system. Whenever a purchase is made, this API automatically updates the customer's profile with relevant information, such as their status in a brand's loyalty program, purchase frequency, and average order value. This makes it possible to apply relevant offers and rewards based on their activities, helping to boost customer retention.

What are the benefits of card-linking in e-commerce?

Boosting participation in loyalty programs

Consumers love loyalty programs, as shown by the 3.3 billion memberships that exist in the United States alone. However, getting shoppers to engage with programs and earn rewards is far harder. According to Bond Brand Loyalty, consumers belong to an average of 14.8 loyalty programs but are only active in 6.7 of them.

The reason for this lack of engagement is simple; most loyalty programs don't offer a hassle-free experience that makes it easy for members to participate. 

If engaging with a rewards program requires customers to log into an account or have a loyalty card on their person when they go in-store, shoppers will miss out on valuable opportunities to earn rewards. As well as creating frustration if they have to carry multiple loyalty cards on their person, this leaves customers much less incentive to engage with your loyalty offering.

Card-linking technology ensures that customers will always earn points on purchases by automatically updating their loyalty profile when their chosen credit or debit card is used. Payment-linked loyalty means more points earned and more redemptions, thereby keeping customers within the loyalty cycle.

Streamlining the shopping experience

Card-linked loyalty programs aren't the only way that brands can use card-linking technology to create a seamless customer experience. Keeping payment cards on file opens up ways to streamline numerous parts of the customer journey.

For example, secure card linking makes it easy to sign up and manage a recurring subscription plan, or offer one-click checkout capabilities to garner more impulse purchases. By removing friction from these touchpoints, brands can create a more seamless user experience that brings customers back to shop in the future.

Gathering valuable transaction data across channels

As the famous saying does, what gets measured gets managed. But too often, brands have little to no insight into their customer's spending habits or are dependent on third-party customer data-gathering which has significant gaps.

This is a growing problem as customer expectations for personalized experiences and offers continue to grow. 66% of consumers expect companies to understand their unique needs, while 52% expect all offers to be personalized.

Card-linking technology doesn't just capture how much customers are spending with individual transactions, but also how often, what time of day, and in which channels a customer's transactions are taking place. It's a first-party treasure trove that enables brands to build an in-depth profile for each customer and what promotions or loyalty rewards are most likely to appeal to them. In sum, card-linked offers make it possible to target customers with the right offer at the right time to boost conversions.

Examples of card-linking technology at work

Amex Offers

American Express was a pioneer of card-linked offers by card issuers in the retail banking sector. Cardholders can go into the mobile app to find the 'offers' section which boasts a range of promotions with various retailers across shopping, dining, travel, and entertainment. To redeem an offer, consumers just need to add that offer to their card, then simply make a purchase to redeem the offer and earn rewards.

The choice and ease of redeeming card-linked offers have made Amex a sought-after loyalty program. In 2021, eligible Amex Members earned over $392 million in statement credits by adding and redeeming Amex Offers.

Starbucks Rewards

Starbucks has long been considered a gold standard loyalty program, thanks to its intuitive app and range of rewards, such as free drink customization or food purchases. They've also taken convenience to a whole new level by using card-linking technology to offer a range of additional payment services that aren't available to non-members, such as contactless payment and pre-ordering drinks for in-store pickup.

Moreover, Starbucks Rewards has invested in card linking with other loyalty programs to allow customers to double-dip when earning. By linking their Starbucks loyalty card with their Delta SkyMiles account, shoppers can begin earning 1 mile for every $1 spent on eligible Starbucks purchases. This enhances the value of the Starbucks Rewards program and gives customers more incentive to use Starbucks as a way to fund other everyday purchases.

Must-haves for a successful card-linking strategy

Find a reliable card-linking provider

Having a secure card-linking technology platform is essential to make a card-linked loyalty program secure and capable of robust data collection to present the right customer with the right offer. It should have the capability to securely connect and track transactions made with linked cards, ensuring accuracy and privacy.

An intuitive app or web portal for managing card linking

To encourage customers to add a payment card to their account, this process needs to be as seamless and stress-free as possible. Shoppers will likely want to add or change the card linked to their account or check in to see what card-linked offers are currently available to them. To make this possible, e-commerce brands need seamless mobile or web applications that allow users to link payment cards, view offers, track rewards, and manage their account settings without needing assistance from a customer service representative.

Have a strategy to promote your card-linking system

There's little point investing in card-linked offers or loyalty programs if your customers don't know it exists or how they benefit from sharing their chosen payment method. Before launching, brands should dedicate time to raising awareness and educating on the benefits of card linking to get customers engaged and interested in signing up. For example, explaining how payment-linked loyalty allows your business to tailor personalized rewards increases the likelihood of customers adding cards to their loyalty program profile.

Have robust measures in place to combat e-commerce fraud

Keeping customer details on file opens up e-commerce brands to increased liability in the case that data is stolen by nefarious actors. This makes it essential to prioritize data security if you plan on adding card-linking technology to your business. Systems such as encryption and tokenization protect sensitive information while also reassuring customers that their data will be kept safe.

Card-linking technology makes it possible for brands to offer their customers a hassle-free loyalty program experience and attractive perks, without the need to carry a separate loyalty card or enter their details with every purchase. Using the data collected to create personalized card-linked offers helps to drive engagement and boost customer retention - all through interaction with a normal payment card.

As the competition for customer loyalty heats up, strategies such as card linking offer e-commerce brands an additional growth lever to build stronger engagement and provide ongoing incentives to keep on purchasing.