The Costly Conundrum of Credit Card Rewards: Benefits for Customers, but High Fees for Merchants. But What is the Alternative?
Credit card rewards have become a popular way for customers to earn cash back, points, miles, and other perks for their purchases. However, these rewards come at a cost, both for merchants and for customers. Rewards and reward schemes have become increasingly popular among ecommerce merchants looking to increase customer loyalty and drive sales however there are pros and cons of these rewards. So lets look at why they can be a costly conundrum for both parties involved and what an alternative solution could be.
Benefits for Customers:
Credit card rewards can be a great way for customers to save money and earn rewards on their everyday purchases. For example, they can earn cashback on groceries, gas, and other purchases, or they can earn points that can be redeemed for travel, merchandise, and other rewards. These rewards can help customers save money and enjoy a better shopping experience.
High Fees for Merchants:
Unfortunately, credit card rewards are very costly for merchants. This is because credit card companies charge merchants a fee for each transaction, which can be as high as 3% of the purchase amount. In addition, many credit card rewards programmes require merchants to pay annual fees, which can be a significant expense. These fees can eat into the profits of merchants, making it difficult for them to offer credit card rewards to their customers.
Costly for Customers Too:
While credit card rewards can be a great way for customers to save money and earn rewards, they can also be costly. Many credit card rewards programs require customers to pay an annual fee, which can range from £50 to £500 or more. In addition, some credit card rewards programs require customers to spend a certain amount of money each year in order to qualify for rewards. This can be a significant expense for customers who are not careful about their spending.
This is why we are doing things differently here at Boodil. We offer the merchants significant reduction in fees whilst also rewarding customers every time they check out without having to pay an annual fee. Merchants will get the benefits that open banking technology can offer such as lower fee’s instant settlement of funds whilst removing fraudulent transactions. For customers who purchase via the Boodil payment method, they get a seamless payment experience whilst receiving redeemable points for rewards or entries into our various prize draws, including everything from vouchers, experiences and holidays.
The Boodil solution can increase your customer loyalty by offering these customised rewards and incentives, improve the customer experience by creating a seamless checkout experience and boost sales by converting customers that may not have made the purchase.
In conclusion, rewards in payments are an ideal way for ecommerce merchants to increase customer loyalty and drive sales, however it shouldn’t require both the customer and merchants having to pay significant costs to materialise the benefits that they bring.
If you are an ecommerce merchant looking to increase customer loyalty and drive sales, consider implementing Boodil at your checkout. Get in touch here