News

Study reveals banks need to re-examine reward programs

October 8, 2006

NEEDHAM, Mass. - A new report from Boston-based consultancy, TowerGroup, says banks need to evolve their rewards strategies.

Although credit cards remain a financial institution's most profitable product, the "Card Rewards: Profits, Pitfalls, and Promises" report states that overall declines in general bank-card interest is signaling a need for change.

In 2005, general-purpose cards produced 75 percent of the bank-card industry's sales volume. But fewer than half a percent of targeted consumers responded to card-issuer solicitations.

As customer acquisition costs continue to rise, the industry's dependence on card designs that include a rewards feature will increase. 

TowerGroup expects that 90 percent of consumers holding general-purpose cards will have a card-based rewards program within five years.