As the 2020s began, global payments were in the midst of a multi-decade shift away from paper and into card and electronic transactions. While paper payments continue to shift rapidly in many areas of the globe, the digital shift that was dramatically accelerated by the global pandemic has left an indelible mark on a number of developed markets which have surged towards a nearly cashless existence. In a digital era, the importance of loyalty programmes and top of wallet status becomes increasingly paramount. Success in this era will require an understanding of regional differences and systemic factors which affect the fiercely competitive loyalty and rewards landscape.
Consumer card payments rise to dominance in the first quarter century of the 2000s
The first 23 years of the new millennium have seen rapid shifts in the way that consumers pay around the world. As of 2023, just shy of two thirds of the consumer payments value was transmitted via cards. While a significant amount of this value comes from major markets such as China, the US and the UK, dramatic shifts have also been underway in markets that, until recently, relied much more heavily on paper payments. Personal debit cards are a major force for payments, but consumer credit cards – the most important payment method for loyalty and rewards platforms – have grown to encompass one quarter of all consumer payment transactions: a value of USD18.5 trillion.
It should come as little surprise that interchange fees are often the lifeblood of credit card rewards and platforms. Supporting the financial cost of rewards generally takes the form of either interchange fees or opt-in rewards fees.
The highest-level rewards cards can feature interchange fees in excess of USD500 per year (and even up to USD5,000 per year in ultra-high-end offerings)
Source: Euromonitor International
In category-leading countries, top issuing brands compete heavily to best one another on the depth and breadth of the rewards programmes that they offer on their flagship cards. In the US, for example, flagship cards typically offer a suite of travel benefits, lounge access, and accelerated earning rates, while providing generous redemption options or transfer partners. However, in some cases, these loyalty rewards are becoming so commonplace that it threatens their premium nature. This is the case in the US, where so many consumers are gaining access to cards which offer airport lounge access that overcrowding in lounges has led to measures to try and alleviate this, for fear of losing customer prestige. To learn more about loyalty strategies being taken by some of the most successful companies, read Euromonitor’s report, The New Loyalty Playbook: Strategies from Leading Brands.
Looking at the markets with the highest penetration of cobranded credit cards, it is also apparent that, often, they are present in more laissez-faire interchange environments.
The US features 31 total cobranded cards among the profiled merchants
Source: Euromonitor International
Only one of the top 10 markets (France) is located in the EU, which quite notably has long implemented strict caps on both debit and credit interchange fees. And in markets where more recent caps have been placed on cards, it is not uncommon to see rewards scaled back over time. Exploring the various studied merchants, a consistent theme is that cobrands are most common among supermarket chains and flag carrier airlines. Some of the greatest opportunities for cobranded partnerships exist in the hotels space, which is overwhelmingly the leading penetrated space in most markets.
While credit cards – and cards writ large – have continued their strength in recent years, there are a number of challenges to keep eyes on. As noted above, regulation continues to be an ever-present threat to the vitality of rewards and loyalty programmes: mature programmes could see significant effects should interchange fees be cut. Electronic transactions also present a potential challenge, particularly in markets where cards have not caught on as much and must compete against electronic platforms that may benefit further from government backing – particularly present in certain Latin American markets. Finally, geopolitical risk remains an important consideration. As recent conflicts have shown, sanctions, boycotts, and public disapproval can be potent forces against businesses internationally, and it is important to have an eye to the possible challenges that may lie ahead.
Learn more about credit card loyalty in our report, Personal Credit Cards Around the World, to dive into rewards and features around the globe.