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EU Pullbacks Haven’t Axed Rewards Payment Cards—They Still Rule, says Auriemma Consulting Group

January 31, 2017

(London, UK):  One year after the implementation of Interchange Fee Regulation (IFR), the majority of British consumers continue to favor payment cards that reward them with points or miles for their spending, according to recent research by Auriemma Consulting Group (ACG).  The EU-mandated cap on credit and debit card interchange fees reduced the revenues earned by card issuers, prompting many to scale back their rewards schemes in 2016. Despite these cutbacks, over half of UK credit cardholders in the ACG study say they earn rewards for payment card usage, and they respond enthusiastically by concentrating their spending on those cards.

As part of its ongoing UK Cardbeat research, ACG surveyed 400 UK adults who own rewards payment cards.  Almost a quarter (23%) reported a change to their rewards programme in the past year—78% of them saying the change decreased the overall value of the card. Still, more than half of that same group say their usage was not affected by these changes, and 82% say a payment card that earns rewards is their most frequently used card.

The most widely held type of rewards payment card is cashback (37%), followed by supermarket (33%), and airline (21%). Despite their smaller market share, airline miles seem to be the most powerful reward, as these cardholders spend more in total and report higher satisfaction overall.

“Airline and hotel rewards are big-ticket and aspirational” noted Marianne Berry, Managing Director of ACG’s Payment Insights practice, which conducted the study. “Most consumers who have an airline co-branded card are consciously banking their miles earned toward a free ticket for a vacation or personal travel, so they’re very motivated to use that card to pay for everything.”  On average, cardholders say they need to spend £8,325 to redeem points for a flight, compared to £3,386 for a hotel room.

This perception of rewards’ intrinsic value translates into much more spending. On average airline rewards cardholders spend more per month (£1,182) on their airline rewards cards than retailer/grocery (£606) and cashback (£564) cardholders do on those cards combined. And 62% of their spend is outside the card’s partner brand (vs. 52% retailer/supermarket cards), suggesting a purposeful effort to earn miles with a range of purchase types. They also ascribe a higher value to their airline miles earned. About half (46%) of airline rewards cardholders believe a mile is worth £0.05 or more, while only one-quarter (24%) of their retailer/grocery counterparts believe a point earned is worth the same.

“Ultimately, industries vary in how they structure their rewards payment card programmes,” says Berry. “Those with airline cards spend more and have to wait longer to redeem, while those with retail or grocery cards get more frequent, but lower-value rewards. These rewards schemes appeal to different types of cardholders.”

On February 22, these findings (and more insights on UK rewards payment cards) will be presented by Berry at the 2nd Co-Brand EMEA conference in London, entitled, “Is Your Marketing Bold Enough?” ACG’s Director of International Partnerships, David Edwards, will act as Chairman for the event. Those interested can visit www.airlineinformation.org to learn more.

Survey Methodology

This study was conducted online within the UK by an independent field service provider on behalf of Auriemma Consulting Group (ACG) in September 2016, among 400 adult rewards cardholders. The number of interviews completed on a monthly basis is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted.

About Auriemma Consulting Group

ACG is a boutique management consulting firm with specialised focus on the Payments and Lending space.  We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines.  Founded in 1984, ACG has grown from a one-man shop to a nearly 50-person firm with offices in New York and London.  For more information, visit ACG’s website at www.acg.net.