Decoupled Debit a Rewards Jackpot for Consumers

It has been frequently rumored since its 2014 inception that Apple Pay would roll out a rewards program for users of its digital payment service – likely as a means of driving adoption and establishing Apple Pay as the default payment option. This week, Samsung beat Apple to the punch, announcing the launch of a rewards program for Samsung Pay.

Consumer interest and excitement over the rewards program will naturally grow as users begin to understand the relevant value of each point while accruing them during everyday purchases. But consumers with strong loyalty toward a certain store in particular should be extra excited for the proposition that digital payment rewards offer: triple rewards for decoupled debit accounts.

Decoupled debit involves the loading of funds from a credit card (more times than not) onto a store’s prepaid card that can be used until the funds are drawn down to zero. It is essentially a reloadable store gift card. These accounts exist primarily to turn sporadic customers into loyal shoppers through exclusive perks offered only through the prepaid card. Some examples are the Target Redcard and Starbucks card.

Many consumers forget the fact that they are being rewarded by two separate parties when they use these cards: by the merchant as in-store transactions are made and by his or her bank when transferring funds from a credit card to the prepaid card. And now – provided that Apple Pay and Samsung Pay are nothing more than wrapping on top of a consumer’s credit card – the consumer will earn two sets of rewards points on any card purchase (which includes the transfer of funds to a prepaid card) PLUS merchant rewards points as store purchases are made.

We have officially reached the point in the digital age at which loyalty and rewards are being embedded into every layer of the value chain. It’s worth noting that, for providers, the rewards themselves are ultimately a cost or investment in the provider’s customers. For this reason, we have seen providers scrutinize the economics of their rewards program to ensure that its existence is truly contributing to the bottom line (latest example is the change in Starbucks’ loyalty program this past spring).

Merchants that offer decoupled debit should capitalize on this three-pronged rewards value proposition to their consumers by working with banks and payment providers to create marketing and promotions that accelerate the use of decoupled debit.

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