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Trust On How Debit Rewards And Cash Back Help Drive Loyalty

Debit payments took off last year as more U.S. consumers shifted to debit card use during the pandemic for better visibility into their spending, as many faced financial hardships. One study found that debit cards were the most popular way to pay among consumers in 2020, at 28 percent, compared to cash, credit and ACH. The financial crunch brought on by the pandemic also has driven banks to extend incentives for debit card use, with rewards such as 2 percent reimbursement on routine expenses, including those made at supermarkets, drugstores and monthly subscription services. These cards reward users with options such as cash back, points and discounts. 

SunTrust Banks Inc., now Truist following its merger with BB&T, has joined the trend, providing rewards to its debit card customers. Truist rewards them with cash back on purchases at hundreds of participating retailers through their card. Its Delta SkyMiles World debit card, which carries a $95 annual fee, allows customers to earn one mile for every $2 spent on purchases, for example. The miles then can be redeemed for travel and seat upgrades. 

“Truist is focused on offering relevant and engaging rewards as part of its solution offerings,” said Carl Thibodeau, senior vice president of consumer credit and debit card solutions. “As evidenced by overall industry trends, debit card volumes have been prominent, so we’ve worked to offer rewards across both credit and debit. In debit, we’ve found clients, on average, tend to be more primary and engaged when provided these types [of] benefits.” 

Debit Card Users Shop Less, Spend More

Thibodeau noted there has been a behavior shift for debit cardholders since the pandemic began. They made fewer large purchases and reduced their number of shopping trips, he said, but they added more than usual to their shopping baskets during their visits. He said customers altered their spending to card-not-present transactions at both restaurants and supermarkets. In addition, digital wallet transactions accelerated. 

He noted that while offering debit rewards helps to ensure customer loyalty, cash back is not the only reason why consumers are embracing debit cards. Convenience, security and control are fundamental to driving client loyalty. 

“The core value proposition of debit is convenience, security, control,” Thibodeau said. “We have seen clients become more engaged when relevant rewards are presented. … The ability to deliver relevant and engaging rewards is a way to differentiate and drive incremental loyalty for clients that value rewards.” 

The emergence of debit card popularity comes more than a decade after Congress passed the Durbin Act, which allows the Federal Reserve Bank to limit fees to merchants processing debit cards. The measure capped interchange fees banks depended on to provide rewards to debit card customers. To fill the hole, FinTechs created what they called merchant-funded rewards. The arrangement allows financial institutions (FIs) to give retailers access to their databases, enabling them to distribute rewards to banking customers. 

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