How Co-Branded Programs And Digital Payments Are Redefining Customer Engagement

In today’s hyper-connected world, your phone’s maps app predicts when it is time to head to “work,” health trackers buzz to remind you to stretch your legs, and voice-activated devices nudge you to complete daily household chores. Yet, despite this heightened connectivity, many brands struggle to capture genuine loyalty. While traditional loyalty programs have long been a trusted and proven engagement strategy, for today’s consumer, basic rewards programs are often less motivating.

Modern consumers expect meaningful, personalized, and valuable interactions, and success requires brands to invest in the infrastructure necessary to forge these connections. By teaming up with established payment technology partners, businesses can offer customers real value and foster dynamic relationships that create a virtuous loyalty cycle delivering cost efficiency.

For example, when an airline offers a co-branded card, they provide benefits including access to priority boarding and complimentary lounge services. These offerings promote a sense of belonging and ease the challenges of travel. What makes these loyalty programs particularly effective is that they empower cardholders to earn additional frequent flyer miles with every dollar they spend, both at the airline and through everyday purchases such as filling up a gas tank or going out to dinner. As points accumulate, cardholders unlock additional perks and airline status, thereby gaining access to savings on air travel. This creates an incentive for consumers to stay engaged with the brand year-round, even when they aren’t actively flying. For the airline, as consumers earn more rewards, they are more likely to begin planning for that next vacation or indulge in an upgrade or an amenity for an upcoming trip.

Unlocking loyalty with a digital key

Over the past decade, the convenience of contactless payments, mobile wallets, and QR codes has significantly boosted consumer engagement. For brands, leveraging this surge in digital payments is crucial because it unlocks new avenues to engage customers.

Co-branded cards can use consumer-permissioned data to provide partners with a deeper understanding of customers’ habits, preferences, and purchasing patterns. These partners — whether banks, merchants, networks, or fintechs — can then anticipate a customer’s needs and offer relevant, timely promotions that present convenience, accelerate savings, and unlock special access or experiences.

Say a customer typically grabs a latte after stopping for gas. With a mobile app that integrates payments, the coffee shop could offer a digital discount to entice that customer to stay for brunch as well.

Creating reasons to come back for more

Consumer-permissioned data can even set off a virtuous cycle. Participants in co-branded loyalty programs tend to move from basic to more premium options, becoming increasingly engaged with the brand and more likely to become brand ambassadors.

That’s because loyalty and co-branded programs not only capture more of a customer’s wallet, but also influence purchasing decisions across categories. For example, when an airline uses its co-branded card to offer miles for staying at partner hotels, renting partner cars, and dining at partner restaurants, it is driving traffic to businesses throughout the travel industry and beyond. As a customer’s point balance grows, the airline gains deeper insights into their preferences.

Thus, the virtuous cycle goes into full effect as businesses use these insights to offer services tailored to each user. When digital interactions are done right, partner brands can also direct their offers to target only the customers most interested in receiving them, or those with the greatest conversion value. This further optimizes its return on investments as opposed to broad-scale discounting. Offering personalized offers that can be digitally “clipped” and redeemed is one way that Mastercard is working with our partners. One partner in North America saw a 20% increase in spend on their program from cardholders who were engaged and redeeming the offers.

Plus, consumers increasingly want digital capabilities for all their transactions, so using a card and mobile app ultimately offers them their preferred method of interaction, creating a superior and sticky customer experience.

Envisioning loyalty in the future

Over the next several years, co-branded programs will likely continue to become even more personalized and create more value for both brands and consumers. We may see greater integration of machine learning and predictive analytics to anticipate customer needs and deliver bespoke experiences and rewards.

Businesses will likely look for ways to enhance “silent” payments (think ride-share fares) within the loyalty app by using customer-permissioned data to help customers save money, earn more rewards, and access special perks. Social media can be used to create a community of loyal customers who share their experiences, tips, and feedback, while in-store offerings can provide immediate gratification and envy through instant rewards and personalized services.

Ultimately, when a brand becomes ingrained in a customer’s daily habits, the loyalty program is at its most robust, which propels a virtuous and optimized cycle of customer engagement.