Customer loyalty in banking looks different today. Card points and miles programs, traditional “earn and burn” style, now compete against personalized offers that can be sent in real time from retailers. Not to mention, consumers are being conditioned to expect that level of personalization by interfaces like Netflix and Amazon where the user interface has been customized to them; effectively, a “segment of one.”
Banks now realize that loyalty can no longer be treated as a static program where everyone is treated the same, working towards earning points and other awards that may end up being devalued anyways. Loyalty now has to be a strategy extending to engagement, retention, personalization, and revenue, all at the same time.
This guide breaks down the questions banks are actually asking about loyalty right now, with answers around the deeper reasons behind them.
The core challenge is relevance: most bank loyalty programs are still built around static rewards that don't reflect how or where a customer actually spends. That disconnect shows up as low customer engagement, attrition, and banks' spending on loyalty programs that don't generate a measurable return. Banks that treat loyalty as a simple product feature to check-off, and not a growth lever, can see weaker results.
Traditional bank loyalty programs were designed around a simple model: spend on a card, accumulate points, redeem for travel or merchandise. That model is showing its age. Catalogs where customers can redeem their points go stale, points now devalue without warning, and a basic x-point-per-dollar structure doesn't actually differentiate one bank's card from another's. In effect, these are loyalty programs that exist on paper but don't actually change customer behavior.
The attrition data makes the stakes concrete: a study from CORA group found that 14% of closed credit card accounts had zero reward redemptions in their final year. Those customers left because they never engaged with the program. A loyalty program that isn't being used isn't working to reduce attrition.
The second challenge is data. Banks sit on enormous amounts of transaction data. They know what stores their customers buy from, how much they spend, and how often. But historically they haven't had a way to turn that data into real-time, actionable offers at the moment a customer is deciding where to shop.
Banks can increase engagement and retention by integrating valuable shopping rewards programs into existing customer behaviors, rather than treating loyalty as a separate destination for customers to seek out. Routine, everyday activity is repeated over time, resulting in more opportunities for a bank to be of value to their customers. Shopping is one of the most frequent everyday behaviors a customer does. So rewarding those behaviors is one reliable way a bank can affect customer engagement.
Research on banking customer engagement from Cornerstone Advisors gives us actual data on why it’s so important. The study found that 42% of highly engaged consumers (with engagement measured through recurring daily behaviors like debit card usage, or using a bank's financial management tools) held six or more products with their primary bank.
This makes customer engagement much more than a “nice to have.” High engagement is actually the mechanism that grows participation across banking products by a customer that may start with a single product like a checking account. Morningstar and other sources have found that customers with deeper relationships across multiple products with a bank tend to be more valuable to a bank, and far less likely to switch institutions.
This is why banks should consider building a shopping rewards program into their offering: it gives customers another reason to open a banking app or use a card regularly. It also reinforces the perception of the bank as a helpful, everyday money-saving resource rather than just a place to store money.
But ultimately, a rewards program only reduces churn if the customer is aware it exists and interacts with it regularly.
To that end, shopping rewards programs built around everyday spend, such as earning cashback rewards from the online retailers and services that someone already buys from regularly, create far more value-adding moments than a once-a-year big travel points redemption.
Internal data from Wildfire-powered shopping rewards programs shows how these programs can impact customer engagement: on average, members activate available rewards somewhere between 11 and 17 times a month. Plus, offering shopping rewards as part of a loyalty program reduced customer attrition by at least 7% for one of our clients.
Finally, every time a customer sees an available reward offer and acts on it, it reinforces that the bank is actually a helpful part of their shopping routine, not just a utility handling payments.
The way to deliver rewards offers to banking customers matters too. Some customers want a browser extension that surfaces offers automatically while they shop online. Others prefer checking a dedicated offer and shopping portal inside the banking app. Others respond better to email or push notifications about a specific merchant offer. Banks that support multiple channels rather than a single delivery mechanism capture more of these engagement moments across their customer base.
Personalization improves loyalty by replacing generic, one-size-fits-all offers with rewards tailored to what an individual customer actually buys, where they shop, and where they are in their relationship with a merchant (or the bank.) With personalized offers, a reward from the same retailer would be different for two different customers depending on context. For example, a new-to-the-brand shopper might need an incentive to buy there for the first time, while a loyal one might respond better to a bonus tied to their status as a longtime customer.
With this approach, rather than grouping customers into broad demographic segments, banks can use observed shopping behavior to tailor an offer to an individual in real time, a strategy that was discussed in an interview with loyalty leaders from Braze and Visa. With such an approach, two customers could see two different offers. One would be designed to incentivize a shopper who usually responds only to %-off discounts of at least 15%, while the other could reward a frequent shopper who buys regardless of discount but always from the same brand.
Each offer would be based on their own purchase history and behavioral signals, rather than grouping those two distinct customers into a static segment. In the segment-based approach, at face value those two customer examples could belong to the same demographic / income / geographic segment. But in the behavioral reality, each one is very different in their actual approach to shopping. This is what “segment of one” targeting looks like.
The data that powers this comes from continuous visibility into shopping behavior which the shopping rewards program informs. Through shopping tools, a shopping rewards program can capture insights such as: which merchants a customer visits, what products they view, what they ultimately purchase, and how much they spend. Those behavioral signals, aggregated and analyzed to build unique customer profiles through AI and machine learning over time, can be turned into insights that help a bank deliver actually-relevant offers instead of generic ones.
The insights are based on aggregated shopping behavior, and consumers consistently say they want this kind of relevance. In a Wildfire consumer survey, 81% indicated they prefer to receive cashback and shopping offers directly from their bank or card issuer. And a study from Bain & Company found that 70% of consumers want their primary bank to use their profiles to deliver more personalized experiences, while roughly 60% of cardholders want rewards customized to their specific relationship.
Meanwhile fewer than half say they’re actually satisfied with what they receive, so delivering better offers should be a top priority.
This consumer preference is enhanced by the bank already having the context to make an offer contextual and personally relevant, instead of feeling so “random.”
Rewards drive loyalty most effectively when they're simple, deliver immediate value, and have flexibility. This is why customers consistently prefer cashback to other rewards such as points, miles, and rewards catalogs. For example, a points-based program puts the burden on the customer to do the mental math for redemption value. Cash back is just… cash.
Cash's simplicity translates directly into a higher likelihood of customers using a rewards program.
A Wildfire consumer survey found that 78% of shoppers say they prefer cash back over other reward currencies. Cashback is preferred because it’s simple. There are no blackout dates, no confusing point-conversion tables, and no risk of a program devaluing the currency a customer has been accumulating (as noted, which happens repeatedly with airline miles programs).
When the reward is dollars, a customer doesn't need to be a rewards-optimization enthusiast with a complex tracking spreadsheet to see the value.
The behavioral impact is measurable at the point of decision, too. In Wildfire’s data, when a customer activates a cashback offer in a Wildfire-powered browser extension, the conversion rate can be as high as 15%, vs. a 2-3% average conversion rate for e-commerce in general. That gap illustrates why timing and presentation matter as much as the reward itself: an offer delivered at the right time (whether that is on a retailer's site, in a search result, or at the checkout page) converts far better than a stash of points sitting unused in a rewards account, waiting to be used in a redemption catalog that a customer has to seek out.
None of this requires abandoning points-based programs entirely. Many of the most effective bank loyalty strategies combine a cashback program as the base, with options to earn accelerated rewards for specific categories or during promotional periods. This gives customers additional flexibility without adding unnecessary complexity to the core rewards program’s value proposition.
The financial sustainability problem with most bank loyalty programs comes down to funding the rewards, and that problem is getting worse as consumers shift away from credit cards to debit.
Traditionally, interchange revenue has funded rewards programs. But debit interchange is capped at a fraction of credit interchange fee rates, which means the same rewards playbook doesn't generate enough revenue to sustain itself anymore. To survive this shift, banks/card issuers need to stop relying on interchange alone and bring in a second funding source: merchants. We cover this issue in our blog post and infographic, “The New Loyalty Economics: How Banks Can Fund Rewards Beyond Interchange.”
That debit shift is real and it's accelerating. Sky-high credit card interest rates are pushing consumers away from credit to avoid high-interest debt. Debit also offers something credit doesn't: immediate visibility into what's actually in an account, which helps consumers stick to a budget. That preference is especially pronounced with Gen Z, over 60% of whom prefer debit or cash specifically for the control and predictability it offers.
That shift creates a real math problem for issuers. Debit interchange is capped by regulations like the Durbin Amendment, so debit issuers earn $0.46 or less per transaction in gross interchange revenue. Compare this to credit card issuers, who can collect up to 3% of the transaction.
Rewards programs funded entirely out of that interchange margin were already a stretch on the credit side; on debit, the margin often isn't there to fund a rewards program at all. That's the core of the "issuer's dilemma": banks can't self-fund rich rewards on debit-level margins, and any program that's internally funded is one budget cycle away from getting scrapped, which damages the brand relationship it was meant to build in the first place.
However, consumer expectations haven't scaled down along with the interchange available to fund them. Consumers still expect personalized benefits and tangible value, whether they use credit or debit. And debit actually presents an underutilized opportunity: with the average debit card used more than 30 times a month, that’s a high volume of everyday transactions that, if monetized correctly, could fund a meaningful rewards program without banks needing to find new funding sources for it.
That's exactly what merchant-funded rewards are built to solve, and it's the mechanism covered in the next section. Instead of a bank subsidizing every dollar of reward from its own margin, merchants pay a commission when the bank refers a purchase. That commission pays for the rewards to the customer (and a revenue source for the bank itself.) This turns rewards from a cost center that shrinks with every interchange cap into a program that can fund itself plus generate a margin, regardless of which card network or product a customer uses.
Merchant-funded rewards create new revenue because the reward is paid by the merchant, not the bank. Retailers pay a commission when a bank is the referral source for a customer who makes a purchase, and that commission funds the customer's cashback while leaving the bank with revenue left over. This is the mechanism behind "the new loyalty economics:" a funding model built for a world where interchange margin, especially on debit, often isn't enough to sustain a rewards program on its own.
The mechanics behind merchant-funded rewards work following these three steps:
That structure is what makes this a genuine funding diversification play. Banks are no longer solely dependent on the interchange spread to pay for rewards. They're tapping into an existing merchant marketing budget. It's also what makes debit-level rewards economically viable, period. Because the reward is funded by the merchant's commission rather than the transaction's interchange rate, a debit purchase can generate a meaningful reward even though debit interchange alone couldn't support it.
Scale matters, too. A merchant network with access to tens of thousands of merchant affiliate programs gives banks much more coverage and therefore a significantly better revenue opportunity than negotiating individual merchant partnerships one at a time. This also keeps the customer experience consistent across the retailers, sites, and services people already use.
The bigger picture is a genuine shift in how loyalty gets funded: rather than leaning on a single revenue source, modern programs increasingly combine merchant-funded commissions with other monetization layers, like commerce media (covered later in this guide), to support rewards without leaning on a shrinking interchange margin. That's what turns loyalty from an interchange-dependent cost center into a self-funding program with its own, more resilient, revenue base, and it's the foundation the next two questions build on.
Loyalty becomes a revenue-generating capability when a rewards program is structured as a flywheel that drives other parts of the business rather than a standalone program. The flywheel is: rewards drive engagement, engagement generates shopping insights, and those insights unlock two additional revenue streams, deeper product personalization and commerce media. Each piece of the loyalty flywheel feeds into the next, which is why banks that treat loyalty as an integrated platform tend to outperform those that treat it as an isolated cardholder perk.
This pattern isn't unique to any one bank. Zooming out on recent industry trends, this is roughly the same structural playbook that Chase, Mastercard, Capital One, and American Express have each followed, in their own ways, over the past several years. Chase built loyalty and offers capabilities, layered merchant intelligence and consumer insights on top, and launched a media solutions business in 2024. Mastercard acquired a loyalty platform, added a data and personalization layer, and launched its own media solutions business the following year. Capital One and American Express have followed similar paths.
The consistent pattern across all of them: loyalty drives engagement, engagement creates data, and data powers a media business, each element building on the next.
Concretely, the flywheel works like this:
This matters strategically because each element of the loyalty flywheel funds and strengthens the next. Rewards that are merchant-funded rather than bank-funded remove the cost-center problem. The engagement those rewards generate produces the shopping data that makes personalization possible. And the combination of an engaged audience plus rich shopping context is exactly what merchants pay a premium to reach through commerce media. A bank that builds all four pieces on a single platform isn't just running a rewards program anymore. It's running a data and media business with loyalty as its foundation, which is a far more different, and more durable, source of value than any standalone rewards/points program.