PYMNTS Intelligence noted in recent research that at the same time that consumers are using their credit cards to navigate an inflationary environment, and to purchase everyday essentials such as groceries, they also value the rewards tied to that spending.
Consumers use general purpose cards across all age and income levels. The data shows that more than 80% of consumers receive rewards offers from their credit cards, and 72% used these rewards in the 90 days leading into PYMNTS Intelligence’s surveys. More than a third of the more than 3,200 consumers we surveyed received cash-back rewards on their purchases.
Research this week from the New York Fed underscores the economics of interchange fees, putting a number on the scale and scope of the rewards programs and how they are paid for, and that at a high level keep the four-party card ecosystem running. The ecosystem’s been around for decades, the funding mechanism’s not new, but the figures show just how the rewards expenses — for the six largest card issuers at about $67.9 billion — are covered.
The Fed’s data delves into the extend to which the rewards expenses are covered by the banks’ interchange income. The Fed found that banks’ average interchange income is 1.82% of purchase volume on average, while rewards costs are 1.57%.
The majority of the income, then — at about 86% — is passed on to cardholders in the form of rewards. Banks and payment networks are in the ever-constant midst of upgrading and improving their fraud defense systems, and the more cardholders use their cards, the more the rewards programs and the defenses must be expanded.
Banking 4.0 – „how was the experience for you”
„So many people are coming here to Bucharest, people that I see and interact on linkedin and now I get the change to meet them in person. It was like being to the Football World Cup but this was the World Cup on linkedin in payments and open banking.”
Many more interesting quotes in the video below:
