What Apple’s expanded Reward Redemption options mean for Loyalty

Jun 13, 2024

With the release of iOS 18, Apple Pay users will be able to view and redeem rewards from eligible credit or debit cards when checking out online and in-app checkouts. Initially available in the US for Discover and Synchrony cardholders and across Apple Pay issuers with Fiserv, this functionality will provide Apple Pay users with greater flexibility and options for using their points, meeting the growing demand for point ubiquity.

While this advancement meets member expectations, loyalty strategies must also deliver enterprise value to the brands that fund them. Loyalty marketers need to carefully design their strategies to preserve and grow enterprise value through loyalty.


Member Expectations for Point Ubiquity is Growing

The demand for flexibility in loyalty points – to gift, buy, or exchange between programs – has been increasing for years. Our 2024 Kobie Loyalty Study reveals that 84% of members now expect the points they earn in loyalty programs to function like actual money.

The loyalty marketing industry has responded to and nurtured this expectation through status matching, innovative partnerships, and expanded reward options. Recently, retailers and issuers have joined forces to enhance point ubiquity by enabling point-based payments at the point of sale (POS). Major players like Walmart and Amazon already allow co-branded credit card points from select issuers to be used at POS.

The ability to redeem points and rewards at POS is a trend we expect to continue accelerating. Within our 2024 Loyalty Study it was the most popular loyalty innovation among all respondents – including younger members and members with a strong emotional connection to a brand. And, earlier this week, Apple Services announced several new features coming to Apple devices this fall, including a major enhancement to Apple Pay.


Implications for Loyalty Marketers

The key question is where consumer loyalty will lie if points can be redeemed anywhere. If a consumer uses rewards linked to their credit card to check out online with Apple Pay at a retailer, will they feel loyal to the credit card for enabling point ubiquity, or to the retailer where they redeemed the benefits? Can brands design strategies that deliver value across all parties involved?The specific implications of paying with points across a broader ecosystem vary depending on the brand’s role within that ecosystem.

  • For Retailers/QSRs/Travel Companies:Enabling pay with points or rewards at POS or online offers numerous benefits for participating brands, including increased purchasing power because consumers can add the value of their points to the available credit-card open-to-buy. However, brands must consider that allowing credit card points and rewards at their checkout may impact their own brand equity. Many credit cards are co-branded meaning it’s feasible that a hotel chain could offer point redemption of a competitor’s credit card points. Brands must consider how they would manage and communicate cross-branded redemptions just-in-time to preserve their enterprise value through loyalty.
  • For Credit Card Issuers: Enabling rewards to be used at POS or online can benefit issuers by delivering on members expectations for point ubiquity and instant gratification. Additionally, issuers can design their strategies to have favorable economics given the in-the-moment decision making. However, issuers face the risk of members associating the redemption with the brand where they redeemed, rather than with their credit card. This shift could undermine the post-redemption spend lift typically realized after a member redeems points.


How Kobie can Help

Kobie offers Pay With Point solutions that integrate with the POS and card processing ecosystem to enable rewards in real time with key retailers and payment solutions. Kobie also provides strategic loyalty services that assist issuers and brands in developing the right strategy, financials, and business case to preserve and grow consumer’s emotional connections and brand’s enterprise value. Reach out to Kobie to learn more, how to prepare for Apple Pay’s upcoming changes, and other strategic services. As the only named Leader in Loyalty Technology and Loyalty Services by Forrester, we are ready to help you navigate the future of loyalty marketing.

Reach out to Kobie to learn more about solutions and other strategic services, as the only named Leader in Loyalty Services by Forrester.