What is driving travel cards?
Cards with travel as a reward are here to stay. Broad trends in consumer behaviour, banking and the airline industry are indicative of what your product will look like
Multi-brand cards
For one, customers want unrestricted travel rewards. For banks who are keen to have a travel product in the market, multi-brand cards are an option, where the bank works with a travel major to provide multiple airlines.
In the case of co-branded cards, whether or not the customer ends up using the miles, the cost to the bank remains. The winner is the airline, which benefits from the breakage as it is called. The customer has two choices — be restricted to one airline in a co-branded card, where perhaps less number of miles are needed for the same ticket, or opt for a multi-brand card, where you may need more miles to purchase the same ticket but have the freedom.
In case of multi-brand cards, larger financial institutions negotiate advance purchase to buy bulk tickets. They can use data on customer behaviour to anticipate and predict and lower the cost of rewards.
Win-win
When airlines launched FFPs 30 years ago, being able to understand the dollar value of the mile was not simple. IATA’s tables calculating distance between destinations became the benchmark with FFPs designed to take miles as a proxy of value.
Airline strategy
The customer is the focus. While earlier the airline decided what a frequent flyer earned as benefits, today the consumer can choose. Air Canada, for instance allows consumers to decide whether they prefer to redeem points with lounge access or excess baggage allowance. On the other hand, with FFP programmes coming into their own, expect to see more tie-ups. Qantas’ FFP has consistently delivered more profits than the airline, even during the downturn. So FFP may be tying with supermarkets and mobile companies to sell more miles.
Bank strategy
Banks today are working towards getting a unified view of the customer. Traditionally, even if a customer had a mortgage, a car loan or a savings account, in most cases the loyalty currency only came from the credit card.
In the post-downturn world the bottom line is more important. ADCB Bank, for instance allows the customer to earn reward points for not just credit cards but also across loans, mortgages and savings. Rather than operate as separate divisions with little communication, banks are working closely with their strategy divisions to consolidate and recognise what each customer is worth across business units.
