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The More Rewards Programs Grow, the More They Look the Same

Next time you wait in line at the local supermarket, look at the keychains of those waiting with you. You'll often see fobs or cards mixed in among their keys, bookmarking their allegiance to their retailers of choice.

Next time you wait in line at the local supermarket, look at the keychains of those waiting with you. You'll often see fobs or cards mixed in among their keys, bookmarking their allegiance to their retailers of choice.

For any number of retail businesses, customer reward and loyalty programs are a part of what keeps customers coming back for more. When it comes to banks, these programs manifest themselves in the form of cobranded airline mileage programs, cash-back programs or other branded reward opportunities. At U.S. banks, the number of rewards programs is growing in both debit and credit cards, according to research published by Corporate Insight.

"Based on the fact that almost every mainline super regional or national bank in the United States offers these, they are very certainly seeing some type of return on these programs," says Doug Miller, senior analyst at Corporate Insight.

Corporate Insight's analysis gave high marks to the reward programs at Capital One, Citibank, Bank of America, Citizens Bank and SunTrust. Traits such as cobranded airline card options, transaction-based rewards and points for both PIN and signature purchases were common among the top banks.

And the number of rewards programs has grown since Corporate Insight's last report on rewards programs, Miller says.

Most banks offer similar rewards program options, many of which come with annual fees. A number of banks also give incentive points or miles to new customers.

"Of the 31 rewards program options we looked at, just over 60% offer bonus points or miles for new clients," Miller said. "These are often called initial use bonuses or sometimes they're enrollment bonuses."

Miller's report recommends banks offer rewards based on both PIN and signature transactions, include bonus points or accelerated earnings to help entice users, increase the rate of return on points earned and do a better job promoting the programs. Further, he says adding relationship points-earning opportunities to existing programs should be more common. Citi, for instance, offers a nominal number of extra points on a recurring basis based on the number of Citi products any given customer uses. A small number of other banks offer relationship-based rewards.

"Aside from those few firms that offer relationship points, we haven't seen it," Miller adds.

A follow-the-leader approach is common among banks. Most banks offer similar, if not duplicate programs as their competitors, with few taking radical steps to bring customers something different.

"I certainly don't think they do this in the dark of what their competitors are up to," Miller said. "The most glaring example of that would be the cobranded airline cards. There are 11 different cobranded airline debit cards out there, four of which you would call high end, but the other seven of which are very basic. They are very similar."

The report is available through Corporate Insight's website.

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