Open banking is a revolutionary concept that is quickly changing the financial landscape. In this blog post, we will explore the case for loyalty in open banking, specifically the untapped potential for loyalty rewards and incentives in the form of digital gift cards.
What is Open Banking?
Before diving into the specifics of loyalty rewards in open banking, it's essential to understand the concept itself - so what exactly is open banking?
Open banking leverages digital technology to increase accessibility and competition in the financial sector. It allows third-party financial service providers access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions through application programming interfaces, also known as APIs.
By improving access to data in the banking sector, open banking encourages a more integrated and efficient financial ecosystem where banks, fintech companies, and other financial service providers can offer improved and innovative services.
The Opportunity for Loyalty in Open Banking
Open banking offers significant potential benefits to the consumer but also carries with it certain apprehensions, primarily around data security. While the benefits of Open Banking outweigh its risks, some businesses still need help encouraging user adoption.
While further education and awareness will slowly sway consumer sentiment, loyalty rewards provide another cost-effective opportunity for fintechs and banks to increase the adoption rate of their open banking initiatives.
By actively encouraging consumers to try the technology through the delivery of rewards and incentives, market-leading fintechs can accelerate adoption and fast-track their innovations.
Digital Gift Cards: A Win-Win Solution
Digital gift cards present a unique opportunity for loyalty rewards within the open banking ecosystem. They are flexible, digital-native, and offer immediate value to the end-user
Here are a few of the key reasons why digital gift cards make a compelling case for loyalty in open banking:
🔗 Ease of Integration
Digital gift cards can be integrated into existing platforms. They fit seamlessly into the online spaces where financial institutions interact with customers. This makes them a cost-effective and convenient solution for banks and other institutions keen on adding loyalty programs without a massive system overhaul or expensive new tech.
👍 Wide Appeal
Another key benefit of digital gift cards is their near-universal appeal. Because gift cards can be used with many businesses, from the most popular online retailers to much-loved local restaurants and global travel platforms, there's something to suit everyone's tastes.
🤝 Supporting Cost of Living Consumer Behaviour Changes
In an era of rising inflation, gift cards have evolved beyond simple financial tools. They are now viewed as strategic assets for managing economic pressures faced by both consumers and retailers.
A recent research study revealed that among over 2,000 surveyed consumers, 97% were worried about the rising cost of living, and 61% plan to change their shopping habits to cope with inflation, with gift cards emerging as a potential solution.
Additionally, 37% of participants reported purchasing more gift cards for personal use as a strategy to manage expenses and maintain financial control.
A survey of over 1,000 UK adults, conducted by the UK Gift Card and Voucher Association (GCVA), revealed a notable shift toward gift cards among Gen Z and Millennial consumers. Among those aged 16-24, 28% expressed a stronger preference for giving gift cards due to the cost of living crisis, and 14% plan to increase their spending through gift cards.
The versatility of gift cards means that no matter who your customers are, their interests, or their lifestyle, you can offer them something they'll genuinely value, maximizing the efficiency of gift cards as a reward or incentive.
💸 Encourages Additional Spend
Perhaps one of the most intriguing aspects of digital gift cards is their proven ability to encourage additional spending. According to data from Capital One Shopping Research, 61% of consumers spend more than a gift card’s value when redeeming, for an average of $31.75 more than the card’s value.
This means that not only do digital gift cards make customers feel valued and appreciated, but they also actively encourage economic activity, benefiting businesses and the economy as a whole.
🚀 Flexible and Convenient
For customers, digital gift cards offer flexibility and convenience. They can be redeemed and used anytime, anywhere, and are easily stored and managed on a smartphone or computer.
Discover the Power Of Digital Gift Cards with Tillo
At Tillo, we make it easy for fintech businesses and banks to harness the power of digital gift cards. Our award-winning gift card API allows for a single integration to 2,000+ global brands, making it easy to surprise and delight every customer.
To find out more about the Tillo network and uncover the potential of Tillo for your business, get in touch with us today and start supercharging the adoption of your open banking initiatives.
