As a consequence of recently passed legislation that squeezes banks' revenue, rewards and loyalty initiatives may be their salvation. Loyalty platform provider BillShrink is banking on the strategy that greater customer loyalty and deeper customer relationships will help banks make up for lost profits.
According to BillShrink Chief Executive Officer Schwark Satyavolu, passage of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (the Credit CARD Act) and The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 will cause banks to lose over $30 billion annually. (The Durbin Amendment in Dodd-Frank seems to be particularly costly to banks. It mandates the Federal Reserve not only cap debit card interchange, but also amend Regulation E rules to combat debit card fraud.)
With a "significant amount of new pressure on banks, both on the credit side and the checking or banking side, there's a lot of pressure to go find other ways of making that revenue," Satyavolu said.
One way banks can increase revenue is by imposing new fees on customers – what Satyavolu calls the "stick" approach. But Satyavolu said BillShrink offers another way –the "carrot" approach by adding rewards functionality directly to consumers' online bank statements.
Through its StatementRewards program, consumers can take advantage of discounts at merchants they already frequent, as well as recognize where they can achieve savings in their recurring bill payments.
The Bill Analyzer feature of StatementRewards analyzes consumers' recurring bill payments and recommends how consumers can, for example, lower wireless phone service costs. Satyavolu said the average consumer spends a total of $5,000 a year on cable, cell phone and gas; Bill Analyzer can save the average consumer $1,000 annually on those bills.
The second component of StatementRewards involves other expenses that aren't as large or recurring, such as coffee at your favorite coffee shop or clothes from your favorite clothing store.
"What we have done is created a platform that effectively rewards you for your loyalty with each of these different merchants without having to sign up for a loyalty program, without having to swipe an additional card every time you go into the store," Satyavolu said. "It actually just shows up on your statement."
If a coffee drinker buys coffee from a local vendor 10 times in a three-month period, the consumer can get a $15 discount on the next $50 in coffee from the vendor. "And that's something you would get access to right in your bank statement … and without actually having to do anything extra," Satyavolu said. "So it gives you access to discounts at merchants you shop at, and it doesn't require you to do any additional work on your part."
According to a BillShrink survey, 94 percent of respondents said they would use cards that offered them in-statement rewards and money-saving recommendations over cards that did not. And over 76 percent of respondents said they would use a new card or change banks if current providers did not offer loyalty rewards in their statements.
Additionally, respondents would increase by 40 percent their visits to merchants who offer in-statement loyalty rewards. Also, 90 percent of respondents would have a more favorable opinion of merchants who offered in-statement discounts.
Satyavolu believes in-statement rewards may also be a way for banks to reinvigorate gift card programs.
"I think the closed-loop gift card is definitely one of those things that has reached a saturation point, but it does have a significant amount of penetration," he said. "People understand it and how to use them. And so giving them access to those kinds of cards, this kind of mechanism definitely puts more cards back into play with a larger audience than they traditionally had access to." 
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