Payments the new battleground for customer loyalty in Australia

Historically Australians have been staunch brand loyalists. Rarely have we switched banks, or shopped at Coles if we’ve always gone to Woolies.

In recent years, though, brand loyalty has taken a nose dive, largely due to cost of living pressures. In 2024, 71 per cent of Australian consumers had become less loyal to the brands they usually use.

Companies are having to work much harder to keep customers coming back, and the world of payments is no exception.

Digital wallet usage is now prolific, so how we pay is usually just a choice of convenience. But that is changing.

Payments are becoming the new battleground where customer loyalty is won or lost.

Payments and loyalty a match made in heaven

We are now witnessing the emergence of a marriage between payments and loyalty unlike anything we’ve seen before. Gone are the days when you had to be a wealthy business owner with a frequent flyer credit card to earn rewards from paying.

Commbank’s ‘Yello!’ and NAB’s ‘Goodies’, for example, are bringing cashback, offers and discounts to everyday banking. Customers are being increasingly rewarded for demonstrating loyalty to a single payment method.

If you’re a marketer, blending payments with loyalty is a smart move for two key reasons. Firstly, it fosters broader brand loyalty. In a recent Shopify Australian Retail Report 2024 (available for download free here), 92 per cent of consumers would remain loyal to a brand if the brand offered them something in return. Payments blended with rewards encourages loyalty both to the payment method itself, and via repeat offers at partner merchants; for example, attending the same cinema, staying with a health fund, or keeping electricity with a single provider. 

Secondly, it has the potential to not only reduce payment costs but improve payments UX. By incentivising the checkout experience, there’s less pressure on merchants to provide as much payment choice, saving money on multiple providers, while also giving customers a seamless journey.

Why Pay by Bank and loyalty 

Pay by Bank, an emerging payment method that allows customers to pay directly from their bank account without a card, is starting to take the concept of payments and rewards to a new level. Pay by Bank has the ability to reward all consumers, particularly the underserved debit consumer, without being restricted to any particular bank or card system.

There are many benefits to Pay by Bank as it stands, like avoiding the fraud risks of credit card and wallet transactions due to bank-grade security. There are no passwords or storing of information. It also provides both merchant and consumer with an easy, reliable payment option without additional surcharges, credit card fees, or interest charges.  Other benefits like easy integration, no chargebacks, fast settlement, and higher conversion, are further driving uptake.

But the real power of Pay by Bank for merchants is the ease with which it can be used to incentivise consumers at the checkout. Whether that’s discounts, promotions, loyalty points, or exclusive offers, consumers will increasingly get better deals from their merchants by choosing Pay by Bank.

Pay by Bank means a merchant can establish a loyalty scheme of its own without needing to go through a third party, which is otherwise required if you are integrating payments with loyalty on a card-based system. This could take the form of:

• Adding Pay by Bank to the checkout and offering greater deals/discounts for those who connect their account 

• Integrating Pay by Bank as a payment option within an existing loyalty scheme, eliminating the need to introduce or retain costly card payments

• Offering loyalty and rewards without any ‘owned’ loyalty scheme whatsoever.

A great example of the latter is the recent partnership between Chemist Warehouse, ShopBack and Banked, to launch Australia’s first in-store Pay by Bank experience that also allows consumers to earn Cashback and rewards. The seamless experience combines the speed and security of Pay by Bank with the value of ShopBack rewards, all within a single app. The solution enables customers to Pay by Bank via the ShopBack app using a QR code on Chemist Warehouse’s Quest payment terminals, meaning Chemist Warehouse is incentivising customers with cashback rewards and low cost payments, without the overhead cost of an owned loyalty scheme, and virtually no change to existing payments infrastructure.

This could even work in the context of a shopping app. Let’s say a supermarket rewards scheme, where a customer adds Pay by Bank into their rewards wallet. When they tap their rewards card to pay for groceries, money is debited straight from their account, and they gain rewards without the friction of having to pay with a separate card.

For marketers looking for the keys to brand loyalty, payments are where it’s at, particularly with the emergence of Pay by Bank. Making the checkout process not only seamless, but a mechanism to win on conversion, customer experience, and above all, loyalty, is compelling.