Issuers Say Smart Checkout Could Rewrite Card Rewards

§ 01 Executive Snapshot

• What: Issuers are increasingly interested in adopting smart checkout systems to enhance rewards programs.
• Who: 70 card issuers and FinTechs participated in the survey conducted by PYMNTS Intelligence in collaboration with FIS.
• Why it matters: Smart checkout could significantly transform the rewards landscape by embedding incentives directly into the payment experience, potentially increasing customer loyalty and issuer competitiveness.

§ 02 Key Developments

• 90% of surveyed issuers are very or extremely interested in adopting smart checkout.
• 87% of issuers expect smart checkout to become a core part of their rewards strategy within five years.
• 81% believe that smart checkout will either become a standard capability or a key competitive differentiator within two years.

§ 03 Strategic Context

• Traditional rewards programs often fail to effectively enhance customer loyalty, with fewer than half of issuers reporting success in driving deeper customer behaviors.
• The growing gap between the cost of rewards and their impact is prompting issuers to seek innovative solutions like smart checkout to modernize their reward offerings.

§ 04 Strategic Implications

• Immediate market consequences include a potential shift in how rewards are perceived and utilized at the point of sale, influencing consumer card choice at checkout.
• Long-term operational implications may involve increased investments in technology and governance to ensure transparency and control over customer relationships.

§ 05 Risks & Constraints

• Potential risks include concerns over trust and control regarding data use, targeting, and merchant participation in smart checkout systems.
• Issuers require clear governance frameworks to manage financial exposure and oversight before fully adopting smart checkout technologies.

§ 06 Watchlist / Forward Signals

• Issuers will be looking for developments in smart checkout technology that offer transparency and clear audit rights as indicators of successful adoption.
• The timeline for broader adoption may hinge on the establishment of trust frameworks and governance structures that address issuer concerns.