GROUP EXECUTIVE & EXECUTIVE VICE PRESIDENT, MASTERCARD

AINSWORTHJOHN

TECHNOLOGY, LOYALTY AND THE MEMBER EXPERIENCE

Loyalty Trends in the Payments Industry

Market Conditions

The retail industry has seen dramatic changes over the last 5-10 years:

• Discretionary income and consumer confidence causing spending shifts

• Power has shifted from retail stores to shoppers

• Consumers preferences have shifted from aspiration rewards to practical rewards

Web enabled mobile devices have transformed e-commerce (Omnichannel):

• Innovative ways to engage the consumer

• A wealth of product information and alternative shopping channels at their fingertips

• The local marketplace has been replaced by the global marketplace

The Conflicted U.S. Consumer

Post recession customer attitudes are evolving…

Fear fatigue

Recessionary

hangoverKey trends that were

born of the recession

or even pre-recession

era will continue to

impact consumers

Recessionary

backlashKey trends that have

developed as a

rejection of the

consumption patterns

forced on consumers

as a result of the

recession.

Enduring value

perceptions

(education,

retirement)

Streamlining

lifestyles

Redefining the

“new community”

Relaxation,

re-connectivity

and self

indulgence

Uncertainty

avoidance

Conspicuous

consumption

Age shifts

Experiential

shopping

Changing

perceptions

of luxury

Co

nsu

mers

Save

Spend

Consumers are smart and will shop for the best deal for their money

58%Stick to brands &

stores I can afford

$150K+

36%

68%Regularly use coupons

to reduce costs

$150K+

56%

75%It’s important to get

the lowest price on

most things

$150K+

53% 55%Go a little further

to shop stores where

I can save

$150K+

42%

50%Choose lower priced

brands than their usual

to save money

$150K+

24%

43%Look online for

discounts before

shopping

$150K+

36%

42%Used to go to stores

just to browse, don’t

as much anymore

$150K+

30%

ALL THE WAYS I’M SMART

Rise of Digital Competitors Potential Threat to Financial Institutions Loyalty Programs

Cardholder Demand for Relevance Increasing

1. Barry Levine “ClickFox Survey Asks Whom Consumers Trust with Data”, August 15, 2012, Ernst and Young “The Customer 2. Takes Control, Global Banking Survey 20123. CGI “Understanding Financial Consumers in the Digital Era”, 20144. Swirl “iBeacon’s First Retail Holiday: Consumer Insights” December 2013

80%of consumers expect

companies to use their purchase history and retail

experience1

68%of consumers are willing to

provide information if it means greater

personalization of better service2

of financial consumers want omni-channel digital services regardless of age or income3

77%of consumers would share their smartphone location data in return for valuable,

relevant offers4

58%

Cardholders Experience Redemption Pain Points

Source: Lightspeed data, 2014 & Mastercard Advisors Panel Study 2014

48%Like to save up until they have a large amount of

points

29%Don’t have enough points to

redeem

Are unhappy with rewards options in their program

48%Have experienced frustration

while redeeming rewards

54%Must drive deeper engagement at point of interaction

Key reasons rewards cardholders have not redeemed rewards include:

Benefits from expanding use of merchant-funded offers:

• Low cost benefit and reward option

• Cardholder-relevant value and savings

• Brand loyalty and advocacy

• Competitive differentiation

• Improved marketing metrics and returns

ISSUERS CAN PROVIDE MORE OPPORTUNITIES OF ENGAGEMENT

Source: Daily Deals:

The Opportunity for Banks

and Credit Unions Aite Group LLC.

45%subscribe to at lease

one daily deal service

47%are interested in receiving

daily deal offers from

their primary FI.

U.S. CONSUMERS

COMMISSIONED STUDY: DEBIT CARD FEATURES CUSTOMERS VALUE MOST

Security Security

Travel

Travel

Shopping

Travel

Security

Travel

Money Mgt

Shopping

Shopping

Security

Shopping

Shopping

Money Mgt

Shopping

Shopping

Indexed Demand Utilities*

Young Adults Mass Families AffluentNumber of Respondents (Weighted) 606 601 601

Rewards 200 199 199

Zero Liability 143 156 158

Price Assure 140 132 145

Price Protection 136 141 139

Receipt and Warranty Vault 127 135 132

ID Theft Resolution 127 137 141

Extended Warranty 126 132 134

Shipping Discounts 125 126 129

Best Price Mobile App 124 126 124

Satisfaction Guarantee 124 130 130

Wallet Protection 124 130 133

High Security Travel Vault 123 126 132

Payments Calendar 120 121 117

Purchase Assurance 119 123 124

Know Your Balance 118 121 118

Debit Card Spend Dashboard 116 117 115

Luggage Tracker 116 113 120

COMMISSIONED STUDY:

DEBIT CARD FEATURES CUSTOMERS VALUE MOST

Advances in technology are

enabling innovative approaches:

• Beacons

• Prepaid cards

• Card linked redemption

• Push notifications

• Gamification

• Wearables

CONSUMERS EXPECTATIONS FOR LOYALTY ARE INCREASING

HIGH LEVEL LOYALTY SOLUTIONS PRODUCT ROADMAP FOR REWARDS

2014 2015 2016 & Beyond

Rew

ard

s &

Off

ers

• Experiential Earn Options

• Integration of Offers & Rewards Platforms

• Website Redesign to be Mobile Responsive

• Email & IM support

• Integration with Priceless cities

• Real-time POS Discounts

• SKU level offers

• Digital Marketing Platform

• Launch Redemption at POS (Pay With Rewards)

ADVANCING LOYALTY ADVANCING COMERCE

DISCUSSION QUESTIONS

• How do you measure the voice of your member?

• How does loyalty fit into your payment strategy?

• What are you doing to drive loyalty beyond free checking?

• Are you top of wallet for your members?

• How do you make the economics work?

• How do you choose the right partner?