Virtual currency and digital payments continue to evolve as card networks and financial institutions look for new ways to influence consumer spending at the checkout counter. Visa’s recent rule change allowing immediate point-of-sale discounts on specific Visa cards could open the door to more personalized rewards and targeted offers for shoppers. The move signals a shift toward seamless, card-linked incentives that eliminate the need for separate coupons or rebate programs, while giving banks and merchants new tools to strengthen customer loyalty and drive card usage.
Legal observers have flagged recent changes in Visa rules as signifying a potentially new direction with regard to the treatment of cards at the point of sale. A recent article by Brian Hurh summarizes the issue as follows:
We understand that Visa recently revised its rules to permit US issuers and merchants to offer immediate discounts at the point of sale to encourage and reward the use of different types of Visa cards. Visa’s prior rule barred such point-of-sale differentiation among Visa cards. While the rule change could have a broad impact, we speculate that it also may relate to the recently announced letter of intent between Visa and JPMorgan Chase to launch “Chase Merchant Services,” a payments platform intended to “create more differentiated experiences for its merchants and cardholders.”
Such a capability would have particular value to firms with presence in both issuing and acquiring businesses, offering an ability to customize rewards capabilities on selected cards.
The revision could be especially beneficial to financial institutions that are substantial players on both the issuing and processing sides of the card business. By virtue of their existing processing relationships, these institutions already have contractual privity with many merchants and obtain substantial volumes of cardholder transaction/preference data that could be useful in targeting discounts. (Moreover, under certain circumstances, these entities are permitted by federal law to share the data for rewards purposes, see Regulation P, 12 C.F.R. 1016.14(b)(2)(iv).) And by virtue of their issuing operations, these institutions could link rewards – customized to the card, merchant and cardholder – to the use of the cards they issue. For example, they could agree with Merchant A to offer one cardholder 5% off specific purchases at Merchant A on Card X, while agreeing with Merchant B to offer another cardholder 5% off specific purchases at Merchant B using Card Y – both Cards X and Y being Visa cards issued by the financial institution’s card-issuing bank.
This development would potentially allow Visa merchants to make special offers to specific cardholders without the presence of a separate coupon. Seamlessness and ease of redemption are valuable potential elements of rewards programs, and an important means to reinforce the value of rewards to program participants.
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