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All Rewards Platforms Are Not Created Equal: Why Bank-Grade Capabilities Matter

With some of the biggest financial institutions in the world launching shopping rewards programs, it’s clear these loyalty incentives are becoming table-stakes in the field of value-added financial services. But not all loyalty/rewards platforms are created equal when it comes to meeting the needs of sophisticated financial institutions. 

As financial services organizations consider partners to power their rewards programs and other value-added services, they need to look beyond those providers’ surface-level claims of being “enterprise-grade.” “Bank-grade” platforms take features and certifications a step further, providing additional capabilities that meet the high standards of banks.

Enterprise-grade is really just the foundational level when it comes to the description of platforms banks may choose to partner with to deploy loyalty/rewards programs for their customers. Enterprise-grade typically means that the platform is robust, scalable, and able to handle large volumes (whether that is customer activity, data, transactions, or any combination of those). 

It also indicates that the platform maintains a high caliber of excellence regarding its performance, functionality, and dependability, appropriateness for big organizations with large customer bases, demanding reliability needs, and crucial processes.

But any fintech looking to partner with a financial institution must take the additional step to ensure their enterprise-grade platform is also bank-grade. This would indicate, at minimum, the fintech partner follows the additional regulatory and compliance mechanisms required of banks. Because ultimately, any fintech platform providing technology to a bank is accountable to the same regulations as that bank.

The key areas where bank-grade rewards platforms differentiate themselves are:

1. Customizability

Banks have unique ecosystems with multiple integration points and third-party tools. A one-size-fits-all platform won’t cut it. Bank-grade platforms provide customizable configurability such as:

- Flexible API integration with core banking systems

- Ability to embed bank-centric features (e.g. encouraging tender preference through certain payment capabilities like “pay with points,” 1-click checkout, payment method auto-fill, etc.)

- Modularity to integrate with the FI’s other preferred vendor tools (e.g. security, analytics, KYC, AML…)

2. Compliance

Banks live under the microscope of regulators, which requires that the bank’s prospective partner must proactively mitigate compliance risks such as: 

- Data transparency for auditing 

- Anonymization to avoid collecting PII

- Industry security certifications (e.g. PCI-DSS, SOC 2)

Bank-grade platforms embed compliance into their DNA with regimented protocols, advanced security, and auditable reports. This ensures banks avoid regulatory missteps or “leak” any customer data.

3. Reliability

Downtime or technical hiccups simply aren’t options for mission-critical bank systems. Bank-grade platforms guarantee reliability through:

- Redundant infrastructure

- Rigorous stress testing 

With so much at stake, banks need partners that assure always-on stability.

4. Trust

At the end of the day, banks live and die by customer trust. Earning it back after lapses, such as the bank collapses of 2023, is hard. Rewards platform partners must demonstrate transparency and integrity:

- Proven security track records

- Long-term client relationships - particularly with other banks  

- Commitment to ethics and compliance

Banks stand by values like fairness and honesty. They need fintech partners who share that commitment to maintaining consumer trust. 

Beyond Enterprise-Grade

As financial institutions evaluate fintech partners, they must dig deeper than marketing buzzwords. For banks, off-the-shelf “enterprise grade” platforms aren't enough. Banks need proven bank-grade partners ready to deliver secure, reliable, and configurable rewards their customers can believe in. The partner platforms banks choose must match the trust and regulatory compliance they've worked so hard to build and maintain.

 

 

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Comments: (5)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 20 June, 2024, 14:00Be the first to give this comment the thumbs up 0 likes

Not so sure. In my company, we've been selling a customer's shopping / loyalty management platform to BFSI and other industries for nearly 10 years. While the platform has enterprise-grade capabilities, banks are either not bothered or not willing to pay for them. As industry insiders know, the rewards model of banks is predicated on customers NOT redeeming a certain amount of rewards points aka breakage. Banks tell us privately that they don't mind if our platform breaks down once in a while since "breakage" is a feature, not bug, of their rewards program!

Sad, but true.

Shawn Conahan
Shawn Conahan - Wildfire Systems, Inc. - San Diego, Ca 20 June, 2024, 15:53Be the first to give this comment the thumbs up 0 likes

Your comment is so off the mark that I don't know exactly where to begin. I suspect that we are assigning different meanings to the words we are using. To me, "bank-grade" means understanding the operating requirements of the financial institution, particularly as it relates to their customers. Our guiding light is to "do no harm" to their customers, not just because it is the right thing to do, but it is also the regulatorily safe thing to do. To suggest a financial institution in the most highly-regulated industry on the planet is not bothered by a lack of safeguards that put them in a regulatory safe harbor is to completely misunderstand the impact of even minor transgressions. For instance, UDAAP compliance means, among other things, that a customer will get the loyalty benefit that was communicated to them. That benefit may be less than a dollar, but the penalty for a miscommunication is comparatively incalculable. 

If there are banks telling you privately that they do not mind if your platform breaks down once in a while so that they can intentionally cheat their customers, please send that list to me so I can avoid doing business with them. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 20 June, 2024, 16:38Be the first to give this comment the thumbs up 0 likes

When tens of millions of customers of customers of Synapse are unable to access their funds ostensibly deposited in an FDIC-insured institution, I can't even begin to see how far off the mark your theory about some obscure compliance is from the actual practice followed in the banking industry.

Shawn Conahan
Shawn Conahan - Wildfire Systems, Inc. - San Diego, Ca 20 June, 2024, 17:19Be the first to give this comment the thumbs up 0 likes

This is not controversial. If you are a technology company working with banks, you should be bank-grade. I suspect anyone who works in the banking industry reading our comments will appreciate my conservative approach to protecting their interests. 

You seem somewhat jaded, and I am sorry about whoever hurt you. ;-)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 21 June, 2024, 11:11Be the first to give this comment the thumbs up 0 likes

Any boss in the banking industry who decides how much budget to allocate, what to buy and how much to pay will not pay a premium to buy something that will erode their profit and thereby dent their bonus twice - once because it costs more and once because it will reduce breakage and thereby increase costs.

You must be drunk on some weird Kool-Aid if you don't know this basic best practice of banking procurement. I'm sorry about whoever is going to hurt you if you continue to shill your platform in this manner.

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