At the advent of American Express‘ innovative “Pay With Points” program, experts predicted a new evolution in credit card rewards.
Eight years later, this program has been adopted into many versions which have, altogether, transformed Frequent Flyer miles into a kind of virtual currency.
It was nearly a decade ago when American Express first introduced their “Pay With Points” program. This new concept allowed AmEx card carriers to use their Frequent Flyer miles to pay for merchandise within the Amazon.com network. It was well received and financial experts quickly prognosticated a new revolution in virtual payment was slated to rise in popularity.
In the middle of last year, American Express updated this program with a new offering that would allow card carriers (with Frequent Flyer points, of course) to transfer their miles into PayPal credits through the online interface known as Points.com. Through their system a user could convert points into virtual currency that could then be loaded onto a prepaid Visa debit card. Of course, more development is coming, which should allow for even more payment options.
Randy Petersen of FlyerTalk reports that Frequent Flyer mile rewards programs have been around for more than 30 years; and using miles as a form of currency is a topic that has been much discussed but never pursued. According to Petersen
there’s been little movement but no major steps until now. Out of the blue,
he continues, “we have major initiatives that are extremely well-funded.” Finally, something is happening that is reshaping the industry in a way that many people have been awaiting for years.
Perhaps the recent statistic that shows most people earn more rewards than they redeem is cause for the expedition of this program. According to recent research, approximately 60% of all credit cards in US circulation offer some kind of reward, accounting for roughly 80% of all charges made. Even with this kind of activity, though, only two-thirds of all rewards earned in 2010 were actually redeemed.
This might be due to the fact that the average card user simply cannot earn enough points to redeem an average plane fare equivalent in a relatively short amount of time, which lends to the idea that card issuers should offer more accessible rewards as an incentive for their customers.
Indeed, this is what the Points.com program offers. While the program was launched 10 years ago and is free to customers it is only now truly getting exposure for the kind of benefits it offers. Even a decade ago, though, Points.com’s online interface allowed you to track, redeem, and swap miles points from over what is now more than 100 separate loyalty programs including various American Express rewards programs, American Airlines AAdvantage mileage club, Delta SkyMiles, Priority Club Rewards, and US Airwares Dividend Miles club.
In 2011, Points.com was the first to offer conversion of points into PayPal credits and the Zurich-based Loylogic recently launched the PointsPay system. This new system lets you convert your reward points into even more partner loyalty programs that include Hilton, Delta, and American Airlines via virtual cards for online shopping or even a physical card that you can print and carry with you. These cards, of course, are accepted at 30+ million merchants around the world.
In addition to these programs, Swift Exchange CEO Richard Postrel reports that their IPO is slated to launch another virtual/electronic conversion system in the near future. Altogether, then, the three different programs will provide credit card users with some much needed flexibility in their point spending. The hope, of course, is that this will stimulate the redemption of points earned and improve the credit user experience.