Customer Loyalty & Rewards Business: Payment Provider Case Study
17 October 2023
Written by Libby James
Libby James is the founder and Managing Director of Merchant Advice Service. Since 2016, she has worked directly with businesses and payment providers across merchant accounts, card processing, payment gateways and complex provider requirements.
Libby specialises in high-risk, declined and harder-to-place merchants, as well as businesses requiring specialist payment methods, integrations or international support. She writes and reviews Merchant Advice Service content, drawing on practical experience gained from real merchant enquiries and provider relationships.
In this article
Share this article with others:
Case study summary
A newly established customer loyalty and rewards business contacted Merchant Advice Service for help understanding its payment-provider options at an early stage in its development.
The company specialised in customer rewards and money-saving loyalty programmes but did not yet have an established transaction history.
This created additional challenges when approaching financial and payment providers, making it particularly important to understand the business model and provider requirements before progressing.
Merchant Advice Service provided guidance around the client's requirements and the considerations involved in identifying potentially relevant payment and financial-service routes.
The business
The client was a new business operating within the customer loyalty and rewards sector.
Its proposition focused on helping customers access rewards and money-saving loyalty programmes.
As an early-stage company, however, the business did not have an established payment-processing or transaction history that it could present to prospective providers.
The problem
New businesses can sometimes find payment-provider selection more difficult because providers have less historic information available when assessing the business.
For this client, there were two important considerations:
- the nature of the customer rewards and loyalty business model
- the absence of an established transaction history.
The business therefore wanted help understanding the payment and financial-service landscape rather than approaching providers without first considering whether their criteria aligned with the company.
How the business found Merchant Advice Service
The client was introduced to Merchant Advice Service following a recommendation through LinkedIn.
This led to a discussion about the business model, its early-stage position and the payment and financial-service requirements it needed to consider.
What Merchant Advice Service identified
Merchant Advice Service worked with the client to understand the business before considering potential provider routes.
Relevant considerations included:
- the customer loyalty and rewards proposition
- how money would move through the business
- how customers would interact with the service
- payment-processing requirements
- the company's stage of development
- the lack of historic transaction data
- provider acceptance criteria
- the type of financial relationships the business may require as it developed.
The aim was to help the business understand its requirements and identify potentially relevant routes rather than treating the enquiry as a simple search for the lowest payment rate.
Why transaction history can matter
An established payment-processing history can give a provider more information about how a business trades.
Depending on the provider and the business model, historic information can help demonstrate areas such as:
- transaction volumes
- average transaction values
- refund levels
- chargeback history
- customer locations
- payment methods
- seasonality
- general trading patterns.
A newly established business may not yet have that evidence.
This does not necessarily mean that a new company cannot obtain payment services, but it can make it particularly important to approach providers whose requirements are compatible with the business model and stage of development.
Customer loyalty and payments
Customer loyalty technology can interact with payments in several different ways.
Depending on the proposition, a loyalty business might use payments to support:
- card-linked rewards
- customer incentives
- merchant-funded offers
- discount programmes
- digital loyalty schemes
- reward redemption
- transaction-based customer engagement.
The payment requirement therefore needs to be understood in the context of the actual loyalty proposition rather than assuming that every rewards business requires the same setup.
Merchant Advice Service also publishes information about customer loyalty through card-payment technology.
Early-stage businesses and provider selection
For a new business, selecting a payment provider can involve different considerations from switching an established merchant account.
An established merchant may already be able to provide:
- processing statements
- transaction history
- chargeback data
- historic processing volumes
- evidence of an existing provider relationship.
A start-up may instead need to explain its projected payment model, expected transaction values, customer journey, business plan and operational arrangements.
Understanding these requirements before approaching providers can help make the provider-selection process more focused.
The support provided
Merchant Advice Service provided guidance based on the specific circumstances of the new loyalty and rewards business.
The work focused on helping the client understand the issues surrounding its business model, early-stage position and potential provider requirements.
The final decision on whether to provide an account or financial service remained with the relevant provider, together with responsibility for its own underwriting, due diligence, pricing and contractual terms.
Customer feedback
Following its experience with Merchant Advice Service, the client provided the following feedback:
“Highly recommend the MAS & Libby; the service provided to us was exceptional.”
Merchant Advice Service view
This case demonstrates why payment-provider selection for a new business can require a different approach from comparing providers for an established merchant.
Without an established transaction history, the business may need to explain more about how it intends to operate and how its payment model is expected to work.
This can make the initial requirement-gathering stage particularly important.
For a loyalty or rewards company, MAS would want to understand questions such as:
- What does the business actually sell or provide?
- Who pays whom?
- Does the business receive customer funds?
- Are rewards linked to transactions?
- Are third-party merchants involved?
- Which payment methods are required?
- Which countries or currencies are involved?
- What transaction volumes and values are expected?
Answers to those questions can materially affect which payment-provider route is relevant.
What this case demonstrates
- Start-ups can require a different provider-selection approach. An early-stage business may not have historic processing information available.
- The business model needs to be understood. Loyalty, rewards and fintech-style propositions can involve payment flows that differ significantly from straightforward retail.
- Provider fit matters before an application is made. Understanding acceptance criteria can help narrow potentially relevant routes.
- Payment requirements are part of the wider proposition. Technology, customer journeys and the movement of funds can all influence provider selection.
- Underwriting remains with the provider. Merchant Advice Service can help identify potential routes, but the provider makes its own final decision.
Comparing payment providers for new and growing businesses
A business's payment requirements can change significantly as it moves from launch to growth.
Processing volumes, transaction values, payment methods, integrations and geographical reach may all develop over time.
Businesses reviewing potential providers can read Compare UK Payment Providers for more information about the factors MAS considers during provider comparison.
About Merchant Advice Service
Merchant Advice Service is an independent UK business-to-business payments information, comparison and provider-matching service founded by Libby James in 2016.
MAS helps businesses understand their payment requirements and identify payment providers or specialist partners that may be relevant to the way they operate.
Its areas of payments coverage include merchant accounts, card machines, payment gateways, ecommerce payments, payment-provider selection, switching providers, integrated payments, international and multi-currency payments, recurring payments, merchant finance and more complex payment requirements.
Merchant Advice Service is not an acquiring bank or payment processor and does not make final merchant-account underwriting decisions.
The MAS information, matching and introduction service is free to businesses. MAS may receive commission or a referral fee from some commercial partners where an introduction results in a completed product or account.
Read How Merchant Advice Service Works for more information about provider matching and the MAS commercial model.
