Are Cashback Cards the Future of Ecommerce Businesses?

Do you know what's great? Getting cash back. Do you know what's even better? Getting cash back when you're buying something you already wanted.

For years, cashback rewards programs have been a popular way for consumers to save money on their purchases. And now, with the advent of new technology, these programs are becoming even more popular. Thanks to apps like Drop and Birch, it's easier for consumers to earn cash back on their everyday purchases.

Not so slowly and surely, cashback are making their way out of our leather wallets and brick-and-mortar stores into our phone wallets and eCommerce businesses–and everyone is benefiting.

In this article, we'll dissect the benefits of cashback cards for e-commerce businesses. If you own or run an eCommerce business, and you're looking for ways to increase customer lifetime value, boost customer retention and grow a loyal fan base, keep reading.

What we'll cover:

• How cashback cards became so popular

• How different types of cashback cards work

• The benefits of cashback cards for your customers

• The advantages of cashback cards for you as a business owner

The rise of cashback cards

Brace yourselves: the global cashback industry is expected to be worth more than $200bn a year by 2024. How did it grow so big?

There are a few reasons why the credit card cashback system is becoming more popular. First, as mentioned above, the rise of new technology has made it easier for consumers to earn cash back.

Apps like Drop and Birch make it easy to link your credit or debit card to a cashback rewards program. And second, as the economy has become more unstable, people are looking for ways to save money wherever they can. Cashback rewards programs are an easy way to do just that.

What are cashback cards exactly?

The basic cashback card model is pretty straightforward: you earn a certain percentage of cash back on every purchase you make, which is then credited to your account at the end of the statement period or deposited directly into your checking or savings account.

They are simply credit or debit cards that offer a percentage of cash back on all purchases made with the card. For example, a popular cashback card might offer 5% cash back on all purchases made at gas stations and grocery stores. Some cards even offer higher percentages for specific categories, such as 10% cash back on travel expenses.

There are also often bonus categories where you can earn even more cashback (usually around 5%) on things like gas, groceries, or travel. And some cards will offer sign-up bonuses if you spend a certain amount within the first few months (e.g., $500 in 3 months = $50 bonus).

While 5% may not seem like much, it can add up quickly—especially if you use your cashback card for all of your everyday purchases. Just think about what the total number of 5 percent of all your gas and groceries is in a year. Worth looking into, right?

The big benefits of cashback cards

Cashback cards have a few major advantages over traditional credit and debit cards. Both for the consumer, and for the businesses accepting them. Here's why everyone loves cashback cards.

They incentivize people to shop more

First, they provide an incentive for customers to use the card more often. Cashback cards are debit or credit cards that offer a percentage of cash back on every purchase. For example, the Capital One Venture Rewards Credit Card offers 2% cash back on every purchase.

In addition to the cashback rewards, many cashback cards also offer sign-up bonuses, which can be worth hundreds of dollars. For example, the Chase Ink Business Cash Credit Card offers a $500 bonus after you spend $3,000 in the first three months.

They can save you money on transaction fees

Second benefit? They offer a way for businesses to save on transaction fees. If you're a business owner who accepts credit card payments, you know that every time a customer pays with plastic, you're charged a transaction fee. These fees can add up quickly, eating into your profits. But did you know that there are cashback cards that can help you offset these costs? In this post, we'll explain how cashback cards work and how they can save you money on transaction fees.

No matter which type of card you choose, using a cashback card for your business expenses can help you offset the cost of transaction fees. For example, if your card offers 1% cash back, and you're being charged 2% in transaction fees, using the card can essentially negate the fee. And if your card offers more than 1% cash back, you could actually come out ahead!

When choosing a cashback card for your business, it's important to read the fine print and understand the terms and conditions. It's also important to make sure that the card is accepted by your payment processor. Visa and Mastercard are widely accepted, but American Express and Discover may have more limited acceptance.

It's proven its power in retail, so why not in e-commerce?

Some offline practices are easier to copy to online than others. Cashback programs are more than suitable for eCommerce businesses.

Research has proven that retailers who participated in cashback programs grew their revenue up to 2.5 times faster than their competitors. Meanwhile, they were also generating 100-400 percent higher returns to their shareholders. Those are more than promising numbers, right?

Cashback cards give customer loyalty a big boost

And third, they can help businesses build customer loyalty by providing a rewards program that encourages customers to keep coming back.

In fact, it steers where customers tend to shop: research shows that 46 percent of people participating in cashback programs consider it a vital step in their purchase decisions.

In other words, people are already pretty loyal to the brands they frequent - and adding a cashback component isn't likely to hurt. In fact, it could actually help increase loyalty even further. After all, who doesn't love getting money back?

Retention is cheaper than acquisition

Worried about the costs of investing in a cashback solution for your eCommerce business? Then you should also worry about the costs of acquiring new customers – but that sounds silly, doesn't it?

Truth is, retaining customers is cheaper than acquiring new ones, and a loyalty program like a cashback system is a great way to do it. Plus, nobody can take too much advantage of it!

Last but not least: cashback cards increase spending

It's not just customers who love rewards programs—businesses do too. Studies found that loyalty program members spend an average of 12-18% more per year with businesses that have such programs. So, not only does offering cashback help keep customers coming back, it also increases how much they're spending when they do.

This all sounds great… Why isn't it standard yet?

There are some drawbacks to using cashback cards as well, however. For one thing, not all businesses accept them, but you can still use this to your advantage and start offering cashback systems. If you stay ahead of the competition and make sure you got an in before customers get tired of it.

Additionally, some consumers may be put off by the fact that they have to remember to use the card in order to get the benefits. This is especially annoying in physical stores, but in online stores, you can make sure that your customers (and you!) reap all the benefits. Look into creating a great UI that helps people use the cards as often as possible.

If you're worried about the implications for your taxes or whether a cashback system will put your business in some kind of debt, speak to an accountant that knows the eCommerce sphere.

It is not as difficult a system as you'd think and with the right knowledge, you can make sure your cash flow statements stay up to par.

The verdict: The case for cashback cards in eCommerce

Overall, cashback cards appear to be a promising option for eCommerce businesses looking for ways to improve their bottom line. By offering customers an incentive to use the card and providing a way to save on transaction fees, cashback cards could help eCommerce businesses stay competitive in the years to come. The time to start? Right now.

If you're not already offering some sort of rewards program to your customers, now is the perfect time to set it up. You want to prevent being the last one in your market to even offer a similar program, when all customers are already saturated with cashback programs and loyal to other businesses.

Not only will cashback cards help build customer loyalty, but they will also increase how much they're spending with your business. And what's not to love about that?