Cashback or how to make money on card payments

Winning an average of 55 euros per year in Société Générale, between 24 and 36 euros in LCL… The amount that banks reimburse their customers for card expenses is no longer negligible. Do these cashbacks really support purchasing power? Are there any compromises? Explanation of income.

American Express’s key argument, “cashback,” is making a steady comeback among banking offerings. The process, which consists of refunding a portion of the amount spent to the customer, originated in the United States, where it is primarily applied to credit cards to encourage customers to choose credit payments over cash. Or make you more prestigious by reserving these programs for premium bank cards.

Fintechs have taken it over: Revolut, the Anglo-Lithuanian bank that just created the French Iban, pays 1% on purchases with its Metal card; the German bank N26 pays 0.1% of the costs for Business cards and 0.5% for Business Metal.

Stop or again?

In France, the process has struggled to take hold in the past because banks have not made enough money from cards to make such gifts. In 2002, a 1% cashback led to the collapse of British Egg, which was taken over by Zebank, the bank created by Bernard Arnault. Indeed, bank cards, sometimes erroneously referred to as “credit cards”, in most cases are only payment cards with immediate debit or deferred debit at the end of the month, and therefore are not real credit cards for margin purposes.

In addition, the Lagarde Consumer Credit Act, passed in July 2010, streamlined dual action (credit and cash) cards by making cash payment the default. The confusion with expensive revolving credit is no longer possible in principle.

However, cashback is making a comeback thanks to the creativity of fintechs and marketers. In order to encourage you to use your bank card, while the number of card payments in France has doubled in ten years, rising from 7 billion to 14 billion between 2010 and 2020. “We protect our customers’ purchasing power with cashback and vouchers. . Customers who receive at least one cashback return an average of 5% of the amount spent on partner brands, ”says Eloise Beldico, marketing director of Ma French Bank, an online banking subsidiary of La Banque Postale, which is very interested in the race. for innovation and sensitivity to the expectations of youth, the most fond of awards.

According to a 2021 Yougov survey, 39% of French people said they would like to take advantage of cashback offers linked to their bank card. This figure rises to 43% among those under 35 years of age.

Well located banks

At Société Générale and LCL, these cashback formulas have replaced their old loyalty programs. Interested Société Générale customers must register and buy from merchant partners who pay them between 2% and 15% or even more of their purchases. Launched in 2019, the program has attracted 520,000 participants who receive an average of €55 per year, which they can donate to associations.

LCL launched its own in 2015. It offers discounts at local stores listed on CityStore (stores can be found through the LCL My Accounts app) as well as a large number of online shopping sites. Advantage: you just need to pay with an LCL card without pre-registration in the program. His clients also benefit from national brand campaigns, such as 4% cashback on or Relais & Châteaux, 30% on branded champagne private sale, etc.

Refunds are automatic and are paid to customer accounts once a month, 30-60 days after purchase, in the amount of 3% to 15% of expenses, sometimes even more. This is an average of 25 to 30 euros per client per year.

“Banks are well positioned to develop these programs with merchants because they can market the business to a large customer base. This is more difficult for fintech companies, whose active customer base remains modest,” said Benoît Gruet, president and co-founder of CDLK, which provides technology to the Société Générale and LCL programs.

Paid premium offers

However, consumers have a choice: for me, Aumax, a free banking service that offers to combine all bank cards created by Crédit Mutuel, Arkea is trying to lure in cashback available on cards of all banks, with increased rates on its paid premium offer. “The customer placed a bid of 53 euros on a single purchase. And if a customer has our Responsible card, their cashback is automatically converted into a donation to Pure Ocean’s association with our contribution,” adds Hugues Mercier, General Manager of Aumax for me.

PPP specialist Lydia also promises a 6% refund to her customers registered in the program (or 30% for the first purchase in the brand in question), bonuses increased by fintech when using the Lydia card. The same goes for rival Pumpkin, which offers cashback deals with dozens of partners. Not to mention distributor banks such as Floa Bank, a subsidiary of the Casino group.

Who pays in the end?

From now on, the reward is financed not by the bank, but by the trade, which hopes to receive orders, which allows for greater generosity.

The next step will be to get producers involved. “Discount rates will increase as we will be able to refer customers to brands rather than stores.

If I can tell Evian that my customers will buy this brand of water bottles regardless of the store and no longer in the selected location, it will be more valuable than telling the supermarket that I will arrange 1.5% cashback on purchases at Evian,” explains Hugh Mercier.

Moreover, each program has its own characteristics. Everyone should make the most of this.