Everything in business has a lifecycle: products and services, companies, even entire industries. Rewards programs for financial institutions are no different. Their evolution over the past 15 years has followed the typical lifecycle stages of introduction, growth and, now, maturity.

Like many maturing markets, today's rewards programs face a host of challenges – oversupply and lack of differentiation, declining customer loyalty, increasing competition and shrinking profit margins and growth. But a maturing market can also offer significant opportunity for financial institutions to break the chains of proliferation and parity by introducing innovative rewards programs, compelling value propositions, and new strategies and tactics. Understanding where they are in the business cycle, many leading-edge financial institutions are already moving forward and reinvigorating their rewards programs as a path to market renewal and differentiation. Through innovations that offer customers a wider range of compelling programs that fit their interests and deliver rewards sooner, these financial institutions are driving new opportunities to entice customers and keep them loyal, active – and profitable.

Of course, in today’s market, no financial institution can afford not to innovate – to do otherwise would likely be a recipe for failure. But that doesn’t mean that every financial institution that chooses to innovate will generate the results they expect. There are often barriers to overcome, including choosing the right type of innovation. Harder still is making the innovation a reality, as it often requires financial institutions to change organizational and operational processes and practices.

Although the challenges of creating and delivering innovative rewards programs can be many and varied, several financial institutions – including American Express, Citibank and Discover – are making it work. They are pioneers in creating new dimensions of performance, and their experience may offer key lessons for others seeking creative ways to reward customers in a market that continues to mature and challenge financial institutions with an essential truth: reinvent or fall behind.

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