Westpac says changes it is making to its credit card rewards system reflect changing customer preferences.
By Susan Edmunds of RNZ
It has removed the option of using credit card points to purchase merchandise and has instead started offering cashback offers to customers.
That is alongside its existing hotpoints pay system, which allows customers to use points to clear past transactions or pay for future purchases.
Cashback offers are tailored to customers and currently include things like a $50 cashback on a $300 minimum spend at Michael Hill, $5 cashback on a minimum $50 spend at JB Hi Fi, or $10 cashback on a minimum $35 at The Coffee Club.
The payment is automatically processed to the customer's card when they make a qualifying purchase.
Westpac NZ managing director of product, sustainability and marketing Sarah Hearn said the bank had conducted research to understand what customers through about their card spending.
"We know from talking to customers that their habits and desires are changing. They want a relationship with their bank and their card providers that feels more rewarding, more personal and easier to engage with day to day," she said.
"With that in mind, we're making the offers more relevant to how they spend, what they're interested in, and what will feel useful to them. We think this sets the industry benchmark and customers are going to love it.
"This opens up opportunities for our business customers as well. Through merchant-funded offers, businesses can reach customers in a more targeted way, whether they want to attract new customers, reconnect with customers who have not shopped with them for a while, or encourage stronger engagement."
She said only 7% of points redemptions had been for merchandise, so the decision was made to remove the option in late July.
Hearn said customers wanted rewards schemes that were simple.
Westpac data shows 38% of New Zealanders have a rewards-earning credit card and another 34% were open to it.
Women were more likely to find personalised cashback offers appealing.
Massey University banking expert Claire Matthews said it made sense that people would value cash over merchandise because it was more flexible.
"Merchandise is only good if it's what you want. I've always struggled with merchandise myself, and often ended up getting gift cards because I really didn't want any of the merchandise on offer.
"And cash is likely to be more attractive when people are finding things tougher financially, allowing the rewards to be used against everyday expenses. But I would guess that there are always people who will prefer cash, and those who will prefer merchandise, but the impact of those preferences on what banks offer is difficult to judge.
"From the banks' perspective, it's possible that merchandise is unattractive due to inflation - with cash rewards there's a fixed amount returned to the cardholder, but with merchandise the price could end up higher than expected and the bank then faces a loss. And merchandise is simply more complicated because of the need to offer a range of produce and to manage it."
Consumer NZ has warned in the past that it is only people who spend significant amounts of money on their credit cards who receive enough of a benefit from rewards points to make the higher annual fees worthwhile.
"A high rate of rewards for a credit card almost always means a high annual fee... if you're an average or below-average user, it might be best to avoid rewards schemes altogether and simply opt for a low-interest, low-fee card that's easier to manage on a monthly basis."
Westpac head of everyday banking product Simon Macdonald said people would receive more rewards if they spent more on their cards.
"But that's where the new proposition that we have launched of cashback offers comes in and is really strong because it's not about how much you spend, it's allowing customers access through to cashback offers from various merchants."
ASB, meanwhile, has told customers it will limit the number of interest-free days on its credit cards to 44.
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