March 20, 2024



Why it is smart to start investing in the stock market?

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Should I be a trader to invest in the stock market?

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What app should I use to invest in the stock market?

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Is it risky to invest in the stock market? If so, how much?

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Tell us if you are already investing in the stock market

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Within every human brain is a network of structures and pathways that are activated in response to specific kinds of stimuli. When experiencing certain positive things, for example, our brains release the neurotransmitter dopamine, which causes us to have feelings of pleasure, motivation, and satisfaction as a result of that experience. This is all part of the mesolimbic system in our brain which is, in simple terms, known as the reward system – and it is an incredibly powerful system. 

Every human is born with that innate reward system built into their physical bodies, which is one of the big reasons why loyalty or rewards programs continue to be so effective in the land of commerce. Technology changes, but at a fundamental level, humans remain the same. Rewards programs, which include company-specific, card-linked offers, and rewards platforms, are designed so that customers experience additional positive experiences (saving money, earning points, getting free stuff etc.) in tandem with something that is intrinsically positive already (shopping, i.e. getting new and better products or serves), making them a proven method to not only retain customers but also significantly drive sales, over and over again. 

In the past few months on the blog we started a series called “Startup Studies” where we review fintech startups within a specific sub-category. Our first reviews looked at three startups (Debbie, CreditFins, and Gauss) that have developed reward programs as a motivator for users to pay off their credit card debt. Although all three took slightly different approaches to their rewards, we think this is a creative and potentially very successful way to attract users who have debt and help them to successfully decrease their debt.

In this guide we’re going to look more closely at rewards programs in general: what they are, the ways they can be structured, and our recommendations if you're looking to build one. Our goal is to help developers understand their options when it comes to rewards programs and how they could be implemented. Let’s get started.

What Is a Rewards Program?

A rewards program (or sometimes called a loyalty program) is a marketing strategy designed to encourage customers to continue to shop at or use the services of a business associated with the program. How does that work? By offering experiences that activate the mesolimbic system within customers, like we discussed in the intro.

There are a variety of different ways reward programs can be structured, but they all have one main thing in common: customers receive additional benefits on top of their regular purchases. Members of reward programs have the opportunity to earn points that can be used for future purchases, get cashback, discounts, or even early access to new products or services. These opportunities are the “additional positive experiences” that give customers feelings of pleasure, motivation, and satisfaction, which in turn encourages them to make additional purchases in the future. And like we said in the intro, although simple, those positive experiences can be very powerful motivators to retain and engage customers. 

The Routes to Rewards

Not all reward or loyalty programs are built the same way. Let’s look at some of the most popular ways they can be structured:

Company Specific

Rewards programs that are contained to a specific company are probably better known as loyalty programs. All of their incentives are in-house – members can earn and later cash in rewards that pertain to the products or services of that one company. Some of the most well-known and successful rewards programs are company specific: think of systems like Starbucks Rewards, Amazon Prime, and Sephora Beauty Insider. For each of these, a customer can sign up to join, sometimes for free although sometimes for a monthly fee (like Amazon Prime is currently $14.99 a month), and then immediately start earning points for every purchase they make, get a free gift on their birthday, or access specific discounts (including free shipping), and more. Company specific rewards programs are highly effective. Over 80% of people say that they will continue to shop with a specific retailer if they have a rewards program. 

Card-Linked Offers

Another popular way people earn rewards is through card-linked offers which typically offer rewards in the form of points that can be spent later at participating businesses, or cashback. Every time you use your card at specific participating locations, the user earns rewards. Traditionally speaking, many Card-Linked Offers run through specific financial institutions, major payment networks, or even airlines. 

Rewards Platforms

Today there are also apps built specifically for rewards that can essentially give users the same benefits as what they get through financial institutions or payment networks. Rakuten, Dosh, Figg, and Mogl are some, to name a few. These platforms independently compile rewards from many different retailers. How exactly does a platform create rewards to offer their users? There are a few different methods:

  • Partnering with merchants: This may sound like a lot of work, but there are actually easy ways to access a large swatch of existing promos or offers from many different merchants and integrate them straight into your app instead of going individually to merchants to ask them for an offer and then establish a connection with them. We recommend using open banking APIs because they are fast, less expensive, and stay up-to-date in real time. But you can also do outreach or marketing if there are specific vendors you want to have included in your platform. For example, Debbie, one of the start-ups we covered that offers rewards to incentivize users paying off debt, has a section on their website “Partner With Us” where a merchant could reach out to join Debbie’s platform. 
  • Partnering with entities: A less common approach would be to build a platform that offers rewards for all the businesses within one specific entity, like a city or an airport. Thanks Again is one such platform that works primarily with airport restaurants, parking, or airlines to offer rewards to travelers. 

Our Recommendations

There are many different ways you could build a successful rewards program, but we have two relatively easy recommendations that will not only make it easier to get your platform up and running but also help ensure your program’s success:

  1. Use open banking instead of payment networks. This will save you both time and money. With traditional payment networks, it could take several months to set up offers and onboard new merchants, and it is quite expensive. In addition to the initial costs, you’ll have to pay fees every single time an offer is redeemed by a customer. With open banking, however, you can get started creating offers and onboarding merchants within minutes and you only pay one monthly fee for linked accounts.
  2. Be explicit about steps related to UX. First, explain to users that they will be connecting their banks through a separate page where they will grant permission for a connection to be established between the bank and the platform. This is a required step when using open banking, but it can come as a surprise to users when they’re navigated away from the platform to establish the connection. Explain how it happens and they will be more likely to actually complete the process. Second, explain how with open banking rewards won’t always be available immediately. Banks only update their transactions once or twice a day, and only when that happens will rewards become live. Make sure you explain this reality to users so that they know what to expect and don’t think something is wrong when their rewards aren’t there instantaneously. Remember, without users your platform won’t survive, so organize your platform’s UX in a way that will keep users engaged throughout the sign-up process and beyond. 


Because it provides positive reinforcement to the consumer every time they make a purchase, a rewards program can be an incredibly powerful strategy to increase consumer spending. And although there are a lot of different ways to structure and organize a rewards program, there are definitely some best practices that will help guarantee its success. At Pentadata we specialize in open banking APIs and can help you get your rewards program established in as little as a few hours. If you’re in the process of creating a rewards program, reach out today to find out more about how we can help!

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