Reward Loyalty, the UK card-linked loyalty specialist, returned to the black in the year to April 2022 as it continued to win marquee customers on both the retail and banking sides of the business. Revenue and profits are both now running above pre-pandemic levels.
The business was originally founded by Gavin Dein in 2001 as a soccer loyalty card. Dein is still the CEO but Reward is now focused on syndicating and delivering card-linked loyalty offers. These are generally cash-back rewards sourced from leading retailers and published to the customers of banks and other financial institutions. Verisk Analytics, a large American data analytics business, took a 20% stake in 2020 at a valuation of $200m and has the option buy the remainder of the shares at that price.
The total value of card-linked rewards redeemed in 2021/2 rose 12% to £158m. A further £220m of rewards was held pending redemption at year end, 8% higher than 12 months previously.
Revenue more than doubled to £43m. Most of the higher turnover was from “retail revenue from loyalty programme transactions” which grew to £38m.
Reward says its retailer platform includes 140 regular brands running offers almost every month. Customers include Intercontinental, Europcar and SpaceNK. Reward takes a cut of each offer.
78% of offers were syndicated via Reward’s full-service programmes with the balance distributed to third party programmes, such as those operated by American Express and Mastercard. Reward’s retail partnership team won a slew of awards including “Best use of data” with Sweaty Betty and “Best technology and telecoms” with Sky at the Performance Marketing Awards.
Platform fees charged to financial institutions were much lower at £1.8m. Reward launched new full-service programmes with Virgin Money and Barclaycard (in partnership with Visa) although neither was yet generating significant revenues in this period. Management has reengineered Reward’s enterprise customer engagement platform and believes this make it cheaper to onboard financial institutions. Platform fees are charged per card enrolled.
Data insights revenue grew to £1.9m. Reward’s consultants use anonymised data from its “data lake” to “decipher the competitive pressures in retail….and emerging consumer trends.” Although demand for insights is said to be strong, management concedes this division is “still at a relatively early stage.”
Reward has a strategic objective of internationalising its capabilities but progress is slow. 96% of revenue came from the UK in 2021/2.
Cost of sales, which includes cashback returned to cardholders, was £27m, £9m higher than 2019/20 resulting in £16m gross profit compared to £11m before the pandemic. Gross profit was 24% of the value of offers redeemed.
Administrative expenses were £13.6m with higher spending accounted for mainly by increased staff numbers from 81 to 125.
Operating profit was £2.6m compared with a loss of £0.3m the previous year.
Undeterred by the choppy economic outlook, Reward has set itself the goal of driving £2b of value to cardholders by 2025. That’s double the cumulative amount of rewards it had issued by the end of April 2022. Management says that, despite the quasi-recession, both financial institutions and retailers are investing more in rewarding day to day consumer interactions and this bodes well for its future prospects..
Commentators often point to untapped opportunities for payment companies to build card-linked loyalty into their stack and to exploit payment data to help merchants better target their marketing. Reward is a well-managed business with great customer relationships and a leading position in Europe’s largest card payment market. Yet revenues remain small in comparison to other parts of the payment ecosystem. Maybe there’s not so much money in data after all.