Gone effective September 22 are rental car insurance; trip cancellation and interruption; travel accident insurance; trip delay; baggage delay; lost baggage; price rewind; 90 day return protection; Medical Evacuation coverage; Missed Ticket Protection; roadside assistance dispatch service and travel and emergency assistance.
Reader Daniel asks, how can Citi even do this?
I had a question about the reduction (near elimination) of benefits in Citi products – Doesn’t Visa/MC require a certain amount of benefits for certain level of cards. In other words, in order for Citi to issue “World Elite Mastercards” (and to get the higher swipe fees that come with those cards) don’t they have to offer A, B, and C benefits?
I guess the answer is “no” since they’re clearing doing all this stuff, but I always thought that was the “cost” issuers had to make to issue “elite” card
There’s a general slate of benefits that comes with each level of product, however a card issuer can customize. Citi has offered its own version of several of the benefits for some time.
Think about the Ritz-Carlton card issued as a Visa Infinite, comes with the $100 companion airfare which is a Visa Infinite benefit but Sapphire Reserve is a Visa infinite without that benefit.
This is a whole new level, what Citi is doing of course. They’re betting that people barely even notice these benefits exist.
For a few years Mastercard has been working on an a la carte model, though their original idea was that the consumer would pick which benefits were important to them.
Right now most premium cards offer a variety of benefits that they barely promote to cardmembers (they’ve offered them largely because competitors offered them). They’re only sustainable to the extent they aren’t used much. That’s why we started to see issuers pulling back on price protection: with automation, lots of cardholders were submitting lots of claims since the prices of items they purchased could be tracked for them. Claims were even becoming common for price drops in the pennies. That made the benefit too costly.
A benefit that only works to the extent customers don’t use (or perhaps even know about it) isn’t sustainable. It also isn’t valuable to cardmembers.
The better model is fewer benefits that are directly relevant to customers and that an issuer helps customers to actually use. That’s what I wrote will be the future of credit card rewards.
Targeting benefits. Cards, especially in conjunction with travel data, are in a position to know and understand a tremendous amount. Experiences are offered by many programs, including banks and payment networks (“Mastercard Priceless Experiences”). Very few cardmembers know, investigate, or take advantage of them.
And if experiences are marketed they’re rarely relevant to the cardmember based on schedule or interest. I’ve never paid for a round of golf or purchased golf supplies on my credit card, so why would a program send me information on a golf experience, my status as a mid-40s white guy notwithstanding?
Instead if they know I spend a good deal on nice meals, that I’m traveling to a specific city, and they have a chef experience in the city while I’m there why not prompt me with the opportunity to participate? The point is to deliver the right message, to the right customer, at the right time.
Help customers use their benefits. Right now cards offer myriad travel and purchase protections, and those survive precisely because they’re rarely used. Price protection has become more rare as apps have developed to automate claims, even from tiny price drops. As benefits become costlier to provide they become untenable.
Card companies need to flip the model from one where they hope customers don’t use the benefits to one where they help consumers use their benefits. That will mean fewer, more targeted benefits relevant to the customer.
A company that emailed a cardmember after a long flight delay letting them know they have trip delay coverage and to send them the bill for hotel and meals, that emailed a customer when their co-brand airline partner loses their bags to let them know they can spend $100 a day on incidentals, wins the loyalty of customers in a deep, passionate way. Today most customers who have these benefits don’t know it, and those that know it don’t think about it, and that’s a lost opportunity to add real meaning to the customer experience when the cardmember cares about it most.
Citi isn’t doing this of course. They aren’t narrowing to the best benefits or the ones most relevant to customers. They aren’t targeting specific benefits to specific customers, and then helping their cardmembers actually use the benefits. They’re just taking a blunt axe to the benefits across the board, on the bet that these benefits don’t drive card acquisition or consumer spend.
Will Citi be able to provide less value to consumers without taking a hit to spend volume or card revolve? If they are that’s dangerous because other banks will surely follow.
The better path, I think, is to use these benefits strategically, to use the investment for maximum effect. Imagine the loyalty a card would garner if they let you know right away when a flight delay made a customer eligible for trip delay coverage and told them “hey just get a hotel room and a meal, charge those to your card and we’ll issue a statement credit.” That card would instantly become – and stay – top of wallet. And by shaving off some of the less relevant benefits this could be done without materially driving up costs, once the IT investment is successful.