Rewards and loyalty programs are most effective when they reflect the real behaviors and preferences of members. In the June edition of the Velera Payments Index, Velera explores insights from rewards and loyalty payment trends, emphasizing the importance of understanding consumer preferences to remain top of mind—and wallet.

The June edition highlights that consumer spending in May maintained forward momentum, although at a slower pace than in previous years. The economic outlook remains largely unchanged, potentially influenced by a temporary pause in tariffs. However, consumer concerns about the future continue to loom large. This month’s analysis provides a deep dive into rewards and loyalty program performance, reinforcing the importance for credit unions to tailor offerings based on member behavior and preferences.

Key Takeaways

Key findings from this edition of the Velera Payments Index include:

• Steady Payment Growth: Both credit and debit showed positive growth in May, influenced by uncertainty around import tariffs. Debit purchases rose 5.2%, with the Goods sector accounting for just over one-third of the growth. Credit purchases increased by 1.3%, with the Goods sector contributing more than half of that growth. Debit transactions were up 3.2%, while credit transactions rose 1.8%.

• Loyalty and Rewards Trends:
o Baby Boomers+ and Gen X collectively represented 67.3% of rewards accounts and 88.5% of rewards earnings. Younger generations, while comprising 32.7% of accounts, accounted for only 11.5% of earnings.
o Despite earning the most rewards, Boomers+ had a redemption/earned ratio of 14.6%, and Gen X followed closely at 15.9%. Younger generations had significantly higher ratios, ranging from 26.5% to 34.9%.
o Boomers+ were the least likely to allow rewards to expire, whereas Gen X had the highest expiration rate despite being the second-largest earners.
o Cash remains the dominant redemption category, except during the holiday season, when gift card redemptions spike and cashback redemptions dip. Merchandise and travel continue to hold the highest average monthly redemptions since 2023. Gift card redemptions have recently surpassed cash as the second-leading category.

• Inflation Trends: The 12-month Consumer Price Index (CPI) through May rose by 2.4%, a 0.1% increase from April. The shelter index remained a significant driver of the monthly increase, while energy prices fell by 1.0% due to lower gasoline prices. Core inflation (excluding food and energy) edged up 0.1%, reaching 2.8% in May.

Strategic Implications for Credit Unions

Based on these insights, credit unions should consider the following actions:

• Enhance Rewards Offerings: Deliver competitive rewards programs that strengthen portfolios, boost engagement, and enhance member loyalty. Position rewards as valuable financial tools to deepen relationships, increase transaction volumes, and generate fee income.
• Engage Younger Generations: Promote frequent redemptions through lower-point redemption options or gamified rewards, which often appeal to younger demographics.
• Appeal to High Earners: Offer appealing travel and “trophy purchase” redemption options, which tend to attract older, higher-income members who accrue significant rewards.
• Drive Participation: Launch customized, targeted multichannel campaigns to engage members and remind them of soon-to-expire rewards.

Looking Ahead

Despite easing inflation, concerns surrounding tariffs and geopolitical tensions continue to fuel uncertainty. The 90-day pause on reciprocal U.S.-China tariffs is set to expire on August 12, 2025. However, recent announcements from the White House confirm a finalized deal: Chinese imports will be locked in at a 55% tariff, with no additional increases anticipated. Velera will continue to monitor how these developments influence consumer spending.

Meanwhile, President Trump continues to urge Federal Reserve Chair Jerome Powell to cut interest rates by at least two full percentage points. At its June 18 meeting, the Federal Open Market Committee (FOMC) held its key borrowing rate steady, though Chairman Powell indicated that two rate cuts could still occur later this year, depending on evolving economic conditions.

Velera encourages credit unions to leverage insights from this and future editions of the Payments Index to make informed, strategic decisions that best serve their members.

If you would like more information on Velera, please contact Sara Taddeo at staddeo@mddccua.org to arrange a meeting.