Checkout Becomes the New Battleground for Loyalty Dollars

Brands and merchants are competing for consumer attention in an environment flooded with offers, ads and incentives.

Loyalty programs remain a core strategy, but the challenge is no longer whether to invest in loyalty. It is whether that investment actually reaches the consumer it is meant to influence.

Jakob Harrison, head of business strategy and development for payments networks at FIS, told PYMNTS TV in an interview that the problem is structural. Loyalty, payments and promotions have evolved separately, leaving brands and merchants with fragmented tools and incomplete insight into what truly drives purchase behavior.

Loyalty Is Powerful but Deeply Fragmented

Loyalty programs are intended to build durable relationships, yet the systems behind them are scattered across issuers, retailers and brands. This fragmentation makes loyalty difficult to measure and even harder to optimize, Harrison said.

“There’s a disconnectedness of data, disconnectedness of payments from loyalty, disconnectedness of a consumer from the brands that they’re buying,” he said.

As a result, merchants face margin pressure from promotions they cannot fully attribute, while brands spend heavily without clear feedback on performance.

Coupon Economics Are Broken

From the consumer packaged goods perspective, Dottie Hart, national account manager, pharmacy, at Haleon US, said the inefficiencies are well known and costly.

“The actual ability to reach a customer and get them to activate on a coupon is almost non-existent right now,” Hart said, adding that physical coupon redemption rates sit around 0.2%.

The financial implications are severe. Roughly 60% of U.S. coupon spend underperforms, with costs reaching about $4.87 per redemption, Hart said. That dynamic forces brands to spend broadly rather than intelligently.

“We’re reaching too large of an audience that doesn’t have the interest in the product that we’re trying to coupon,” she said.

Balancing Reach and Margin

That inefficiency creates a balancing act. Brands want scale, retailers want profitability and issuers want their cards used more frequently. Yet promotions funded at the transaction level rarely reflect what is actually in a shopper’s basket.

The industry has focused on interchange and transaction economics while overlooking product-level intelligence that already exists within payments infrastructure, Harrison said.

Why Data Must Drive Decisions

Harrison and Hart pointed to data as the key to fixing loyalty’s blind spots. Hart said brands need insights grounded in actual purchase behavior rather than limited panels or delayed reporting.

“[Consumer purchase behavior insights] really allows us to look at all the data of all the spending behaviors of the consumer and really make a decision that’s based on completely objective pieces of information,” she said.

Harrison said consumers should clearly understand why they are receiving an offer.

“The consumer recognizing that they are getting this promotion based on the choices that they’re making,” he said. “Not some loyalty points or a statement credit three months later.”

How Smart Basket Changes the Model

FIS’ Smart Basket is designed to connect those dots at checkout. Instead of applying rewards after the fact, the system evaluates the contents of a basket in real time and applies promotions, rewards or optimal payment methods immediately.

The model introduces shared funding across brands, retailers and issuers at the SKU level. That approach reshapes incentives by aligning all parties around measurable outcomes rather than broad exposure, Harrison said.

By tying promotions directly to what is purchased, Smart Basket shifts loyalty from a marketing exercise into a transactional decision engine.

How Haleon Is Applying It

Precision is central to the appeal, Hart said.

“SKU-level offers can really make a difference,” she said, adding that brands can apply deeper discounts to higher-value products and smaller incentives elsewhere.

That flexibility allows brands to protect margins while delivering more relevant offers. Hart also said the model enables new types of collaboration, including promotions that span multiple manufacturers within a category.

Retail media does not disappear.

“This is just one more lever to pull in order to get the right customer,” Hart said.

Activity Fuels Better Outcomes

The system improves as adoption grows, Harrison said. More transactions generate more item-level data, which enables sharper targeting and clearer attribution.

“The more activity that we have, the more data that we get,” he said. “That turns into better attribution, and that turns into more funding.”

That feedback loop creates what Harrison described as a commerce network effect, where increased participation benefits every stakeholder.

A Transformational Business Model

Smart Basket has the potential to change how loyalty is funded, measured and experienced, Harrison said.

“This business model offers an opportunity to do that in a much more intentional way,” he said, referring to influencing consumer behavior at checkout. “It can allow anyone in the ecosystem to grow their business and grow their relationship with the consumer.”

Hart agreed, framing the shift in practical terms.

“Money gets invested where money is most well spent,” she said.

By anchoring loyalty to real purchase decisions rather than broad exposure, FIS is positioning Smart Basket as a way to restore accountability, efficiency and trust across the loyalty ecosystem.