Chiara Sheldon
Co-Founder & COO
Expert Contributor

Inflation: Your Opportunity to Excel With Cashback

By Chiara Sheldon | Thu, 07/21/2022 - 12:00

In 2022, the inflation indicator in Mexico will remain around 7 percent. This is due to several international issues, including the increase in COVID-19 cases, the war in Ukraine and the exchange rate depreciation.

All these factors may indicate an economic recession, which, among other characteristics, is accompanied by job losses, fewer available jobs and increased unemployment.

In general, a company's sales line usually suffers in situations of economic recession or crisis. As customers' purchasing power decreases, so do their consumption possibilities. They are put in the position of figuring out how and where to spend their limited resources, and actually, they focus on optimizing their savings and decreasing their expenses.

As a company, there are many ways to deal with a crisis but one of the most common strategies is to increase sales and planning a set of actions to recover lost profits.

Increasing sales in times of crisis? At first glance, it may sound somewhat contradictory and even inappropriate. In fact, as has been said before, a good number of companies choose to take actions in the opposite direction: closing branches, cutting staff and reducing investment, among others. However, if you think about it carefully, it is an effective strategy. It is a matter of appealing to innovation and creativity to mitigate the effects that the crisis may have on a company's sales flow.

Here is where we can start talking about cashback. Cashback is a tool where customers get reimbursed a percentage of their sum spent on purchases directly to their debit or credit card without time or trade limits. Cashback is positioned as a fundamental tool to generate a greater number of transactions among the 56 million digital banking users (in Mexico) and unlike other loyalty and rewards programs, cashback does not require any additional applications or an extra plastic card. This way, consumers increase the use of their own card, since this payment method automatically generates the refund when buying.

As customers are looking for easy ways to save money, cashback is a great solution to their needs.

In order to reinforce the advantages of cashback, we can discuss the downsides of credit cards that offer points. Financial institutions and businesses that push points instead of giving cashback, incentivize their users to spend on products or services, such as travel and entertainment, which can be disposable in situations like this. On the other hand, a card or business that gives cashback is perceived as a way to save money. In fact, companies earn 19 percent more on average when they use cashback instead of points*.

In 2020, we spotted an opportunity in the Mexican market and we decided that REWORTH would be born as the pioneer of cashback in Mexico. We are the only platform in the country that will allow businesses to increase and maintain their sales, clients to save money and financial institutions to increase the use of their credit or debit cards through cashback. According to studies, starting a 3 percent cashback program will cost a business MX$1,575 per month and generate incremental revenues of MX$4,431**. It becomes a non-zero sum game.

But how does cashback flow work? A customer makes a transaction, getting almost automatically reimbursed. As this happens, the bank obtains data on that transaction, which allows it to know the user's purchasing behavior, becoming more accurate with each purchase. With this information, REWORTH can help the financial institution analyze customer behavior and shopping habits and, through their digital banking applications, each institution can make data-based recommendations to clients of affiliated businesses. This becomes a cycle where customers continue to consume in businesses that offer cashback as they increase their transactions, in addition to receiving refunds every day.

According to studies, a mobile notification announcing a 5 percent cashback offer is highly likely to lead a millennial to visit the retailer**. As for businesses, while each one is free to choose how much to allocate to their rewards program, REWORTH offers a tool to help determine that value: it's a calculator that works based on a scenario analysis. This tool uses the business category, location, average credit and debit card ticket as well as the approximate number of monthly visits made by a recurrent customer. Once this information is gathered, our calculator will make a prediction of the impact that cashback will generate in the business. It also shows the estimated monthly cost of implementing cashback, as well as the approximate increases in sales and customer lifetime value.

While awaiting the possible outcomes of financial instability, it is a good option to start thinking of simple alternatives for customers, businesses and financial institutions. Every problem is an opportunity in disguise.


*Ramp. How businesses can save in a recession. June 2022.



Chiara Sheldon is co-founder and COO of REWORTH. She is in charge of offering merchants, entrepreneurs and financial institutions the tools to grow their business through technology. She graduated from International Management at Ecole Hoteliere de Lausanne in Switzerland, and has extensive experience in various sectors, ranging from restaurants and hotels to NGOs and, of course, finance.

Photo by:   Chiara Sheldon