Just a few years ago, many believed loyalty card systems were on their way out. They were expensive to maintain, and customers were growing tired of the benefits they offered. Headlines predicting “the death of the loyalty card” were common, as swipe rates declined and underlying platforms fell into neglect.
However, the landscape has shifted dramatically. With the deprecation of third-party cookies and new regulations around data privacy, first-party data has become invaluable. As a result, loyalty card systems have moved to the forefront of retail strategy, powering personalization, customer engagement, and, crucially, retail media networks—an opportunity projected to be worth nearly £110 billion in the U.S. alone by 2027, with profit margins of up to 90%.
The potential rewards are immense, but so are the challenges. Retailers must modernize aging systems while ensuring they continue to deliver seamless customer experiences. The question is: how can they balance maintaining business as usual with the need for transformation?
Old Systems, New Demands
Loyalty card systems have been around for decades. Many still rely on aging technology and haven’t received the investment they need to stay resilient. Yet today, these systems are under greater strain than ever, tasked with both their traditional role—enhancing the checkout experience—and new functions, such as enabling retail media networks.
Failing to deliver core functionality can have serious consequences. In December 2024, a system failure at UK retailer Morrisons forced it to charge loyalty card customers the standard price on 100 of its most popular products while also offering an extra 10% off their entire shop. This not only impacted revenue but also sparked negative media coverage and customer frustration on social media.
At the same time, loyalty platforms must rapidly evolve to support retail media networks, a space growing increasingly competitive. Research suggests that most brands reallocate retail media network spend from existing ad budgets, making the market finite. FMCG brands typically engage with just six retail media networks—a number expected to shrink further as competition intensifies. This means retailers must get their offering right—and fast.
The pressure on loyalty card systems and the teams managing them is immense. Retailers must navigate a complex transformation while ensuring these systems remain reliable.
Transforming Loyalty Card Systems for the Future
Historically, loyalty platforms were built to serve specific customer journeys. Today, they must integrate seamlessly across a broader ecosystem, including POS systems, mobile apps, e-commerce platforms, and central range management systems. Achieving this integration while ensuring a seamless customer experience requires addressing several key challenges:
System Integration: Loyalty platforms must now communicate in real time with more systems than ever before. How will they interact with existing infrastructure, and what investments are needed to enable frictionless connections?
Data Governance and Quality: First-party data is a strategic asset. How is it being captured, stored, and maintained to maximize value and comply with evolving regulations?
Testing and Reliability: With increasing complexity, how can retailers ensure system updates don’t disrupt customer experiences, pricing, or promotions?
Future-Proofing: Can existing platforms be evolved to meet new demands, or is a complete system overhaul required? Given the rapid pace of change, how can retailers ensure adaptability in the years ahead?
Balancing Transformation with Business as Usual
With loyalty card systems at the heart of both current operations and future strategy, retailers face a delicate balancing act. Prioritizing business as usual risks falling behind on transformation, leading to a constant game of catch-up. Yet, prioritizing transformation too aggressively can disrupt the customer experience and impact revenue. So, how can retailers strike the right balance?
Phased Approach to Transformation: Instead of an all-at-once overhaul, retailers can implement incremental updates, starting with high-impact areas such as POS integration and retail media network enablement. This approach minimizes disruption while maintaining momentum.
Automation for Efficiency and Accuracy: Intelligent automation can significantly streamline business-as-usual activities, freeing teams to focus on innovation. Automated regression testing ensures that changes don’t negatively impact system performance or customer experience.
Parallel Workstreams for Stability and Innovation: Establishing separate teams—one maintaining current operations and another driving transformation—ensures that both priorities are addressed simultaneously without overwhelming resources.
Data-Driven Prioritization: Analyzing customer engagement and transaction data can help determine which system integrations and upgrades will deliver the greatest immediate impact.
Modular, Scalable Architectures: Moving towards API-driven and cloud-based solutions allows for more flexible and incremental enhancements, ensuring the platform remains adaptable to future demands.
Continuous Testing and Feedback Loops: Frequent testing and iterative improvements ensure that changes are validated before full deployment, minimizing risks and improving responsiveness to market shifts.
The Role of Automation in Transformation
One of the most effective ways to balance transformation with business as usual is through automation. Intelligent automation can handle repetitive, high-volume tasks with greater speed and accuracy, reducing strain on teams and minimizing human error.
For example, software test automation can:
Streamline end-to-end integration testing by automating interactions between POS systems, loyalty platforms, and mobile apps.
Enable rapid regression testing, ensuring that pricing updates and promotional changes don’t introduce errors.
Support physical action testing, such as validating loyalty card transactions and payment processes using robotics, reducing testing time from weeks to days.
By leveraging automation, retailers can improve system reliability, enhance the customer experience, and accelerate transformation without sacrificing stability.
For more on this topic, see Improved Customer Satisfaction Through Optimized Data.
Maximizing the Value of First-Party Data
The renewed value of first-party data presents a massive opportunity, but success depends on execution. Retailers that invest in a strategic, well-managed transformation will be in the best position to unlock the full potential of loyalty systems and retail media networks.
The key is to modernize intelligently—balancing innovation with operational excellence. By leveraging automation, adopting a phased transformation approach, and prioritizing data quality, retailers can future-proof their loyalty programs and capitalize on the evolving retail landscape.
Ultimately, the retailers that prepare the best will be the ones that thrive in the new era of first-party data.