Paper Checks Still Common For Rebate Payouts

Instant payments have use cases ranging from quickly paying gig workers for services rendered to refunding a shopper returning a purchase to speeding up insurance payouts and online rebates.

Online rewards and rebates are as popular as ever, so why do paper payout checks still persist?

The latest Disbursements Tracker looks at trends in instant payments and examines what consumers want and how companies are changing to meet these needs.

The State of Rebates

The concept of rebates, a cash-back incentive to buy a particular product, has a long promotional history among merchants. Rebates were commonly used in the 19th century, particularly in the railroad industry.

The whole process from start to finish can be cumbersome. Consumers might still have to cut UPC codes from packaging and physically mail them with receipts to a P.O. box. Then possibly a check might arrive months later, if at all.

Retailers like Staples, Rite Aid and other offer consumers ways to submit rebates online, completely or partially removing any mail-in requirements. At the same time, companies like Rakuten and Swagbucks are built on an online rebate model, offering cash back on purchases made through their apps or using a browser plug-in.

Digitizing the process has obvious benefits. “With instant payments, rebates can be fulfilled quickly and inexpensively in a fully digital experience. From rebate enrollment and receipt imaging to digital disbursements timed to program eligibility terms, instant payments can transform frustrating rebate processes into seamless, mobile engagements,” said Drew Edwards, CEO of Ingo Money.

What Consumers Want

Rebates are an effective tool to attract shoppers. According to the Promotion Marketing Association, more than three-fourths of consumers (75.4 percent) said they were more likely to make a purchase if a product offered a rebate, a more compelling offer than a contest (42.5 percent) or sweepstakes (39.0 percent).

In a separate study, 84 percent of consumers think rebates are a great savings opportunity, and more than half (55 percent) actively search out products with rebates. In fact, nine in 10 consumers would take additional action during rebate redemption if prompted, including completing a survey or review, enrolling in a loyalty program or referring a friend.

Even those enticed by rebates can be frustrated by payout frictions. Lengthy disbursement wait times can undo retailers’ loyalty with them, and few payment processes take as long to complete as physical checks.

Consumer Affairs estimates that rebate redemption rates generally range from 5 percent to 80 percent, depending on the value of the rebate. The leading reason (41 percent) why consumers didn’t redeem a rebate was simply that they forgot to send them in. Additionally, 25 percent lost a paper form, 20 percent decided it wasn’t worth the effort and 14 percent gave up because the process was too complicated.

Merchants’ and Vendors’ View of Rebates

PYMNTS recently spoke with Kristen Gall, general manager for cash-back and shopping rewards company Rakuten Rewards, and Craig Cassata, president of online rebate site Mr. Rebates, about the role of checks in online rebates and why they are unlikely to disappear.

Mr. Rebates offers users multiple payment options, including check disbursements, PayPal or having funds sent to Amazon accounts, a recent addition that is now used for checks. Mr. Rebates recently unveiled Amazon support, and 15 percent of its disbursements. Currently, PayPal is twice as popular as checks.

Rakuten sees higher usage of checks for rebate payouts than Mr. Rebates, with nearly three-fourths of its disbursements being mailed out as physical checks. Rakuten also allows consumers to receive their rebates via PayPal, which accounts for approximately 25 percent of disbursements.

The company also allows its customers to cash out via gift cards, an attractive option for merchants as such cards ensure recipients will spend their money only with issuing retailers. Gift cards currently account for approximately 2 percent of Rakuten’s total disbursements.

Future plans could involve Venmo or credit card partnerships to offer branded rewards or points.

This makes sense considering nearly one-fourth (24 percent) of Americans want digital P2P methods to receive funds from a business, according to a recent study. This includes 17 percent who preferred PayPal, 4 percent who preferred Zelle and 3 percent with a preference for Venmo.

Notably, 31 percent would be less willing to do business with a company that makes payments via check.