BOSTON — Loyalty programs long built around credit cards are being reshaped as consumers shift away from borrowing and toward spending with debit, according to a new report from PYMNTS Intelligence.
The report, part of the Embedded Finance Tracker series and titled “Rethinking Rewards With a Loyalty Platform for the Debit Generation,” finds that co-branded debit cards are emerging as a viable alternative to traditional credit-based rewards as spending habits become more cautious and debt-averse.
Debit already accounts for nearly one-third of U.S. consumer payments, according to Federal Reserve data cited in the report, and about 60 million Americans now prefer debit over credit. Tighter lending standards, generational aversion to debt and regulatory pressures have weakened the dominance of credit-card rewards, prompting brands to explore loyalty models that do not rely on revolving credit, PYMNTS Intelligence said.
Partnership Cited
As an early example, the report highlights a co-branded debit rewards platform launched by Galileo in partnership with Wyndham Hotels & Resort, PYMNTS Intelligence said. The report s stated that unlike earlier debit programs that struggled to sustain rewards, the model is built around loyalty from the start, with Galileo providing banking infrastructure, compliance and rewards mechanics while brands focus on customer acquisition and engagement.
Data from the Wyndham program suggest deeper consumer involvement than is typical for debit products. About 60% of cardholders set up direct deposit, a sign of repeat use rather than short-term experimentation. The report also estimates that roughly 27% of U.S. debit users qualify as “debit devotees,” relying on debit as their primary payment method with limited interest in credit.
Broader Shift
According to PYMNTS Intelligence, the findings point to a broader shift in loyalty economics. Credit-based rewards have traditionally depended on interchange revenue, interest income and balance growth, all of which face growing constraints. Debit programs, by contrast, operate with simpler cost structures and less credit risk when issued through sponsor banks, offering brands more predictable economics.
The report also notes that debit-based loyalty aligns with the preferences of younger consumers. Gen Z and Millennials are described as budget-conscious and debt-averse but still motivated by perks, status and recognition. In that context, even modest benefits, such as automatic status and straightforward points earning, can drive engagement when tied to everyday spending.
Reframing of Payments Cards
PYMNTS Intelligence said the trend suggests a reframing of payment cards themselves. In the emerging model, loyalty — not credit — is the core product, with debit serving as the delivery mechanism. For brands seeking growth beyond traditional credit partnerships, the report concludes, debit-first consumers are no longer a niche audience but an increasingly central force in the future of loyalty.
