Issuers are striving to find creative ways to help consumers save while they shop to stay top of wallet.

Last month American Express Co. announced a new service that lets eligible cardholders sync their cards with Twitter, so that when cardholders tweet specific hashtags, they receive savings from participating merchants when swiping their Amex cards. Amex introduced a similar campaign for Facebook last year.

Amex’s latest announcement underscores the growing trend of issuers gunning to improve customers’ shopping experiences by offering them discounts. Indeed, issuers have been folding in merchant-funded rewards into their cards to incentivize usage and because their customers are hankering for the functionality.

“Customers want convenient ways to shop and get relevant deals,” Bank of America’s Spokesperson Tara Burke tells Bank Innovation.

Indeed, BofA, the second-largest bank by assets, started to trial its own version of Groupon of sorts in January. Called BankAmeriDeals, the service gives cardholders discount offers when they shop at certain merchants. Offers, which are tied to customers’ transactions, appear in customers’ online banking account statements and under a separate tab. The service is powered by Cardlytics.

BofA tells Bank Innovation the recent discount effort is in direct response to customer input.

“We’re always talking to customers,” says Burke. “We know our customers want this. They want to save money [while] they are still shopping.”

Currently, BofA employees are testing the service. Burke says it’s “premature” to comment on when BankAmeriDeals will go live to its customers.

BofA is one of many banks that have been exploring the innovation possibilities in shopping discounts to enhance loyalty and foster card swipes. Indeed, issuers are realizing that as the gatekeepers of transaction data, they can offer customers more relevant deals than say Groupon and offer the service without requiring consumers to print out coupons to redeem the discounts.

“Banks are stepping up to the plate and testing all of these [loyalty] programs,” says Madeline Aufseeser, a senior analyst with Aite Group LLC.

Bank Innovation recently learned that Regions Bank’s mobile banking app will soon have cash-back rewards functionality, for example. Already, the Birmingham, Ala.-based bank offers the functionality in its online banking.

Regions Cashback Rewards, the name of the program, lets customers earn cash back on Regions Visa CheckCard purchases when they are shopping at participating merchants. The program is powered by a partnership with Cardlytics, which has been in place at Regions since September of 2010.

Regions has found that in gaining users, customers’ experience with the program matters most.

“From the customer experience standpoint, the program has to be seamless and easy for customers to interact with and be rewarded,” Tom Brooks, head of cards and payments at Regions Financial, tells Bank Innovation.

The type of offer matters, too. Brooks, for one, says retail offers and day-to-day expenses like food perform best with its customers.

Ally Bank, meanwhile, shares similar findings with its Ally Perk’s program, a merchant-funded reward program that debuted in the summer of 2011. To date, the most popular participating retailers for Ally customers are “everyday spend” categories like drug stores, hardware, fast food and big box retailers, says Beth Coggins, a spokeswoman.

Customers “like” Ally Perks, which is powered by Edo Interactive, because the program gives them offers that are relevant to their lives, says Coggins.

Though Ally and Regions both wouldn’t disclose usage numbers, both lenders said the numbers have been trending up and are expected to continue to grow.

Brooks attributes the ongoing growth of the program to two primary drivers: 1. Gaining deeper history of consumer transactions; and 2. More retailers participating, including local businesses. Still, one hurdle banks must still overcome is educating consumers about merchant-funded reward programs. Though consumers may tell banks they want shopping discounts, many might not know such services already exist.

“Driving awareness is still the biggest challenge for us,” Bob Ryan, head of rewards and enhancement services at Wells Fargo, tells Bank Innovation.

Wells works with Cartera Commerce to offer merchant-funded rewards to its customers. Rather than embedding offers into cardholders’ online banking accounts, Wells boasts a separate rewards website that lets customers scope out the existing merchant deals to claim. Earn More Mall, the name of the rewards website, lets cardholders see what bonus points and discounts they can receive from participating online and in-store merchants, Ryan says.

“We are very pleased with the growth,” says Ryan. And though Ryan says the program is not a “money maker” for the institution, the program does cover the costs for its deployment. “It’s a good idea with long-term legs,” he says. “It’s early in its life stage.”

In a report released last year, Aite forecasted that revenue from the merchant-funded incentives market would exceed $3.5 billion by 2015, with the card-issuer revenue exceeding $1.7 billion that same year. The real potential for the merchant-funded rewards market is expected to be realized when digital wallets mature in the U.S.

“When mobile takes off, merchant-funded rewards could be huge,” Wells Fargo’s Ryan says.

Aite Analyst Auscheer added: “The digital wallet and mobile payment will change everything.”

But no matter what offering emerges in the market, bankers say it is important that they participate in offering related functionality, too.

“There might be other sources, including clipping coupons or other means, but we want our customers to know Regions is here to deliver the value as well,” Regions’s Brooks says.