I prefer this system much better, i like that i can pick whatever games i want to apply the discount to instead of random games or items that i didnt care about.
With that said, i do feel like they could be a bit more generous. 1% for physical & 5% for digital is a bit low, 5 & 10 would be ideal.
All you need is a My Nintendo account to be eligible for the cashback program. I don't know of other companies who offer higher cashback rates.
This transitional period is of course going to be rough for many people. I said as much in the previous thread about this topic. My 240 gold coins have a value of ~€24 if traded in for Wii U or 3DS offers, but on Switch the value of them decreases to €2.40.