Will marrying loyalty programs with mobile payments strengthen customer relationships? Mobile wallets are supposed to eliminate the need to carry a physical wallet, but they have fallen far short of that ideal, slowing uptake of mobile payments.

That’s why a burgeoning trend that incorporates loyalty programs into mobile payments could help transform the mobile wallet into the real deal - and give marketers more data on who customers are and what they want.

On May 4 the US department-store chain, Kohl’s, became the first company to announce that customers could pay for purchases with their Kohl’s credit card and accumulate points in their rewards program with a single tap on Apple Pay. The news gives Apple Pay users one more reason to leave their actual wallets at home.

“I think it’s a big step forward,” says Brett Watson, a partner in KPMG’s payments practice.  “Almost every Australian over the age of 16 has at least one loyalty card, but they often don’t carry or remember to use them. Once it’s integrated well and seamlessly into the digital wallet, I think we will see another spurt in the growth and use of loyalty programs.”
The phone is a perfect vehicle for delivering value in the moment

Mobile payments growing more quickly

Researcher Gartner Inc., estimates that half of consumers in mature markets will use smartphones or wearables for mobile payments by 2018.

Marketers who want to cater to their best customers should also focus on mobile, because members of loyalty programs are also more likely to be mobile, according to Forrester Research.

ANZ, which brought Apple Pay to Australia, sees mobile payments as a great way to build brand loyalty.

"Mobile payments solutions like Apple Pay and ANZ Mobile Pay already offer our customers a terrific payment experience, but they will get greater benefits from them once we can also offer value in a contextual setting,” ANZ General Manager Deposits & Payments, Katherine Bray says.

"The phone is a perfect vehicle for delivering that value in the moment, and there are many successful examples of contextual offers, instant redemption, pay with points, and other loyalty models that lend themselves well to mobile payments solutions.”

She said ANZ and top Australian retailers that the bank works with are looking for ways to create value and deepen their relevance with their customers.

“That should not be confused with simply 'pumping offers' and selling though,” she adds. “There is a genuine focus on using data to drive a superior experience for customers in store or online."
Simply replacing a physical loyalty card with a mobile experience won’t be enough.

Linking loyalty programs and mobile payments

One positive outcome could be that linking loyalty programs and mobile payments creates a more seamless interaction between the member and the business, says Adam Posner, chief executive officer of Directivity, a strategic loyalty consultancy.

He cautions however, that marketers will have to create a three-way connection between loyalty program member, the brand, and the mobile payment experience. Simply replacing a physical loyalty card with a mobile experience won’t be enough.

Overcoming current ways of paying will also be a big challenge. His research, “for love or money 2015” shows that members want a card and therefore the movement away from cards to everything on the phone, will take time.
This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY.
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