Why Loyalty Programs Are Important To Mobile Payments Systems

If you notice more folks swiping their phones at the register, rather than using their credit cards or reaching into their wallets, you’re not imagining things.

In fact, in-store mobile payment volume was expected to reach $75 billion in 2016, and $503 billion by 2020, according to Business Insider’s “Mobile Payments Report[1].”

One reason behind this trend is the continued integration of loyalty programs into consumers’ mobile devices.

“Whether you’re earning cash back, points, or getting offers and coupons from programs such as our Discover Deals platform, your mobile device is now the place to go to get additional value for your purchase,” said Brian Meier, Director of Strategic Merchant Relations at Discover. “Everything a consumer needs to lower transaction costs or speed up the checkout process is now right at their fingertips, and retailers enjoy the benefits of creating closer relationships with their customers.”

But just because you offer customers a way to transact using their mobile phones, doesn’t mean they will. What helps? Retailers with successful mobile payment platforms have integrated loyalty programs, which incentivize consumers to use their wallets by offering the ability to earn points with every tap of their smartphone. Customers can also track their balances, transfer points and rewards between programs, and redeem their points easily.

“Loyalty programs are important,” says Craig L. Aberle, Publisher, pointofsale.com, “when the consumer has a choice of where to buy the product or service— for small to medium sized retailers, it’s one of the few ways to effectively compete with large e-commerce retailers.”

We look at three retailers that are getting loyalty right.

Make a Game of It

It’s hard to keep track of the data plan and phone trade-in offers from the country’s leading mobile device makers. So to compete in this lucrative market, one retailer made a game of its loyalty program.

It works like this: Every week for one day, phone owners who have signed up for the retailers loyalty program and downloaded the retailer’s app can unlock a coupon for a gift from any number of partners, including fast food retailers, car ride providers and movie theaters. Over 15 million gifts have been given to four million users[2]. But it doesn’t end there. In addition to the weekly gifts, users of this loyalty program have the opportunity to win prizes, including airline and Major League Baseball tickets, a new car and a $10,000 shopping spree.

The lesson: While other retailers center their loyalty programs around rewarding customers, this program focuses on no-strings-attached appreciation, reducing the barrier to entry such as a points collection threshold, qualification for membership tiers, or minimum spend.

“We can expect to see more of an overlap between loyalty programs and gamification,” says Aberle. “There is great potential for the use of temporary loyalty/game programs.”

Be Generous

Today coffee drinkers can choose from dozens of outlets to grab their cup of Joe. To compete, one national chain upped the ante on its loyalty program, which boasted millions of members, with substantial benefits.

The program allows customers to use their e-wallet to buy drinks, give gift cards, and add money to their accounts straight from their phones.

But perhaps the biggest reward is the amount of points granted per purchase. For every dollar spent, a customer earns multiple reward points. Once points or minimum purchases are accrued, that customer can cash them in for a drink of his or her choosing. While that may sound like a big spend for a free cup of coffee, this chain’s competitor a threshold spend before a free drink is granted. That means for every drink its competitor’s customers earn, its loyalty program members earns multiple points.

Focus On Inclusivity

Most loyalty programs are centered on customers having a branded credit card or mobile app in order to accrue points per spend.

One department store is turning that notion on its head.

In a bid to attract Millennials, who tend to steer clear of debt by using debit cards, and avoiding a wallet full of credit cards[3], a retailer grants its spend-dependent rewards to all in-store and online customers, regardless of the form of payment in which they make their purchases. By signing up online, and providing their phone number and email, customers simply tie their spend at checkout to designated accounts via their email address. There is a catch: When paying without the retailers-branded credit card, consumers earn one point per dollar, while those that use the card earn two points. These customers also get early access to special sales and events.

“Simple loyalty programs are the best,” says Aberle. “Customers are deluged with loyalty programs today and how many apps does one person really want? I only carry a few of the key tags for the various loyalty programs I belong to, but I don’t mind giving my phone number at the register.”

When it comes to tying loyalty programs to credit cards, it’s important to accept a wide variety of payment options.

To begin accepting Discover® Global Network cards within any payments channel, simply contact your current acquirer, or find one from our list by visiting DiscoverNetwork.com. To let customers know that you accept their preferred method of payment online or in-store, simply log into the Discover Global Network Signage Portal and get free signage, from website/app acceptance marks to window decals, to point-of-sale terminal signage. To test your terminal to ensure Discover Global Network card acceptance, please visit the Test Your Terminal page on DiscoverNetwork.com.

This article was brought to you by Discover Global Network. For more insights into consumer trends and the world of payments, visit the Discover Global Network website.

The article and information provided herein are sponsored by Discover^® Global Network for informational purposes only based on independent research and are not intended as a substitute for professional advice.

[1] Business Insider: Mobile Payments Report, August 2016

[2] Loyalty 360: T-Mobile Tuesdays Thank Customers for Their Brand Loyalty, September 2016

[3] PBS: “Why aren’t Millennials racking up credit and debt?”, August 2016