In case you haven’t noticed, the payments landscape is trembling as shockwaves of change are being launched from different corners of the competitive world. Why should you care about payments when you probably landed at Loyalty Truth to read about customer centric (Loyalty) marketing?
Loyalty strategies are built to influence consumer behavior change, whether driving additional transactions, increasing wallet share, improving retention, or another similar goal. At the foundation of everything we talk about is a purchase transaction, and in each transaction there is a choice of how to complete the payment. A consumer can pay with cash, check, some form of electronic payment (debit and credit cards) and now can use a digital wallet lodged on their smartphone.
In short, you’ve got to become a student of the payments industry if you want to stay in front of the loyalty marketing business.
There is money at the center of the discussion, and it is money that is the source of the shockwaves washing across the business landscape. Retailers have been accustomed to paying a prescribed amount for the privilege of accepting payment by means of a debit or credit card and they are seeking to lower their processing costs. If they are successful in doing so, they will not only unlock a huge well of cost savings, but also create a pool of funding to promote their business to consumers.
Headquarters of the revolution seems to reside in the halls of MCX.com, an industry group formed by familiar national merchants. MCX has a stated goal to build a “customer-focused, versatile and seamlessly integrated mobile-commerce platform”. In language consumers can understand, this means MCX is hoping to create an alternative way to pay for your purchases beyond pulling your Visa, MasterCard, or American Express card from your purse.
Consider just this partial list of merchants participating in MCX which have huge existing investments in their customer loyalty programs: Best Buy, CVS Pharmacy, DICK’s Sporting Goods, Dunkin’ Brands, Lowe’s, Michaels Stores, Sears, Sheetz, Shell Oil. Solving the payments “crisis” as the merchants describe it will have an impact on how they can fund their loyalty programs in the future.
The timeline of announcements and events in 2013 underscores important linkages between payments and loyalty. Resulting directly from the settlement of litigation brought against the leading credit companies Visa and MasterCard by a group of retailers, as of Jan. 27, 2013 it became possible for retailers to pass along surcharges of up to 4% to consumers who complete a purchase with a credit card. Although most research I’ve read indicates that retailers will not institute credit card related surcharges, the door is at least open to do so.
Last week, as the National Association of Convenience Stores (NACS) was holding its NACS Leadership Forum in Miami, Gilbarco (a leading supplier of fuel dispensing equipment in North America) announced a partnership with PayPal through which any of its retailers using its Passport point of sale system will soon be able to process payments with PayPal’s mobile wallet. With PayPal’s global user base at 110 Million and counting and the demographic of PayPal users quite attractive to retailers, this is big news.
Back to the NACS show, which highlighted Customer Loyalty and Customer Engagement as the predominant themes of the event. Presenters focused not only on alternative payment channels and digital wallet providers, but also the spectrum of digital channels that can be used for customer communication and promotion. Presentations touched on everything from Foursquare, Twitter, Facebook, Google+, Groupon, Living Social, Gilt City,Google Offers, city guides Yelp and Patch, location based loyalty programs Shop Kick, Belly, Perka, and fuel finding apps Fuel Finders and Gas Buddy. The conference mantra seemed to be that consumers should drive the future of payments.
Balance all of this excitement with the results of a comScore report “Digital Wallet Road Map 2013″ , which shared that only 12% of consumers surveyed are both aware of and use non-PayPal digital wallets on a regular basis. That would seem to put PayPal in a comfortable lead as an alternative payment provider as the survey reported it also enjoyed the highest recognition rates among Google Wallet, MasterCard’s PayPass, Square and others. Read carefully between the lines and you might also interpret from these results that broad based consumer acceptance of digital payments has a long way to go. Dont’ forget that the competition also includes solutions offered by the powerful ISIS alliance (AT&T, Verizon and T-Mobile), Google, and Near Field Communication (NFC) solutions which are now being deployed on a select group of smartphones.
If I were one to slap bumper stickers on my car, I’d reserve a place for this one in 2013: Know Payments, Know Loyalty – No Payments, No Loyalty