Racing toward mobile payments
Loyalty programs help drive mobile wallet adoption
I was speaking with a venture investor friend of mine recently who reminded me that predicting the future is not really that difficult. The challenge is not what will happen but when it will happen. The list of examples from the automobile to computers, from the mobile phone to electric cars is deep within technologies that were forecast well in advance of actual adoption. Mobile payments is feeling like one of these technological advances that is proving to be challenging in terms of timing. Is it coming? Yes. How fast and how pervasively? Not quite sure.
Some facts about mobile payment systems.
The 2016 Accenture North American Consumer Digital Payments Survey indicated that 56% of consumers are now aware that there is technology to use their phone to pay. Consumers trust traditional providers most for digital payments—those that deliver value will tip the balance and win. 73% of consumers trust traditional card providers the most as their mobile payments provider.
However, according to pymnts.com the growth in people trying mobile wallets is flattening out. At least for now. Walmart has the highest usage percentage of users among those with the appropriate smartphone technology and a downloaded app at 5.95% followed by Apple Pay at 5.7%, Samsung at 3.03% and Android Pay at 1.8%. Not exactly stellar participation for people who have the means to actually adopt mobile wallet technology.
While awareness does not seem to be a barrier to adoption, three facts do stand out:
- Security and privacy concerns – recurring massive data breaches continue to keep consumers wary of sharing credit card information.
- Perceived complexity – re-configuring a mobile app to change cards feels more complex than pulling a different card from your wallet.
- Current physical card-based methodologies work – not broke, why mess with it.
The bottom line is that to date there have been few compelling reasons to move from card use to mobile payments. For some people, the increase in speed of transaction seems marginal and the risks are real. New technology is not always dependable. In-store signal coverage can be spotty in certain regions with certain carriers. Some loyalty rewards programs don't play nicely with mobile payment systems.
Trust and Toasters
In the financial services industry, incentives and rewards have effectively influenced behaviors for over 50 years. Just after the great depression the FDIC was formed to restore trust in the U.S. banking system. The insurance helped restore consumer confidence and the financial sector began to recover. Institutions quickly reached parity in products and services however, so they turned to special rewards to acquire new customers and foster loyalty. Back then it was toasters for opening a new account or adding services. Today rewards commonly encompass a sophisticated system of points or tiers based on transactional value.
Rewards to the Rescue
While mobile payments may have hit a temporary plateau in 2017, there are promising developments to encourage mobile payment fans. Incentives are proving effective in driving increased adoption. One major institution is offering triple rewards for each $1.00 spent via a mobile wallet solution - further fueling a top of screen strategy to influence consumers and generate loyalty. Other institutions offer cash incentives for adopting a mobile payment habit. Institutions and technology providers are increasingly offering consumers added rewards for adopting new behaviors. Financial institutions are quickly realizing once their card is linked to a mobile wallet solution, it remains "top of wallet" (or top of screen as we like to say at Augeo) more persistently than when a cardholder pulls a card from their physical wallet.
Samsung Pay has their Samsung Rewards program just for using mobile payments. Card issuers are offering double or triple points when mobile payment systems are used. Card-linked offers also flow seamlessly through mobile payments linked to a registered card. One of the most successful integrations of rewards with mobile payments come from Starbucks who reported that 27% of its U.S. store transactions came via mobile payments.
Clearly, when rewards are set at the proper level, when complexity is removed from the system and when an atmosphere of trust is established via thoughtful communications, it will result in the growth of mobile payment systems.
As adoption rates increase, one area where financial institution loyalty programs are likely to move is to integrate reward redemption into mobile payment systems. In fact, according to Amdocs, 61% of consumers consider it very important to have the ability to manage multiple loyalty programs within the same mobile wallet, but only 21% of providers offer the feature. This emerging feature works to deepen customer relationships, provide greater value to consumers and elevate loyalty. More to come on this front.