Digital Wallets Have a Secret Weapon: Loyalty Programs & Reward Schemes
Digital wallets have been around for a few years but adoption has been slow. Even though the market has welcomed the idea and the obvious benefits associated with them, customers are still relatively hesitant to make them their default option.
Digitizing payment information brings about its own set of challenges. The technology is there and so is the infrastructure to make it work but the real challenge is changing perceptions and fears related to security. It shouldn’t come as a shock that people are hesitant to share information with yet another online tool.
A recent article by BlueFin, a payment security company, address the adoption woes faced by digital wallets:
“Unlike Visa or Mastercard, mobile wallets are hardly universal. Apple Pay, Android Pay, and Samsung Pay are restricted to their own devices. Walmart Pay has a higher overall usage rate because anyone with a smartphone can access it. For many consumers, switching between mobile wallets based on where they’re shopping creates unnecessary payment friction.”
How do merchants and banks get to people to use digital wallets? The answer is loyalty. Loyalty programs and reward schemes are the perfect use case to ease people in and get them to use digital wallets. Think of it as a trading demo account. You go through the entire experience without having to worry about losing money.
The same principles apply to loyalty points. The only difference between this scenario and the demo account is that the focal point is not money but personal and financial information. People get to use the digital wallet without sharing any banking information. They just use the functionality of the wallet to redeem their loyalty points from a merchant.
Loyalty programs and reward schemes are a win-win situation for both the consumer and the merchant. The consumer gets value without having to give anything back whilst merchants are “training” their clientele to the idea of using the digital wallet.
Restaurants and airline companies are the perfect candidates for this strategy. An exclusive offer could only be redeemable via a mobile wallet, incentivising people to use the wallet. Adoption for mobile wallets is an experiential endeavor. People need to go through it and receive some sort of value that will drive them to change from traditional payment schemes like credit cards.
What’s interesting to note is that loyalty programs have been around for a long time but their effectiveness can be described as lukewarm. The way of claiming these rewards was inconvenient and consumers never really bought into it. Coupons, extra cards and login details were barriers to adoption.
Digital wallets are the perfect medium to maximize the potential of loyalty programs. The infrastructure of the wallet allows rewards schemes to be natively installed and seamlessly used without any extra steps and distractions.
Loyalty is Not Just Measured in Points
Redeeming loyalty points is an obvious use case for digital wallets but not the only one. Customers need to see different value propositions in order to rethink the way they handle payments.
You walk into a restaurant, have a delicious meal and then have to wait for the bill, retrieve your credit card, interact with a POS system, insert your PIN and wait for the transaction to go through. A tad long and unnecessary, don’t you think? This process could be simplified and streamlined through a digital wallet. Right after you finish your dinner, you just log in to the restaurant’s app and pay the bill that’s already uploaded on their app.
The merchant is rewarding your loyalty by buying you time and convenience. The wallet provides an alternative payment method that adds value to your life. This example has different variations and applications according to the industry it’s used for. Skip the line for a cinema, priority release for ticketing, one-touch purchase for e-commerce: value is not just measured in loyalty points or monetary value.
The Future is Mobile, Mobile is the Future
Remember when mobile phones were used for dialing numbers and calling people? No? Believe us when we say that there was actually a time when phones were used to call other people. Then the Internet came along and phones became smarter. Social media, messaging, browsing, watching videos and TV series, listening to music, writing, working – the list of things people do on their phones is endless.
Phones are becoming personal entertainment units, working stations, calendars, organizers and communication channels.
What makes you believe that banking is going to be left out from this mobile revolution? Banks have digitalised their services and mobile wallets are just another extension of this mobile movement. The fact that we carry a physical wallet full of plastic cards will very soon be a thing of the past. I