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Mobile payments could get boost from loyalty rewards tie-ins

March 29, 2016

In the past year, mobile payment platform adoption has taken off for both retailers and consumers, but not as much as many analysts might have predicted, or many businesses might have liked.

In the past year, mobile payment platform adoption has taken off for both retailers and consumers, but not as much as many analysts might have predicted, or many businesses might have liked. To that end, retailers are trying to think of ways to further encourage consumers to start using these platforms, and one area in which many agree there may be some room for improvement is by connecting mobile payment use with new or existing loyalty rewards accounts.

For instance, the national pharmacy chain Walgreens recently began allowing consumers to use their existing loyalty accounts with Apple Pay, and many of the company’s regular customers have taken to using both on a more regular basis, according to a report from Mobile Payments Today. That kind of success isn’t likely to go unnoticed both by direct competitors and interested onlookers, especially because some companies may be finding that the (unfounded) security concerns some people have about mobile payment systems in general can be smoothed over by incentivizing their use in this way.

Incentivizing mobile payment use with loyalty programs could be huge.Incentivizing mobile payment use with loyalty programs could be huge.

What comes next?
Meanwhile, MasterCard – the world’s second-largest processor of debit and credit card transactions – recently announced that it is trying to develop industry-wide security standards for how rewards programs can be tied into mobile payments, to further facilitate adoption, but also grant assurances that these transactions will be as safe as any other, the report said. With this standard, consumers will be able to choose their payment method first, then be presented with applicable loyalty options that can likewise be redeemed to complete the purchase.

Getting over the hump
The question for many in the industry, though, is whether this sort of thing will catch on in the near future, even if consumers are incentivized. While the Walgreens example indicates that it’s a distinct possibility, the fact remains that there is still a relatively small number of people using these systems right now. Marginal improvements may be made here and there as more companies move to integrate rewards programs with widely used payment platforms, but the question is whether that will be enough to overcome consumers’ issues with the security of these systems overall.

It’s generally accepted that there will be a tipping point at which mobile adoption has built up so much momentum that it becomes widely used in a relatively short period of time. Many companies can help push consumers in that direction if they’ve already adopted mobile payment options. However, one big issue here is that the number of businesses – both large and small – that have actually made that move is not particularly large at this point.

For that reason, businesses have an incentive of their own to adopt mobile platforms: These transactions are more secure than traditional credit card payments. Consequently, the risk of fraud is reduced, and the convenience extended to consumers increases significantly. Smaller companies in particular that may be on the fence about such a switch could establish themselves as early adopters in their areas.

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