Banking / Finance

The six things that will redefine payments in 2016

Loyalty will become Payments’ killer app
Give something to get something is an age-old and very familiar adage. And it’s the premise of a lot of online marketing programs: give up an email address to get [fill in the blank]. It’s also the premise of a lot of loyalty programs: give up name, address, and email address in exchange for discounts and other goodies. It’s one of the ways that retailers have tried to compensate for the lack of data about the customers that walk into their physical stores – enrolling them in their loyalty programs gives them the ability to create a record of what’s been bought and how frequently consumers shop at that retailer.
The problem is that loyalty, though, as a category, is also pretty unimaginative. As a category, it came out dead last in our Pii360 Innovation Index survey last year, as did the players representing that category. Until recently, loyalty has been a lot of the same-old, same-old – points-based programs with declining redemption values, that don’t inspire usage, much less influence loyalty.
So, most retailers get back what they give: enrollment without usage. Most consumers enroll in more loyalty programs — on average 29 — than they use – on average 12.
Data – and the creative use of that data — has the ability to change that and inspire the frequency of use that builds preference, engagement and loyalty. Loyalty programs alone can’t deliver that since there’s no ability to close the loop. And payments platforms alone are limited in their ability to deliver that since there’s no incentive, outside of acceptance, to build a base. But together they can change the consumer dynamic for their mutual benefit.
Loyalty can become the killer app for digital payments in much the same way that points were the killer app for card acquisition back in the day. Creatively integrating loyalty capabilities into payments apps can help retailers get what they want — data on consumer behavior in their stores and a way to communicate with them – and consumers what they want – a benefit for being a loyal customer – and payments apps players what they want – adoption of their payments method online without violating consumer privacy or data security.
In 2016, we will see loyalty programs reinvented around data, payments and enabling platforms that simultaneously give consumers the incentive to give up the right data to get something of value from a retailer – and for that to become the foundation for building a lasting relationship between that consumer and that merchant.

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