A mobile wallet, or e-wallet, can indeed improve customer loyalty. In order to understand how to migrate your current legacy loyalty system to a new digital version, it is first necessary to understand how the customer benefits from carrying an e-wallet. If you are already using an e-wallet yourself, you can probably skip this article and go to Part 2.
Loyalty Cards: the Customer Perspective
The loyalty business has become ubiquitous in retail. Loyalty is being rewarded in a variety of ways by retailers of all sizes from global brands to your local coffee shop. This can be a direct benefit, such as points accumulated for shopping at a bookstore, or a discount on an item at the checkout. It can also be a derived benefit via an affiliation; for instance, purchasing a movie ticket can earn you points at a toy store; using your bank credit card can earn you air miles. There is only one drawback.
In order to benefit from these initiatives, you have to become a card-carrying member of the brand.
Everyone wants to issue you with their loyalty cards but where are you meant to store all these tokens of their love for you? You get to the stage of being overwhelmed, where your wallet is stuffed full of plastic that in reality has very little financial value. You cannot blame the retailer for adopting a strategy that is intended to improve customer experience and build repeat business. However, when you stand in a queue at the cashier, and start doing a work study on how much time is spent asking the customer if they have a card and waiting for them to identify the correct plastic in the recesses of their wallet, you have to question the value both to the customer and the retailer.
Enter the Digital Wallet
This is where a mobile wallet, or e-wallet, comes into its own. While it is primarily a mechanism to facilitate payment, it can streamline the whole loyalty transaction process. There are various brands of e-wallets in the market; the most popular ones, apart from being able to store all one’s credit and debit card details, can hold information on up to 1,500 loyalty programs. These are free apps, and all the consumer has to do is download the preferred offering. For anyone with an iPhone, the choice is fairly obvious, Apple Wallet, which includes Apple Pay. There are several Android options, most widely used of which is Android Pay from Google, which has similar functionality to Apple Pay. If, like most of us, you have a PayPal account, you can use the PayPal wallet. PayPal can be used on iOS, Android and Windows Phone, and links to your PayPal account as well. Over 173 million users globally trust and use the PayPal wallet. There is one major drawback – it is primarily for online shopping, however more and more stores are starting to accept it.
The Benefits of Mobile Wallet for the Customer
Secure Payment. Many consumers assume that paying via an e-wallet is risky, when in fact it is very secure. This is because the payment is made from the wallet app itself, without revealing the card details that you have chosen to make the payment. It is a convenient mechanism for aggregating your credit and funds available across banks into one space.
No bulky wallet. The traditional wallet, stuffed with cards and paper receipts, will gradually die out (although not right now).
Also available in wearables. Smart watches, such as the Apple and Samsung watches, can also have the e-wallet downloaded to them. You don’t even need to have your phone with you.
Better loyalty program management. With some mobile wallets allowing you to load up to 1,500 loyalty programs, you can manage all your memberships, rewards, discounts and vouchers in one convenient electronic space.
Faster engagement. Your contact details are stored in the wallet. There is no need to go through a process of filling in or updating personal data – it can be transmitted from the device. This makes applying for a new loyalty program much sleeker.
Faster transaction processing. There is no need to swipe 2 cards at the counter, or for the cashier to ask you for your loyalty card. All that happens is that the phone (or watch) is tapped against the device and the transactions occur. This is good for you, for the other customers in the queue and for the retailer. Everyone wins.
Special offers. While in-store beacons can push special offers and discounts to your phone, an e-wallet can store them for you against the relevant loyalty program.
What are the Disadvantages?
The most obvious disadvantage is the security threat of losing your phone or having it stolen. You must ensure that both the phone and the app are pin-protected and that you can disable the phone remotely, so that no-one can access your funds. Many e-wallets have robust security features that offer you better protection than your physical plastic cards, but you must activate them.
The other major drawback is a problem related to the merchant’s POS (point-of-sale) terminals. Most e-wallets use NFC to make the payment transaction. “NFC” stands for “near field communication” and is an electromagnetic signal rather than a radio signal. It takes place over a very small distance (up to 4 centimetres). Most, if not all, of the newer smartphone models support this very useful technology, which is very underutilized. The issue is that in-store POS terminals need to be NFC-enabled to accept a payment from a mobile wallet. This means that the e-wallet user still has to carry a backup system of cash and a card or both for cases where the store is not NFC-ready. The one wallet that is not restricted by this is Samsung Pay, which uses MST technology, as well as NFC to complete a transaction. This technology mimics a magnetic stripe swipe. It does not work for POS devices that request card insertion, however.
Finally, if the merchant has not digitized their loyalty program to an omnichannel model, it is not e-wallet ready. The merchant will have to invest in some ecommerce development to ensure that you can take advantage of the program and load it into your wallet. They also have to cater for the shopper who is not ready to move to an electronic wallet. If their reward program is being run by a loyalty management company, this should not be an issue, but many smaller retailers will be running a custom program, and will need to upgrade their offering.