Making a true connection between rewarding loyalty customers and increasing mobile payments adoption was the theme of a new report, “Rewarding Loyal Customers to Increase Mobile Payments Adoption,” which was written by Elisa Tavilla, payment strategies industry consultant, Federal Reserve Bank of Boston.
Tavilla talked to Loyalty360 about this riveting topic that is quite germane to loyalty marketers everywhere.
What was your starting point as far as a baseline for whether mobile loyalty rewards can impact consumer mobile payment adoption, what end point did you arrive at, and what are your biggest takeaways from the report?
Tavilla: Our Payment Strategies Group has been regularly conducting analysis on developments and trends in the mobile payments industry, including how to increase consumer adoption. Some of the capabilities afforded by mobile payments, such as enhanced security, greater convenience, and targeted loyalty offers, create stronger value propositions for consumers, which could potentially help increase overall adoption.
By integrating mobile loyalty and complementary features (e.g., additional ways to earn rewards, simpler checkout processes, location-based offers, etc.) with mobile payments, retailers can create more convenient, efficient, and personalized shopping experiences for their customers. These value-added mobile features could appeal to more consumers and influence change in their payments behavior, and lead to broader use of mobile payments.
How are retailers in different segments leveraging mobile loyalty features to enhance the customer experience and increase mobile payment usage?
Tavilla: Many retailers allow customers to easily use their mobile phones to manage their loyalty rewards, receive exclusive offers, and pay for purchases. Some retailers also provide complementary mobile capabilities that are specific to their retail segment as part of their mobile loyalty apps. For example, several coffee chains and QSRs enable their customers to order-ahead and skip lines; some pharmacies enable prescription management, and some hotels allow registered guests to check-in via mobile. Consumers may find these mobile capabilities attractive as they create a better retail experience.
What are retailers doing well in this regard and where do the challenges lie?
Tavilla: Based on conversations with many retailers, mobile loyalty and payment apps that offer the most utility to consumers and solve actual pain points tend to gain the most traction. Several retailers attribute the success of their mobile loyalty apps to recognizing their customers’ needs and purchase behaviors, and using these findings to design solutions that increase utility and convenience.
For example, Dunkin’ Donuts concluded that a mobile-centric loyalty program with payment functionality would be most practical and convenient for its customers to use, based on the frequency of their visits. Other retailers included mobile features that would address customers’ pain points. Chick-fil-A enables mobile ordering to help their customers avoid waiting in line. CVS added a mobile payment component (CVS Pay) to its app to help simplify the checkout process, especially for prescription pickup.
Currently, retailer mobile payments acceptance is not ubiquitous, unlike credit/debit card acceptance. Therefore, if consumers do not have the option to use mobile payments where they shop, they may not see the value of mobile payments even at retailers that do accept them. However, interest in and acceptance of mobile payments is growing across different retail segments. As more retailers accept mobile payments, they should leverage loyalty rewards and complementary features to incent their customers to choose to use mobile over traditional payment methods.
What is your advice for retailers embarking on a journey to find and use mobile solutions and reward loyal customers for mobile payment adoption?
Tavilla: There is no-one-size-fits-all mobile loyalty and payment model for all retail segments. Retailers should develop their mobile payment strategies and evaluate their options and customer needs and purchase behaviors to determine the most suitable mobile solution(s). It is also important for retailers to solicit input from key stakeholders (e.g., customers, franchisees, IT and marketing teams, retail staff, etc.) throughout the development and implementation process, and provide adequate education and training to staff and customers.
Are mobile payments as popular as you think they should be at this point in the U.S.? If not, what factors are preventing more widespread adoption?
Tavilla: Mobile payments adoption in the U.S. has been growing gradually over the past few years. This trend will likely continue as consumers increasingly shop and make purchases in stores and online with their mobile phones, and more retailers accept mobile payments. Even so, some challenges persist, including consumer perceptions and concerns toward mobile payment security, and lack of broad merchant acceptance. While lack of broad merchant acceptance is an issue, some consumers also may not feel comfortable paying for purchases with their mobile phones.
What do you foresee for mobile payment adoption and its impact on customer loyalty?
Tavilla: More education for consumers on the benefits of mobile payments is important. Effective marketing and staff training on the availability of mobile payments, how they work, and their value propositions are essential in achieving mass adoption. Mobile loyalty features can help strengthen the appeal and value of mobile payments. Mobile solutions that consumers use for their everyday purchases (e.g., coffee, lunch, groceries, prescriptions, etc.) can help foster habitual use and increase their familiarity and comfort with making mobile payments, and encourage broader use across different retail venues.